Governor of the Bank of Canada Tiff Macklem holds a press conference at the Bank Of Canada in Ottawa on October 28, 2020. THE CANADIAN PRESS/Sean Kilpatrick

Governor of the Bank of Canada Tiff Macklem holds a press conference at the Bank Of Canada in Ottawa on October 28, 2020. THE CANADIAN PRESS/Sean Kilpatrick

Bank of Canada monitoring hot housing market amid early warning signs: Macklem

Central bank surprised by the rebound in housing market

OTTAWA — Bank of Canada governor Tiff Macklem says the central bank is seeing early signs that people may be purchasing homes solely because they believe prices may go up.

Macklem says rising prices in particular for single-family homes are still a long way from the heated market the country observed about five years ago.

Fuelling the increase has been a combination of demand for more space as millions of workers do their jobs remotely, constrained supply and rock-bottom interest rates driven low by central bank actions.

The bank’s key policy rate has been at 0.25 per cent for about 11 months, and its quantitative easing program is trying to reduce the rates paid on things like mortgages to drive spending.

Macklem says the central bank is surprised by the rebound in the housing market.

He adds there are early signs of what he called “excess exuberance,” with people maybe expecting the recent increases in prices to go on indefinitely.

“What we get worried about is when we start to see extrapolated expectations, when we start to see people expecting the kind of unsustainable price increases we’ve seen recently go on indefinitely,” Macklem said during a question-and-answer session with chambers of commerce in Edmonton and Calgary.

“We are starting to see some early signs of excess exuberance, but we’re a long way from where we were in 2016-2017 when things were really hot.”

The central bank plans to keep its key rate low until the economy recovers, expected sometime in 2023, and adjust its bond-buying program over time.

Macklem says there is still a need for considerable monetary policy support to generate a complete recovery.

In the meantime, the bank will keep an eye on debt levels, as mortgage debt rises as households pay down other debt like credit cards and personal loans, Macklem says.

“We are acutely aware that in a world of very low interest rates, there is a risk that housing prices could get stretched, households could get stretched, and certainly that’s a risk we want to guard against,” Macklem told reporters following the speech.

This report by The Canadian Press was first published Feb. 23, 2021.

Banking

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Several cases of COVID-19 were reported among employees of stores at Bower Place Mall. (Photo by LANA MICHELIN/Advocate staff).
COVID-19 cases reported at Bower Place mall stores

AHS said five complaints were investigated since March, and required changes made

(Image from Facebook)
Some rural central Alberta students return to online learning

Grades 6 to 12 at Coronation School impacted

Edmonton Eskimos' Tanner Green, right, knocks the ball from Calgary Stampeders' Romar Morris during first half CFL football action in Calgary, Saturday, Aug. 3, 2019. THE CANADIAN PRESS/Jeff McIntosh
Lacombe’s Tanner Green happy to finally see a CFL return to play date

CFL announced Wednesday league will return on Aug. 5

Instructor Brandt Trimble leads an outdoor spin class at RYDE RD. (Photo by SUSAN ZIELINSKI/Advocate staff)
Fitness facilities continue to adapt to COVID-19 restrictions

‘It’s really frustrating to be one of the targeted businesses’

Red Deer-Lacombe MP Blaine Calkins (Photo contributed)
Federal budget strangles job growth, says MP Blaine Calkins

‘It is most certainly not a balanced budget’

A vial of the Medicago vaccine sits on a surface. CARe Clinic, located in Red Deer, has been selected to participate in the third phase of vaccine study. (Photo courtesy www.medicago.com)
Red Deer clinical research centre participating in plant-based COVID-19 vaccine trial

A Red Deer research centre has been selected to participate in the… Continue reading

A man walks into a Cargill meat processing factory. THE CANADIAN PRESS/Graham Hughes
Site of COVID outbreak last year: Vaccination clinic at Alberta meat plant postponed

HIGH RIVER, Alta. — A COVID-19 vaccination clinic for thousands of workers… Continue reading

Canadian Prime Minister Justin Trudeau looks at a television screen as he listens to United States President Joe Biden deliver a statement during a virtual joint statement following a virtual meeting in Ottawa, Tuesday, February 23, 2021. THE CANADIAN PRESS/Adrian Wyld
‘We hope to help a little more’: Biden says he spoke to Trudeau about more vaccines

WASHINGTON — Canada can look forward to an unexpected shot in the… Continue reading

The Mission Correctional Institution in Mission, B.C. is pictured Tuesday, April 14, 2020. A new federal study found that people released from prison were much more likely than the general population to have trouble finding gainful employment, even over a decade after returning to society. THE CANADIAN PRESS/Jonathan Hayward
Ease employment hurdles for former prison inmates, federal study urges

OTTAWA — A new federal study found that people released from prison… Continue reading

Governor of the Bank of Canada Tiff Macklem holds a press conference at the Bank Of Canada in Ottawa on Wednesday, Oct. 28, 2020. THE CANADIAN PRESS/Sean Kilpatrick
Bank of Canada keeps rate on hold, sees brighter economic outlook

OTTAWA — The Bank of Canada is keeping its key interest rate… Continue reading

Chief Public Health Officer Theresa Tam speaks during a technical briefing on the COVID pandemic in Canada, Friday, January 15, 2021 in Ottawa. Tam says new information on COVID-19 and variants prompted the National Advisory Committee on Immunization to suddenly cancel its planned update on who should get the Oxford-AstraZeneca vaccine.THE CANADIAN PRESS/Adrian Wyld
AstraZeneca advice from national panel delayed by new data on COVID-19 and variants

OTTAWA — Canada’s chief public health officer says new information on COVID-19… Continue reading

Canadian Prime Minister Justin Trudeau looks at a television screen as he listens to United States President Joe Biden deliver a statement during a virtual joint statement following a virtual meeting in Ottawa, Tuesday, February 23, 2021. THE CANADIAN PRESS/Adrian Wyld
Trudeau pressured to adopt tougher emissions target for Biden climate summit

OTTAWA — Prime Minister Justin Trudeau is under pressure to step up… Continue reading

Passengers from Air India flight 187 from New Delhi wait for their transportation to quarantine after arriving at Pearson Airport in Toronto on Wednesday, April 21, 2021.THE CANADIAN PRESS/Frank Gunn
ICU pressures mount as COVID fells younger people; Ottawa mulls India travel ban

TORONTO — Amid mounting pressures on critical care in hospitals and concerns… Continue reading

Finance Minister Chrystia Freeland delivers the federal budget in the House of Commons as Prime Minister Justin Trudeau looks on in Ottawa on Monday April 19, 2021. THE CANADIAN PRESS/Sean Kilpatrick
Three confidence votes to determine fate of minority Liberal government

OTTAWA — A pair of proposed changes to the federal budget put… Continue reading

Most Read