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Residential Mortgage Commentary – Inflation report offers hope of interest rate relief
The latest Statistics Canada inflation numbers have given some market watchers hope that the Bank of Canada will slow or, perhaps, even pause interest rate increases.
The Consumer Price Index, or “headline inflation”, held steady from September to October at 6.9% on a year-over-year basis. Lower food price inflation off-set higher gasoline prices. Another welcome sign showed core inflation, which factors out volatile items like food and fuel, slowed in October to 5.3%, year/year, down from 5.4% in September. The Bank of Canada uses the core inflation reading when making its interest rate decisions.
However, those numbers will likely come as cold comfort to homeowners and homebuyers who have faced some sharp, inflationary increases.
StatsCan reports mortgage interest costs jumped by 11.4% in October – the biggest y/y increase since February 1991 (11.7%). Property taxes also rose sharply, climbing 3.6% compared to 1.5% a year ago.
StatsCan’s “homeowners’ replacement cost index’, which relates to the price of new homes, dipped to 6.9% in October, down from 7.7% in September. This measure has been declining since May (11.1%).
Statistics Canada offers a simple, plain-language explanation of how housing, or “shelter costs” fit in to the inflation calculation here.
Looking ahead to December 7th and the BoC’s last interest rate announcement for the year, most analysts expect one more 25 to 50 basis-point increase.