Canada’s national housing agency plans to revamp its forecasts to call for a drop of as much as 15 per cent in home prices, as higher mortgage rates threaten to cause a protracted slump in real estate.
Canada Mortgage & Housing Corp. said in July that national housing prices could slide 5 per cent by mid-2023, compared with levels earlier this year. It’s now revising those projections to allow for a 10 per cent to 15 per cent decline, Chief Executive Officer Romy Bowers said in an interview Thursday at the Bloomberg Canadian Finance Conference.
“We’ve seen that inflation has been more persistent than we originally anticipated and the Bank of Canada is taking more aggressive action, so we’re in the process of revising our forecasts,” Bowers said, adding that the new projections would be released soon.
Since CMHC’s July forecast, the central bank has stepped up what was already one of the most aggressive rate-hiking cycles in its history. It shocked markets by increasing the policy rate a full percentage point on July 13 -- the biggest since 1998 -- then raised the rate again by three-quarters of a point in September.
Variable-rate mortgages at Royal Bank of Canada, which were offered at less than 2 per cent in February, are now over 5 per cent and poised to go even higher if the central bank lifts rates in October, as expected. The abrupt rise in borrowing costs has had an immediate impact, prompting benchmark home prices to fall for six straight months.
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