Ringing in the New Year: here’s what we’ll be watching in 2023
With 2022 now in our rear-view mirror, it’s time to look ahead at what the coming year may have in store.
We think it’s fair to say 2022 is a year many of us won’t soon forget.
It was a year that started with Canadian house prices reaching their highest levels ever. Unfortunately, that wasn’t the only thing rising. Inflation hit a 40-year high over the summer, prompting the Bank of Canada to step in with 400-basis points of tightening over seven consecutive rate hikes.
Over the course of the year, both fixed and variable mortgage rates rose while home prices trended downward.
However, there are reasons to be optimistic looking ahead, particularly now that the Bank of Canada is nearing the end of this rate-hike cycle, and may even be there already.
Reasons for optimism in 2023
Nobody has a crystal ball to know what exactly will unfold this year. But the following are just some of the reasons to be hopeful for a return to more normal market conditions in the coming year.
- Interest rates: The Bank of Canada has explicitly said economic data in the coming months will determine if it continues to increase interest rates. While an additional rate hike can’t be ruled out, I believe we’re at least near the peak.
- And rate relief could be on its way in 2023. Some economists believe the Bank could start cutting rates before the end of the year, which would be a welcome relief for borrowers. By 2024, however, most economists agree that interest rates will be lower than they are today.
- Inflation: Despite some “stickiness,” the Bank of Canada’s rate hikes have worked to slow inflation from its peak growth rate earlier in the year. If inflation continues heading in the right direction, it could solidify calls that the Bank of Canada is finished with rate hikes for this cycle.
- The economy: While signs are clear that the economy is heading for a slowdown, the Bank of Canada remains hopeful it will be able to pull off a so-called soft-landing, in which job losses are limited and the country can avoid a major downturn. The Bank of Canada sees GDP growth slowing to under 1% in 2023 and rising again to about 2% in 2024.
And of course, the start of a new year is always the perfect time for an annual review of your mortgage and your personal finances. If you need someone to review your budget and overall financial situation, please give us a call and we’ll be happy to help ensure you’re in the best financial shape possible heading into 2023.
We want to take this opportunity to wish you and your loved ones a happy, healthy and prosperous New Year. We remain at your service for all of your mortgage needs, and would be happy to connect with you for any questions or concerns you might have.