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This Week’s Top Stories: Canadian Mortgages Help Push Record Debt & Investors Are Fleeing

Time for your cheat sheet on this week’s top stories.

Canadian Real Estate

Canadian Household Debt Nears $3 Trillion, Over 130% of GDP

Canadians are warming up to borrowing again, fueled by rumors of cheap credit returning soon. Households owed $3 trillion in debt as of February, climbing 3.4% from last year. Higher rates slowed borrowing, but growth is showing mild acceleration as discussions of rate cuts warm up. It may not be a concern for those who don’t owe debt, but it should be. Every point the household debt to GDP ratio rises above 70%, trims long-term growth by 0.1 points. Central banking experts warn the long-term loss is much worse than any short-term boosts. 

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Canada Sees Domestic & Foreign Investors Pull Out At A Record Pace

Canada’s domestic investors are joining the foreign investor pullout that began earlier this year. Canadians sent a record net outflow of $24.2 billion into foreign securities this February, following a $7.6 billion outflow in January. Foreign investors also sold off an unprecedented $15.1 billion in Canadian government debt, following a $15.5 billion sell off of private debt in January. There’s a lot of reasons for the flight, but a weakening loonie and being left out of the global economic boom are two of the biggest issues.

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Canada’s New Housing Plan Won’t Help, But Slowing Immigration Will: BMO

BMO doesn’t see new government measures helping with housing, but that doesn’t mean they don’t see things improving. The bank sees most budget announcements as demand stimulus, trying to accomplish the opposite of making life more affordable. However, previously announced measures to cap immigration will have a big impact. The bank reiterated its belief that Canada doesn’t have a supply issue, it has a demand issue.

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Canadian Inflation Heads In The Wrong Direction, Broad Based Growth

Canadian inflation is heading in the wrong direction, and the growth is broad based. Annual growth of headline CPI accelerated 0.1 points to 2.9% in March, largely due to gas and energy prices. Housing remains a big contributor, but it’s showing some signs of moderation. Despite the acceleration, experts generally still see rate cuts coming mid-year. 

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New Canadian Mortgage Rules To Have Little Impact On Housing: BMO

Canada unveiled a few new measures to stimulate demand, including extended amortizations and higher RRSP withdrawal limits. Virtually all of the new measures involved finding a new way for buyers to borrow more to purchase a home, supporting higher prices. At least one bank doesn’t see it having much of an impact though, as the relevance of first-time buyers fades in Canada’s housing bubble. 

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