Breadcrumb Trail Links
The cost of mortgage rates rose 29.9% year-on-year in May, and economists say there’s “further upside.”
Published on June 27, 2023 • 2 minutes reading time
Homes in Toronto. The cost of mortgage interest rose 29.9 percent year-on-year in May. Photo by James MacDonald/Bloomberg
article content
Inflation moderated in May compared to the previous month, but one factor that has been driving CPI incessantly higher is mortgage interest costs – and the pressure is not abating.
advertising 2
This ad has not yet loaded, but your article continues below.
THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY
Subscribe now to read the latest news in your city and across Canada.
- Exclusive items from Kevin Carmichael, Victoria Wells, Jake Edmiston, Gabriel Friedman and more.
- Daily content from the Financial Times, the world’s leading global business publication.
- Unlimited online access to read articles from the Financial Post, National Post and 15 news sites across Canada with one account.
- National Post ePaper, an electronic copy of the paper edition that you can view, share, and comment on on any device.
- Daily puzzles including the New York Times crossword.
SUBSCRIBE TO UNLOCK MORE ARTICLES
Subscribe now to read the latest news in your city and across Canada.
- Exclusive items from Kevin Carmichael, Victoria Wells, Jake Edmiston, Gabriel Friedman and more.
- Daily content from the Financial Times, the world’s leading global business publication.
- Unlimited online access to read articles from the Financial Post, National Post and 15 news sites across Canada with one account.
- National Post ePaper, an electronic copy of the paper edition that you can view, share, and comment on on any device.
- Daily puzzles including the New York Times crossword.
Register to unlock more articles
Create an account or log in to continue your reading experience.
- Access items from across Canada with one account.
- Share your thoughts and join the discussion in the comments.
- Enjoy additional articles per month.
- Receive email updates from your favorite authors.
article content
The latest CPI figure, released by Statistics Canada on June 27, showed that the upward trend in housing costs was the single largest contributor to the month’s inflation rate of 3.4 percent.
Top stories from financial posts
By clicking the subscribe button, you consent to receiving the above newsletter from Postmedia Network Inc. You can unsubscribe at any time by clicking the unsubscribe link at the bottom of our emails or any newsletter. Postmedia Network Inc | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300
Thanks for registering!
article content
Mortgage interest costs rose 29.9 percent in May from a year earlier when they fell 2.7 percent. May now marks the 11th consecutive month of rising mortgage interest expenses, the fifth consecutive month that year-on-year increases topped 20 percent, and the third consecutive record rise.
“[The rise in]mortgage interest costs is unprecedented because interest rates haven’t moved that fast in a long time,” said Benjamin Reitzes, managing director of Canadian interest rates and macro strategist at the Bank of Montreal.
article content
advertising 3
This ad has not yet loaded, but your article continues below.
article content
Reitzes said long-term average prices need time to stabilize, so he thinks there’s “probably more upside.”
“‘Did we see the top of 29.9 percent year-on-year here?’ We could be close,” he said. “The big rate hikes started in June last year, so there could be another hike in the next month or two, but after that there will likely be some deceleration, but not much.”
For prospective homebuyers, the rise in mortgage interest costs means higher monthly payments and less purchasing power. According to Reitzes, this situation has made it increasingly difficult for would-be homeowners to enter the housing market or upgrade their existing properties.
“Higher (mortgage) rates are still likely for adjustable rate mortgages and we’ll see where the fixed rates end up,” Reitzes said. “But with high inflation and the fact that the Bank of Canada is showing no signs of a willingness to back down as of this writing, expect mortgage rates not to stay far from current levels, which certainly means affordability.” makes it a challenge.”
advertising 4
This ad has not yet loaded, but your article continues below.
article content
Inflation in May was a full percentage point below April’s surprise 4.4 percent, a decline that has led some economists to predict the Bank of Canada may now back off further rate hikes. But Reitzes isn’t so sure.
“Even excluding mortgage interest costs, inflation is still well above the Bank of Canada’s target and is probably still quite uncomfortable for them and high enough to make them likely hike rates again in July,” he said .
In February, the central bank stressed the importance of meeting the 2 percent inflation target in order to restore the price stability that Canada has enjoyed for the past three decades.
-
Homeowners are abandoning adjustable rate mortgages in favor of fixed rate alternatives
-
Inflation slows to 3.4% in May
-
What economists are saying about the latest inflation figures
On June 7, the bank implemented another 0.25 percent hike in the federal funds rate, resulting in a policy rate of 4.75 percent. The next interest rate announcement for 2023 is scheduled for July 12.
• Email: [email protected]
article content
Share this article on your social network
Comments
Postmedia strives to maintain a vibrant but civil discussion forum and encourages all readers to voice their views on our articles. It can take up to an hour for comments to be moderated before they appear on the site. We ask that you keep your comments relevant and respectful. We’ve turned on email notifications – you’ll now receive an email when you get a reply to your comment, there’s an update to a comment thread you follow, or when a user you follow makes a comment. For more information and details on how to customize your email settings, see our Community Guidelines.