Canadian homeowners increasing their appetite for renovations is partly to blame for the caution being exercised by the Bank of Canada in keeping the prime rate in Canada at one per cent. Even with tightening mortgage rules, it appears homeowners will continue to invest in their homes with renovations or “buying up” to larger homes, increasing their debt to income ratio.
“While growth in household spending has been moderate in recent quarters, it has been disproportionately supported by housing investment, which is around historical highs and showing signs of overbuilding,” says the Bank of Canada.
According to a report in the National Post, the bank sees economic growth troughing in the second quarter at an annualized 1.8 per cent, down from its 2.5 per cent projection in April. It sees growth of 2.0 per cent and 2.3 per cent in the third and fourth quarters, respectively.