Business & Investment

Five or more rate hikes from 2022 to 2023: a heavy burden for Canadians?

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In a speech by Paul Beaudry, Deputy Governor of the Bank of Canada (BoC) before the Ontario Securities and Exchange Commission, Warning to Canadians.. He said household debt has increased significantly due to historically low interest rates. However, if borrowing costs rise next year, the impact on households could be enormous.

Home buyers, especially first-timers, shouldn’t rush to buy before Mortgage rates gain. The federal government has also warned of sudden price declines, as the housing market is vulnerable to corrections. CIBC “When interest rates start to rise, people, including investors, will enter the market,” said Benjamin Thai, deputy chief economist. He expects activity to accelerate further in the coming months.

Rate hike forecast

RBC Josh Nai, senior economist in economics, said the central bank of Canada is likely to raise interest rates three times for the first time in April 2022 next year. Derek Holt Scotiabank BoC, a top economist, may raise rates up to eight times by 2023.

Holt’s forecast is a four-quarter point increase next year and a four-quarter point increase in 2023. If his expectations are correct, the benchmark interest rate will be 2.25% by the end of 2023, or 1.25% higher than the current applicable interest rate.

Real estate investor

Toronto-based mortgage broker Lombardler said real estate investors account for 25% of housing demand. This group purchases real estate for rent or for speculative gains. The federal government has confirmed that investor purchases have doubled since the onset of the health crisis.

If you want to be exposed to the real estate industry but are afraid of a housing bubble burst, real estate investment trusts (REITs) are a viable alternative.Can be derived repeatedly Income flow from Morgard (TSX: MRT.UN) and Boardwalk (TSX: BEI.UN). Both are well-known lenders for different types of properties.

Long-term capital increase

Morgard suffered a loss in the year of COVID, but has since recovered from fallout. In the nine months ending September 30, 2021, we posted a net profit of $ 5.68 million compared to a net loss of $ 289.5 million in the year-ago quarter. In particular, funding from the business increased 7.3% to $ 50.94 million.

This $ 347.68 million REIT owns and operates industrial, office and retail real estate. Among its greatest assets are high-quality offices and authentic regional shopping malls. Morgard trades at $ 5.42 per share and pays a 4.4% dividend. Management continues to expand its portfolio, ensuring investors a long-term capital increase.

Fundamentals of a powerful apartment

Boardwalk boasts strong fundamentals in the core market. This $ 2.88 billion REIT owns and operates an apartment rental community in Canada. Growth in rental revenue (1.9%) and net operating income (5.1%) in the third quarter of 2021 and 2020 appears modest, indicating a resilient leasing business. Also, many Canadians may rent a home in 2022 instead of buying one.

Boardwalk Chairman and CEO Sam Collias said REITs’ continued success was due to improved apartment fundamentals. Tenants reciprocate with positive lease spreads, in addition to high occupancy and retention rates. At TSX, Boardwalk is a high flyer. Today’s investors are $ 56.45 per share, up 70.8% so far and participating in a 1.79% dividend.

Freeze commitment is gone

Bank of Canada’s freeze commitment to rate hikes by 2023 is off the table. Households in Canada bear a heavy burden regardless of whether the rate of increase is 3, 5, or more.

Five or more rate hikes from 2022 to 2023: a heavy burden for Canadians? Five or more rate hikes from 2022 to 2023: a heavy burden for Canadians?

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