News release from Scotia Macloud
Lower-for-longer interest rates
Canadian economic growth has shown most of its weakness concentrated in trade. Housing market sales and price gains in 2012 have been modest, but positive. Constraints on economic growth continue as the markets currently focus on the resolution of the fiscal cliff - however, the global financial markets will just have to navigate through these risks. Consequently, the lower-for-longer interest rate environment will likely continue, while we expect moderate economic growth to support commodities and equities.
Tighter mortgage rules
The withdrawal of monetary stimulus is expected to begin around mid-2013. This will be gradual and administered in phases. More stringent mortgage rules and tighter mortgage underwriting rules have recently slowed down the housing market. Even with tighter mortgage rules, the low interest rate situation could still bring demand for homes in the market, causing home prices to trail upwards - at least until interest rates rise in late-2013. Under the condition that economic growth continues, the Bank of Canada stated that the next shift for interest rates in Canada will be upward.
Housing market impact
All regions of the housing market are expected to be affected from the macroeconomic trends and regulatory progression. This means those who will be impacted will depend primarily on location. While regulation is having the intended impact on the housing market, this is only temporary. The slow down we are experiencing is expected to be lifted in early-2013.