Statistics Canada released its latest GDP numbers. To say they aren’t pretty would be the understatement of the century. The Canadian economy shrank by 0.6 percent in the first quarter of 2015. The numbers are even worse than the Bank of Canada had forecasted. Our central bank had forecasted growth of 0 percent for the first three months of 2015.
The Canadian economy is in jeopardy of slipping into recession territory. A recession is defined as a period of economic decline, where GDP falls in two straight quarters. All eyes will be on the second quarter 2015 GDP numbers. If the Canadian economy shrinks for a second consecutive quarter, we’ll be in a full-blown recession.
Tough Times Ahead for Alberta
The dismal GDP numbers are further proof how hard the Canadian economy has been hit by perpetually low oil prices. Tough times are ahead for oil-rich provinces like Alberta and Newfoundland. Alberta is facing a $5 billion budget deficit in 2015-16, followed by $3 billion in 2016-17. It’s quite a reversal of fortune for Alberta, once known as Canada’s economic engine. Alberta, which used to be the fastest growing province, is in full on recession.
While the Alberta economy is struggling to adjust from boom to bust, Alberta’s housing market has yet to feel the effects of low oil prices. The Canada Mortgage and Housing Corporation reported the number of newly insured mortgages actually rose in Alberta in the first quarter of 2015. Newly-insured mortgages rose to 23.8 percent from 23.4 percent last year. New CMHC-insured mortgages for multi-residential construction, such as apartments and condos, were also up, nearly doubling to 12 percent. Overall, the value of newly insurance mortgages increased by 2 percent year-over-year to $322,963.
Where are Interest Rates Heading?
With the dismal GDP numbers, could an interest rate cut be in the cards? That’s the million dollar question. After Bank of Canada Governor Stephen Poloz shocked markets by cutting the overnight lending rate by 25 basis points to 0.75 percent in January, all bets are off on whether a further interest rate cut could be in store. Poloz held the overnight lending rate steady last week, but that was before Statistics Canada released its cringe worthy GDP numbers. With the next interest rate announcement set for July, many economists are predicting a cut in interest rates. (Just remember to take their predictions with a grain of salt, as no economist predicted the surprise interest rate cut earlier this year).
You may be wondering what the disappointing GDP numbers mean for mortgage rates and the housing market in general. If you’re sitting on the fence, not sure whether to take the plunge and buy a home, I’ll offer you some reassurance: there’s never been a better time to buy. Despite a shortage of listings in highly sought-after markets like Toronto and Vancouver, there are still pockets of the city you can purchase a home while avoiding the dreaded bidding war.
Get Pre-Approved for a Mortgage Today
If you’re in the market for a home, make sure you get pre-approved for a mortgage. At Calum Ross Mortgage, we help you find the best mortgage product for your need. When you’re pre-approved for a mortgage you gain the best of both worlds. If mortgage rates rise you’re protected, but if rates fall you get the lower rate – it’s a win-win situation. Get pre-approved for a mortgage today and start taking advantage of record low mortgage rates right now.