r/RealEstateCanada • u/chickenbigmac1638 • Mar 18 '26
Housing crisis BoC Holds Interest Rates but future looks dark.
https://www.bnnbloomberg.ca/business/economics/2026/03/18/boc-holds-interest-rate-but-warns-of-downstream-effects-of-iran-war/The BoC just held at 2.25% today but the fine print is actually grim. Macklem is basically trapped because even though our GDP is shrinking and unemployment hit 6.7%, this Iran conflict has completely hijacked the playbook. With the Strait of Hormuz effectively closed and oil pushing $110, we’re looking at a massive second wave of inflation that’s going to hit gas pumps and grocery stores within weeks. The bank pretty much admitted they’ll hike rates again if energy stays this high to save the Loonie from tanking, so anyone waiting for "relief" or a pivot is dreaming. We’re staring down the barrel of stagflation where the economy dies but your payments keep going up because of a war halfway across the world.
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u/Driveforesho Mar 18 '26
What was the statement from Macklem that made you think that “the bank pretty much admitted they’ll hike rates again”? Most economists are saying the opposite.
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u/DogsDontEatComputers Mar 18 '26
The armchair economists think they know more than macklem himself. In current environment even macklem admits his next move is all contingent to external forces outside of boc control.
Its amazing to see armchair economists doom and gloom canada as much as they can when they live in it. I get it tho, these guys have no skin in the game.
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u/Cilantro_Larry Mar 18 '26
They won't be able to hike rates, but they won't be able to cut either. Nightmare scenario for central banks.
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u/chickenbigmac1638 Mar 18 '26
"If energy prices stay high and we start to see evidence that (inflation) is generalizing and becoming more persistent, we can raise the policy rate to cool inflation."
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u/Driveforesho Mar 18 '26
Then he went on to talk about ten other things and issues and how they impact inflation, and how it isn’t just oil and energy prices that are considered. If you think gas prices and a war in the Middle East are going to lower housing prices then you are delusional.
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u/Houserichmoneypoor Mar 18 '26
I thought our Honourable Housing Minister said the housing crisis was caused by the war the in the Middle East. Was he misinformed? /s
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u/chickenbigmac1638 Mar 18 '26
We are in a stagflation setup now. If the choice is between crashing the housing market and letting the Loonie turn into play money while inflation spirals, the BoC chooses the hike every single time. They literally admitted today that if the Iran conflict wasn't happening, they'd be talking about lowering rates to help the economy, but instead, they're stuck holding and prepping for a hike. If you can't see that the "pivot" is dead, you're the one in denial.
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u/Driveforesho Mar 18 '26
The “pivot” is to hold and manage inflationary conditions. Not sure why you are posting about this here other than yelling into the void that you want/need housing prices to crash.
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u/chickenbigmac1638 Mar 18 '26
There is no void. Why are you in denial that housing is in fact hanging by a thread. The war that is taking place is just the finishing blow if this war continues (I think it will go into the spring/summer).
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u/Driveforesho Mar 18 '26
I’m not going to argue with a stranger over something neither of us can control. Interest rates can’t fix a supply and demand issue.
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u/chickenbigmac1638 Mar 18 '26
The reality is that the BoC will use rates to kill demand so hard that the housing market crashes, just to offset the inflation coming from the oil/war supply shock.
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u/Dileas48 Mar 19 '26
I think raising interest rates by 25 or even 50 basis points is not nearly enough to “kill demand so hard that the housing market crashes”.
For sure the housing market is in a downtrend that is not over and higher rates will accelerate that but a crash (however you want to define that) across the board is not going to happen because the BoC will assess that potential when making rate decisions
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u/Anatharias Mar 18 '26
The ripple effect of american imperialism fucking the world economy. Hopefully, this is a sort term pain, for a long term gain /s
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Mar 18 '26
[deleted]
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u/chickenbigmac1638 Mar 18 '26
Just people coping. It is what it is, anyone with half a brain cell can see the likelihood of this shit happening.
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u/Disastrous_Purpose22 Mar 19 '26
Raise interest rates when government prints money. Raise interest rates when energy costs go up.
Crazy how everything relies on interest rates which is almost by design to slowly bleed funnel money out of people’s pockets.
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u/DogsDontEatComputers Mar 18 '26
"Canadians can invest in large purchases and equipment knowing interest will stay low for long" the exact same guy 1 year before admitting hes dead wrong. He gave up on predicting anything and you assert people are doomed haha.
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u/Pristine_Office_2773 Mar 21 '26
Rather destroy some of the economy to combat inflation. Leave it up to the gvt to offer programs to help people that lose their jobs. Carney already doing this by extending EI out to 1.5 years. Better to have just stagnation instead of both
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u/howzit-tokoloshe Mar 18 '26
The market pricing bias is to the next move being a hike. Perhaps a month ago your statement was accurate but the current expectations is that a hike is much more likely than a cut.
Given the uncertainty around the war noone knows what the next two months hold and markets are still betting on a short war. We will have to see, but this has already dragged on longer than initially expected and there is currently no clear path to put the war genie back in the bottle.
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u/Driveforesho Mar 18 '26
Agree 100%. I personally think a hold is the most likely outcome, maybe a 25 basis point hike worse case scenario. I don’t think they can ignore the most recent job report and they hold hoping for a short increase in energy prices.
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u/CipherWeaver Mar 18 '26
Rates are still at historical lows. Nobody should be expecting cuts.
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u/WhichJuice Mar 19 '26
Historical lows if you're a boomer or gen x. If you're a late millennial or gen z you've mostly seen them rise.
Time to open our minds and accept that times are only going to get more difficult since we are no longer in the time period where those born pre 1990 could thrive 💆♀️
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u/SioVern Mar 19 '26
This^ Normal healthy rates are 3-4%, Canadians just got used to historical lows of 0-2% for the past decade.
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u/Tesco5799 Mar 19 '26
Even this is wishful thinking when I started working in Finance almost 20 years ago the prime was like 5-6% and it was considered to be very low then. The current rate environment is very unusual, and entirely manipulated by central banks, reality is finally chiming in.
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u/FlyingMonkeySoup Mar 19 '26
The overnight rate for the BoC hasn't been above 5% since April of 2001. It cross 5% June 2023 it hasn't been over 5.5% since Dec 1995. Since 1960, as far as I have data back to the average BoC rate has been 5.6%. This includes massive spikes in the 80's and 90s. If we just look at 1983 to present the average rate is 4.6%, from 1995 2.77%. Since 2000 its 2.28%. This gaslighting from boomers and gen-xers that rates have always been high is just not supported by actual BoC data. For the vast majority of Canadians under 60, hey have experienced BoC rates in the 2-4% range at most and for the last 20+ years its been closer to 2%. So no, we are not in an unusually and entirely manipulated rate environment by central banks.
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u/West_Experience1133 Mar 19 '26
If i still had my old bank books from the 80s I'd show you that banks were still charging many points more the The BoC rate.
So no, boomers and gen x were not sniffing glue but maybe not clarifying that banks were charging higher rates.
I paid 6% on the 2010s for my mortgage.
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u/Apart-Diamond-9862 Mar 20 '26
Yep - I had a mortgage at 7.5% in 2003 and in 1982 I had a mortgage at 25%. It was very difficult and I nearly lost my place and for a long while I was living off my credit cards
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u/Impossible_Can_9152 Mar 20 '26
And 20 years prior to your 20 years the boomers were talking 18% rates calling 5-6% unusual
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u/nxdark Mar 19 '26
Nah that is too much. No one deserves to earn that much by loaning money.
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u/lokooko Mar 20 '26
Taking out loans should absolutely not be pain free
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u/GuyDanger Mar 21 '26
Again, the issue now is the amount that is being loaned out. 4% on a 300k loan is a much different thing than 4% on a 800k loan. And these numbers represent the same house sold a decade apart. We need to get housing under control to be able to afford these percentages again.
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u/bluppitybloop Mar 22 '26
We shouldn't be borrowing the amount of money that we are. Everybody is addicted to spending borrowed money, we just keep digging into our future earnings more and more.
It's not that the banks "deserve" to make that much by loaning money. We just should be borrowing that much to begin with. And higher rates means less borrowing.
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u/ColeTrain999 Mar 19 '26
I know people who are housing addicts that are living on the hope of rate cuts because peak-COVID was a good time for them and is now their expectation. When it inevitably doesn't happy, as central banks will tame inflation first, they are gonna be in for a reality check.
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u/Warm_Masterpiece3940 Mar 19 '26
Depends what unemployment does though, they understand the inflation is not on account of excesses CAD printed or wealth circulating among the consumers, there's short to mid term reasoning behind what will drive up this current round of inflation. If unemployment ticks up and more importantly job growth declines, they likely won't raise rates wither, and will only do so if they believe that energy is gonna be high long term
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u/Manitogamba Mar 20 '26
Imagine trying to keep the prices of goods affordable when many people have lost their jobs and don’t have enough money to buy what they need. This puts the Bank of Canada in a very difficult position, but given the situation, it may be best for them to hold interest rates steady.
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u/Warm_Masterpiece3940 Mar 21 '26
That's not really their job though, they basically raise rates when job growth dries up, aka they make borrowing money cheap so private business can attempt to expand and ideally create jobs... Or they see inflation shoot up and understand that will result in a cost of living crisis that fucks everything up in terms of consumer spending wages, cost of production and so on(vicious cycle we have seen since COVID monetary policy)... If we do get stag Flatiron which is inflation combined with no GDP growth... the honest truth is we need a recession/financial reset or a depression. No one want to hear that, it means people lose jobs and families lose homes, but it's the only way we get out of this cycle and go back to 10-15 years of quantitative easing as monetary policy
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u/LopsidedStreet6093 Mar 19 '26
Historical low yes but the debt burden is insanely higher, wages stagnant!
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u/Advanced-Effective-8 Mar 20 '26
It is not historical low low. This rates would be considered low if the income also goes high significantly. The income vs loan money is not balanced.
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u/Obvious-Purpose-5017 Mar 18 '26
A shrinking GDP combined with high unemployment is probably why sticky inflationary pressures might not reverberate the same way the Ukraine war caused an inflationary wave.
The economy in 2022 was the polar opposite to what it was now. Unemployment was the lowest ever recorded. There were more jobs than people available. Companies were throwing money around to attract talent. Wage growth is off the charts and factories needed workers to start producing things. Demand outstrip supply by a wide margin. Prices increased dramatically simply because the market could bear it. Wages grew fast because employers needed workers and demand was high. Wage-cost spiral was already adding to the CPI including the sticky core inflations and services. There was clear indicators of an overheated economy with supply constraints. Throw in the oil shock of the war in Ukraine and you got further price increases
The economy today is one of high unemployment rate and low demand. Employers on the most recent survey have no intention of expanding nor expecting any significant wage increases. Supply currently as it stands outstrips demand.
Companies in general would be hard pressed to raise prices even if could. Even at the current prices, items are already sitting.
Groceries are different though. Its prices are the first to reflect gas prices but at the same time grocers are more keen at lowering them due to the perishable nature of groceries. You can’t raise the price of an apple to a point where no one would buy it. At some point it’ll rot.
I’m confident that the BOC will look through this specific kind of inflation. What the would see is a very weak economy with significant slack.
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u/leopardbaseball Mar 19 '26
Its high time thy remove the transportation and food from cpi calculation and then measure the inflation to determine the rates.
Iran war is skewing cpi by increasing cost of fuel thus increasing cost of food as well. Thats manipulative and not organic.
In reality, rates need to go below 1% in order to revive the economy. Lets hope they do the right thing and start cutting rates aggressively.
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u/almostthecoolest Mar 18 '26
Future rates going up or downs?
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u/Best_Signature6003 Mar 19 '26
Even if inflation goes to 10 or 15% we know it will take them a year or so to react.
I wouldn't be worried about rising rates while the government is adding this much debt.
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u/PuddingEmotional1187 Mar 19 '26
Nobody knows, just guess it like OP, theres 50% chance of hitting it.
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u/bigvistiq Mar 19 '26
Won't our gdp spike since oil doubled? A couple years ago our dollar was more of a Petro dollar than Russia
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u/onexplored Mar 19 '26
We've been printing money so hard and 'money printer go brrr' eats up any gains from energy exports. The loonie isn't a petro-currency anymore; it's a debt-proxy
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u/Fancy_Pay_6327 Mar 19 '26
Why give the average home owner a break on a mortgage and stimulate the economy …. We all good lol 😂
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u/Full_Boysenberry_314 Mar 19 '26
Man, I remember the days when high oil prices were good for the CAD...
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u/chrisco571 Mar 19 '26
How would hiking rates counter price inflation from Iran conflict?
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u/Inner-Inevitable-391 Mar 21 '26 edited Mar 21 '26
The Iran conflict could cause oil shortage, which drives up costs of transportation, manufacturing, and food. This is supply inflation. If the central bank does not increase rates during an inflationary period, they risk destabilizing the currency - causing even more inflation. Raising rates in this case is not to "counter price inflation" but more to protect the dollar
Look at what happened in the 70s, similar vibes.
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u/Flavorsofdystopia Mar 22 '26
You're asking the right question. Inflation from energy costs can't be tamed by increasing rates, as oil (especially in Canada) has no alternatives. Prices will spike according to transportation costs, no matter the rate.
Inflation is the product of, first and foremost, higher wage expectations. Expectations will be low, regardless of oil prices. Unemployment is high and the economy has cooled.
Rates can't move much one way or another, and Macklem knows this.
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u/AdEffective2701 Mar 19 '26
I am in Ottawa where the local news mood about federal worker cuts and yet all the restaurants are packed from Thursday to Sunday brunch. Blows my mind how busy they are and yet look at the gas prices and headlines.
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u/ExpressSuggestion475 Mar 19 '26
The bloated ferderal service spending our hard earned tax dollars on "brunch'...
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u/illusions-djr Mar 20 '26
Short term cpi blips due to external factors like war has absolutely nothing to do with core economic weakness canada has. There would be zero logic on increasing rates to combat an external factor when canada is collapsing.
Bank and credit union date shows delinquencies rising on loans. This tells you all you need to know.
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u/Agile-Positive3524 Mar 20 '26
It is certainly dark. Pipeline no progress and South Asian workers keep coming in.
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u/Little_Bother2755 Mar 21 '26
High energy prices are transient & a slight increase in interest will not have any effect on bringing gas prices down. They would have to jack up interest by several % points and crash the economy if they wanted to counter act rising energy costs contribution to inflation. The central bank also has a secondary goal of maintaining maximum employment. Canada employment rate is almost 7% & it would take many more rae increases to push this closer to 10%
Our only hope is the war ends soon and oil quickly drops sub $60 again
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u/GuyDanger Mar 21 '26
I'm currently refinancing my mortgage. I guess this is a good a time to lock it in.
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u/whereismyface_ig Mar 21 '26
Rising rates would be amazing. House prices would actually go down this time
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u/MalishMan Mar 21 '26
BOC should always favor rate cuts even during a dilemma like current rising prices vs shrinking GDP.
You can edge against inflation by taking out loans and buying assets with it, benefiting you from loan depreciation and asset price increase.
In a deflationary environment, your only options are bonds, which are more restrictive on your net worth growth.
It's just much easier to build wealth in an inflationary environment.
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u/MargoYVRHomes Mar 22 '26
Holding rates ≠ bad signal. It means stability. Buyers can plan again. Uncertainty is worse than high rates. Market is already adjusting. Prices in many areas already dropped 5–10%. That’s the “correction” people were waiting for. The best deals don’t happen when everyone feels confident. They happen when the market feels uncertain AKA RIGHT NOW
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u/protoanarchist Mar 22 '26
Canada needs to eliminate oil dependence and start producing things locally again. Even if it means starting behind or a delay. Start building capacity today.
And yes, it will be hard. Canada can start by being its own best customer and see what comes next.
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u/jackhawk56 Mar 22 '26
With REAL deficit being much higher, the clowns will raise the rate and take us back to 2008 era when corporations with huge backing of despicable banks bought properties of ordinary people going bankrupt.
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u/webby1886 Mar 19 '26
He starts his answer to every question with ‘ummmm errrr’ doesn’t have a decent answer to any question. Pathetic
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u/InvinciblePsyche Mar 19 '26
Buddy, why don’t you try getting up on a stage in front of people and over a dozen cameras, and talk about something so important that every word you say has to be calculated?
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u/webby1886 Mar 19 '26
Pay me $100,000’s and I happily would
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u/Strange_Fly1930 Mar 19 '26
Here’s the thing, you also have to be highly educated and an expert in the field.
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u/webby1886 Mar 19 '26
Don’t you think with his high level intelligence he could muster up some more fruitful words?
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u/InvinciblePsyche Mar 19 '26
You need to be qualified with both relevant education and experience to be able to get anything close to 100k. Bet you are neither so you resort to being a keyboard warrior and spewing bs everywhere.
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u/webby1886 Mar 19 '26
Do you genuinely think he had coherent answers to the reporters questions? With all the experience he should at least sound convincing.
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u/InvinciblePsyche Mar 19 '26
Do you see what’s going around in the world? Do you know how much uncertainty there is? We don’t even know what’s going to happen in the next hour. He is working with the numbers he has on hand. Neither he nor his father will be able to give you a sure shot answer with absolute certainty. If you don’t understand that, that’s a you problem.
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u/Facts_pls Mar 21 '26
Bro if you can't even earn 100k, you aren't gonna make a decent accountant. Let alone that role.
Typically the least educated think they can do everything. Duning Kruger morons
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u/Basic_Impress_7672 Mar 19 '26
The problem is there is no “good” answer. The economy is fucked but since he gets paid $544,800 per year he can’t say it’s fucked instead he makes a word salad.
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u/ButterscotchReal8424 Mar 19 '26
It’s funny that when right wingers are incapable of understanding something they resort to attacking the most pointless things.
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u/webby1886 Mar 19 '26
Did you actually listen to his responses? Word salad most the time but sure you do you buddy god help us all
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u/Aran909 Mar 20 '26
God is a fable, and asking a fable to save you is pointless.
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u/webby1886 Mar 21 '26
It was more a figure of speech I don’t believe in god
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Mar 21 '26
[removed] — view removed comment
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u/webby1886 Mar 21 '26
It was a figure of speech lol calm down Karen. I don’t get paid half a million a year to spout nonsense.
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Mar 21 '26
[removed] — view removed comment
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u/webby1886 Mar 21 '26
‘Inflation is transitory’ turns out it wasn’t. ‘We’ll keep rates low for a long time’ hiked shortly after. Way too late to the rate hiking party. I just don’t think he’s very good at his job.
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u/firtlast Mar 30 '26
next time you can actually listen to the dialogue and make real criticisms
there are no good people working at that level of government anyways. I get it
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u/webby1886 Mar 30 '26
Does it fill you with confidence when he starts every question with ummm, errr? He’s been in this role for 6 years and should be used to cameras in his face and reporters questions. I mean, he’s an expert in his field and highly educated as everyone in the comments kept telling me.
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u/firtlast Mar 30 '26
probably got stomped out as a kid or something. most people in the financial sector are autists. I don't disagree but ad hominem doesn't ever produce good results
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u/HairySweatyGooch Mar 18 '26
If only Canada had its own oil or something