Although Canada’s housing market appears to be stabilizing, one economist doesn’t think the country should relax just yet.
David Doyle, a Canadian market strategist and economist at Macquarie Group, says the reset of five-year fixed mortgage rates next year could pose potential risks to the economy, BNN Bloomberg reports.
“Where I get more concerned about housing actually is, as we move into 2020, is that the rate reset of five-year fixed rate mortgage holders moves higher again, 75 to 80 basis points,” Doyle told Bloomberg. “So that for me is a risk for 2020, that potentially, there’s another bout of weakness coming for housing across the country.”
The Bank of Canada is already thinking of ways to make the economy safer. Earlier this month, BoC Governor Stephen Poloz revealed he wanted to give Canadians more flexible mortgage options, such as longer fixed-rate mortgages, in order to lower financial risk.
Poloz argued that longer terms would make homeownership more affordable because consumers would be renewing at higher rates less often.
Doyle’s concerns about housing weakness come just after chief economist Gregory Klump, of the Canadian Real Estate Association, noted that “sales activity is stabilizing among Canada’s five most active urban housing markets.”
Klump’s comments were in regards to a CREA report that home sales in April had their first year-over-year increase since December 2017. The data suggested the Canadian market was in recovery, following February’s numbers, which hit an all-time low since 2012.