Canadian Mortgage Rate Relief Done For This Stage of The Cycle: BMO

Canada’s real estate recovery has barely begun but it already faces headwinds. Rising inflation and credit demand has the market now expecting 5 rate hikes. This morning, BMO Capital Markets told investors that 5 hikes seems a little much right now. However, the bank warned that rates will rise and mortgage relief for this cycle is over. Investors Expect Interest Rates To Climb Sharply The pressure on higher interest rates is clear. Headline CPI’s annual growth sits at 3.0%, the upper limit of tolerance for the Bank of Canada (BoC). Bond yields have responded, with the 5-year government bond adding 10 basis points (bps) in the past 5 days. It’s climbed 51 bps over the past 3 months, though consumer borrowing costs have yet to show the change. Experts also see higher costs rolling in over the next few weeks. The market sees the current 2.25% overnight rate adding another 125 bps, or 1.25 percentage points. That works out to roughly 5 hikes, pushing the overnight rate to 3.5% by the end of 2027. Higher rates are bad news for the Canadian real estate market, which has been at a standstill for years. Especially with prices still well out of reach for the average household. Canadian Rea...