BOC admits overkill from regulations
January 17, 2019
The Bank of Canada (BOC) has conceded that stiff new mortgage regulations, provincial and municipal housing restrictions and rising interest rates have had an overkill affect on the Canadian housing market, resulting in a larger and more negative impact than expected.
“Staff analysis suggest that the combined effect of tighter mortgage guidelines and higher interest rates has been larger than previously estimated,” the BOC noted in a January statement.
The BOC left the overnight benchmark policy rate at 1.75 per cent.
Consumer spending and housing investment "have been weaker than expected” as housing markets adjust to “to municipal and provincial measures, changes to mortgage guidelines, and higher interest rates. Household spending will be dampened further by slow growth in oil-producing provinces,” according to the BOC statement.
The contribution to average annual real economic growth from housing investment has been revised down to -0.1 per cent in 2019 from the +0.1 per cent BOC forecast in October 2018.