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CIBC predicts mortgage plunge in second half

October 4, 2018

An expected hike in the Bank of Canada overnight lending rate in October would accelerate a second-half plunge in housing sales and related mortgages, major banks are warning.
BMO chief economist Douglas Porter said last week that the market might remain cool for the remainder of the year.
“On balance, the results are a bit softer than expected and suggest that the market overall is still adapting to new regulations and higher rates,” he wrote in a recent note. “With longer-term bond yields still grinding higher yet, don’t look for a quick turn in the market anytime soon.” 
CIBC retail banking head Christina Kramer said that CIBC expects the number of new mortgages it will grant in the second half of 2018 will be cut in half due to the new mortgage stress test that came into effect on January 1.
“We expect there to be an origination decline in the 50 per cent range relative to the same period last year,” said Kramer, in a statement. “A year ago, two-thirds of our revenue would be related to our mortgage business and today that’s about a quarter.”
The bank saw its mortgage book grow by a relatively low 7 and 9 per cent in Q1 2018 and Q4 2017, respectively, and Kramer predicts that number will continue to remain in the single digits for the rest of the year.
The Bank of Canada hiked the overnight rate to 1.25 per cent in January, and is widely expected to increase this rate again before the end of the year.



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