Monday Market Minute | Jan 13, 2020

Bank of Canada holds at 1.75% as housing recovery gains traction

What Moved

The Bank of Canada maintained its overnight rate at 1.75%, signalling confidence in the domestic economy despite global headwinds. Meanwhile, CREA data showed Canadian home sales had posted their strongest December in two years, confirming the housing recovery that began in mid-2019. Toronto and Vancouver led the rebound, with sales volumes up double digits year-over-year. The B-20 mortgage stress test, which had cooled markets since 2018, appeared to be fully absorbed.

Why It Matters

Stable rates and recovering housing fundamentals reinforced the thesis for private real estate and mortgage investment corporations. MIC lenders benefited from steady borrower demand and the spread between their lending rates and the cost of capital remained attractive. For private credit investors, the BoC's hold signalled a stable rate environment — supportive of fixed-rate portfolio returns without the reinvestment risk of a rate cut cycle.

Signal to Watch

January housing data from the major metro areas would confirm whether the December momentum was seasonal noise or a durable trend reversal.

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