There could be some way to go yet before the outlook improves materially, suggests analysis
Cooling inflation and lower mortgage rates in recent weeks are offering a “glimmer of hope” on the outlook for Canadian homeowners and buyers – but significant hurdles related to the cost of housing still remain, according to a new analysis by digital mortgage lender nesto.
Mortgage expert Samson Solomon wrote this week that another dip in overall inflation last month, from 2.7% to 2.5%, could result in a more stable economic future and lower mortgage rates.
That inflation trend could be an indicator that the Bank of Canada's efforts are starting to see results. And while it's a positive sign, the path to full economic recovery is still long and arduous. Potential low interest rates and further cuts are good news for Canadians burdened by high borrowing and housing costs.
This prospect of lower interest rates could bring much-needed relief to Canadian homeowners facing rising mortgage costs. However, translating lower policy rates into lower mortgage rates might take some time, and the overall impact on housing affordability will likely be gradual.
Similarly, affordability is still a concern, and the impact of any rate reductions on the housing market may take time to materialize.
“While the broader economic picture shows signs of improvement with easing inflation, the Canadian housing market remains a significant source of financial strain for many,” Solomon wrote. “Housing costs represent a substantial portion of household budgets, and unfortunately, these costs are still on the rise, particularly among renters.”
Still, that improving outlook on inflation means the Bank of Canada can now shift its focus towards addressing other critical economic news, thanks to inflation seemingly being under control. For example, the labour market is showing signs of weakness and developing job growth will be crucial for sustained economic recovery.
Solomon noted that even though the July inflation report is positive, it should serve as a reminder that the economy is still in a delicate state.
