Bank of Canada expected a steeper home price decline. Why it could still come
Global News
Higher interest rates could lead to a further slowing in Canada's housing market heading into the winter, some economists argue, as the Bank of Canada's key rate remains elevated.
The Bank of Canada says home price drops driven by the recent hikes to interest rates weren’t as steep as monetary policymakers would usually expect, thanks largely to a “structural” lack of supply.
But economists who spoke to Global News say the housing correction likely isn’t finished, with more declines to come.
Carolyn Rogers, senior deputy governor at the Bank of Canada, discussed the central bank’s view of the housing market on Wednesday after holding interest rates steady for the second consecutive time.
She said that the housing market has been more resilient to rate hikes to date than historical patterns would have suggested.
Rogers explained that home purchases are among the most sensitive parts of the economy to respond to interest rate changes, as they’re big-ticket items typically bought with a loan.
“As interest rates come down, house prices will move up a bit and they’ll come off as interest rates come back up,” she said of historic norms.
“We haven’t seen that same dynamic,” Rogers continued.
“They’ve come off a bit this time, but we’re not seeing, relative to the degree of rate increases, the decline in house prices that we would expect.”