Forecast for 2020

Prime Lending Rate

FOUR FACTORS THAT POINT TO A CONTINUING STRONG MARKET IN 2020

1. LOWER AND STABLE RATES WILL KEEP PRESSURE ON PRICES 

Where Are Interest Rates Going in 2020?

After spending all of 2019 on the sidelines and leaving rates untouched, the Bank of Canada is expected to deliver a long-awaited 25-bps rate cut in 2020.

The BoC’s target overnight rate remained at 1.75% throughout 2019, thanks largely to a strong domestic economy in the face of global headwinds. Meanwhile, more than 40 central banks around the world have cut interest rates in recent months.

“We expect subtrend growth will continue through the early stages of 2020, testing the BoCs patience,” economists at RBC Economics wrote in a research note. “We look for a rate cut in Q2, but acknowledge that persistent strength in housing and earlier fiscal stimulus could keep the bank on the sidelines.”

Overnight Index Swap markets are currently pricing in a roughly 30% chance of a rate cut by July, according to Westpac.
(article taken for CREA website) 

2. CONTINUING LOW INVENTORY WILL ADD TO PRICE PRESSURE AND THE INCREASE IN NEW BUILDS 
 
There was virtually no change in the number of listings in Cranbrook from 2018 to 2019. The blue line (barely visible) is 2018, the magenta is 2019. The 60 new units for seniors on Kootenay Street did not increase the inventory of existing homes in the latter part of 2019. 

3. THE DROP IN EXPIRED LISTINGS POINTS TOWARDS A CONTINUING TIGHT MARKET
The blue area is 2018, magenta - 2019 

4. CHANGES ARE COMING THAT WILL PUT MORE BUYERS INTO THE MARKET

MOURNEAU (federal finance minister) HAS BEEN ASKED TO LOOSEN THE GRIP OF THE MORTGAGE QUALIFYING RULES
Ideas like relaxing the mortgage stress test, extending the maximum amortization period for insured mortgages, or increasing the amount of RRSP take-out for a first home down payment might bring short-term relief to buyers.