The Bank of Canada is expected to leave interest rates unchanged at its next meeting on Wednesday. However, ABN Amro’s Dustin Reid says, “The bank will want to tighten rates before the year is out, and September’s meeting will only serve as a temporary reprieve.”
The worst may be yet to come in the U.S. subprime mortgage industry. U.S. subprime defaults are expected to peak in February or March.
Over the past year, U.S. home prices have dropped the most since World War II.
According to CIBC’s Benjamin Tal, “We expect over the next six months, we will see a noticeable softening in the subprime activity in Canada.” Unlike the U.S., however, Canada’s subprime mortgage sector has grown 40% year-to-date. It grew 50% last year.