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Posthaste: Gloomy homeowners think their property values will never again reach boom heights Back to video

Good Morning!

Just one more sleep until the Bank of Canada rate decision, and while we wait here’s more insights into how Canadians are dealing with the rising cost of borrowing.

A survey out today by Dye & Durham and the online Angus Reid Forum found that the three percentage points the Bank has already hiked has had “a considerable cooling effect on Canadian spending” — especially when it comes to real estate.

One in three Canadians say the swift and steady rise in interest rates this year has caused them to delay making a real estate transaction or major purchase. One in 10 say they have delayed buying a home, while the same proportion expect to delay buying one in the next year.

Since the Bank of Canada began hiking rates in March, property values in Canada have declined for seven months in a row and are now down 8.8 per cent from their peak in February.

Smaller markets in Ontario and B.C. that led the frothy climb during the pandemic are suffering the worst of the correction, said RBC economist Robert Hogue. For example, prices in Cambridge, Ont. have tumbled 20 per cent, Hamilton, 16 per cent, and Chilliwack, B.C., 13 per cent.

At the same time the steep rise in mortgage rates has cut deeply into affordability for many Canadians.

One in five homeowners surveyed say they expect rising rates will mean it will take them significantly longer to pay off their mortgage than they had thought. Almost one in 10 expect they will need to take on more debt to pay for their current mortgage.

With borrowing costs likely to rise further, Canadians in the survey were equally gloomy about selling, with almost one in five expecting that their home will never reach the value it did prior to the 2022 rate increases, the poll said.

Martha Vallance, Dye & Durham’s chief operating officer, says the knock-on effect that this slump in sentiment will have on businesses that rely on consumer spending and real estate transactions in 2023 is significant.

“The effects that the one-two punch of rising interest rates and recession worries are having on spending and real estate plans cannot be understated. The average Canadian is concerned about what lies ahead and is bracing for a recession by tightening up their spending and delaying major purchases,” Vallance said in the press release.

And worried we are, according to the poll. More than half, 53 per cent, of Canadians believe the country is about to enter a recession, while 30 per cent believe we are already in one.

Canadians are equally pessimistic about where Bank of Canada rates are headed, with a third saying they expect the Bank to hike another 100 basis points before the end of the year, putting the rate to 4.25 per cent.

Disturbingly — especially for central bankers who want to douse inflation expectations — almost half, 48 per cent, say they don’t believe interest rate hikes so far have slowed inflation, and more than half, 53 per cent, believe inflation will continue to rise over the next six months.

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IN WITH THE NEW New Conservative Party leader and incoming prime minister Rishi Sunak waves as he leaves the Conservative Party Headquarters in London after being announced as the winner of the leadership contest Monday. Sunak was appointed as Conservative leader and the UK’s next Prime Minister after he was the only candidate to garner 100-plus votes from Conservative MPs in the contest for the top job. He was appointed prime minister by King Charles today, replacing Liz Truss, who only lasted 44 days before she said she would resign. See more on Britain’s latest leader below in today’s Leading Indicator. Photo by Dan Kitwood/Getty Images

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Rishi Sunak, 42, became one of the youngest British leaders in modern times when he was sworn in as Prime Minister today after winning the race to lead the Conservative Party. In fact, the youngest in 200 years.

The multi-millionaire former hedge fund boss is also one of the wealthiest politicians in Westminster. A former Goldman Sachs analyst, Sunak became the latest in a long line of former Goldman employees to become policy makers in the Group of Seven economies, Bloomberg reports. Since December 2005 until last Sunday, there has always been a Goldman Sachs alumnus serving as a G-7 prime minister, finance minister or central bank chief. Mark Carney, former governor for the Bank of Canada and the Bank of England, has been one of them.

The run was only broken when Mario Draghi stood down Sunday as Italian premier. Today’s chart is by Bloomberg.

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Are you on a variable-rate mortgage and starting to sweat as the Bank of Canada raises rates? Those feeling the squeeze on their budgets might consider going to a fixed-rate mortgage. But before you take the leap, it is good to know all your options.

Our content partner MoneyWise can help.

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Today’s Posthaste was written by Pamela Heaven (@pamheaven), with additional reporting from The Canadian Press, Thomson Reuters and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com, or hit reply to send us a note.

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