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Latest in mortgage news: Borrowers must adapt to ‘new normal’ of higher rates, says Macklem

Interest rates may slowly start to be easing around the world, but they won’t be returning to pandemic levels and borrowers will need to adjust accordingly.

Interest rate outlook - Bank of Canada

Interest rates may slowly start to be easing around the world, but they won’t be returning to pandemic levels and borrowers will need to adjust accordingly.

That’s according to Bank of Canada governor Tiff Macklem, who made the remarks during a Montreal speech last week.

“Interest rates may be easing in many economies, but global interest rates are unlikely to return to pre-pandemic levels,” he said. “The new normal won’t be the old normal. And if we’re not going back, we’ll all need to adjust.”

He also acknowledged that there were policy errors made by the Bank of Canada during the pandemic.

“[Compared to the 1970s] our track record on inflation control combined with our forceful monetary response brought inflation back down at much lower economic cost. But public trust and central bank credibility have been dented by the post-pandemic inflation,” he noted.

“To keep the trust we have and to restore what trust we’ve lost, we need to continue delivering for our citizens. And we need to communicate clearly and broadly.”

Canadians’ household net worth rises, boosted by equity and housing markets

Despite the current economic challenges, Canadian households were wealthier in the first quarter, seeing their net worth rising by a total of $548.2 billion, or +3.3%, to $16.9 trillion.

That was due in large part to a 10.2% rise in equity markets and a 5.8% rise in the S&P/TSX Composite Index specifically, according to recent data from Statistics Canada.

Canadians also saw their wealth boosted by a collective $213-billion rise in residential real estate, marking the first quarterly decline after two consecutive declines. StatCan noted that household wealth isn’t distributed equally, with over 90% of net worth being held by homeowners.

The household savings rate was also up 6.9% in the quarter, the highest rate since the first quarter of 2022.

“Over the last four quarters, households added $113.7 billion in deposits compared with $161.3 billion in the four quarters prior to that,” StatCan said. “Households have responded to interest rate increases by adjusting their preferences towards fixed-term deposits that earn higher interest.”

National Bank to acquire Canadian Western Bank in $5 billion deal

National Bank of Canada announced its plan to acquire Canadian Western Bank in a $5 billion stock-swap deal, valuing the latter at $52.24 per share.

This move will extend National Bank’s reach into Alberta and British Columbia. Following the announcement, Canadian Western Bank’s shares surged 70% to $42.35 on the Toronto Stock Exchange.

National Bank, the sixth-largest lender in Canada, has seen its share price rise by 89% over the past five years, making it the top-performing stock among the Big Six banks. This growth is driven by its strategic expansion beyond Quebec and investment in niche markets.

The acquisition aligns with National Bank’s strategy to strengthen its presence in Western Canada and diversify its business. The deal is expected to create substantial value for shareholders and is pending regulatory approvals and customary closing conditions.

New CMHC CEO announced

The federal government has appointed Coleen Volk as the new president and CEO of Canada Mortgage and Housing Corp. (CMHC) and Don Iveson as the chair of the board of directors.

Volk’s experience includes having served as a deputy minister in the Alberta government, assistant deputy minister at the federal level, corporate treasury work at CIBC, and nine years at CMHC, including a stint as assistant vice-president of finance.

“I am thrilled to be returning to CMHC as the newly appointed President and CEO, and look forward to leading the organization in supporting Canada’s housing system with the dedicated group of people at CMHC,” she said in a statement. “Together, we will work on today’s challenges to build the housing system of the future.”

She succeeds Romy Bowers, who stepped down at the end of 2023, halfway through her five-year term.

Don Iveson, former mayor of Edmonton from 2013 to 2021, is recognized for his work on pro-density housing supply and regulatory reforms in the city.

Building permits jumped 20.5% in April

The total value of Canadian building permits surged by 20.5% in April to a seasonally adjusted $12.8 billion, as reported by Statistics Canada.

Residential permits experienced a significant increase of 21%, reaching $8 billion, driven by record high levels in the multi-unit sector, which soared by 32.6% to $5.4 billion.

British Columbia set a new record with $2.1 billion worth of residential permits, marking a 60.2% increase from March. Ontario saw residential permits rise to $2.9 billion (up 19.9%), Nova Scotia to $244 million (up 41.5%) and PEI to $44.5 million (up 29%). Conversely, Quebec experienced a decline, with residential permits falling to $1.2 billion, a 6% decrease.

Nationwide, permits were issued for 22,600 new multi-unit dwellings and 4,300 single-family units. Over the past year, a total of 267,500 new units have been authorized. The data for May building permits will be released on July 12, 2024.

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Last modified: June 18, 2024

Steve Huebl is a graduate of Ryerson University's School of Journalism and has been with Canadian Mortgage Trends and reporting on the mortgage industry since 2009. His past work experience includes The Toronto Star, The Calgary Herald, the Sarnia Observer and Canadian Economic Press. Born and raised in Toronto, he now calls Montreal home.