Economic numbers trending in right direction for Ontario residents

But more homes need to be built to lower the cost of housing

Published Sep 17, 2024  •  2 minute read

Homes being built. Photo by Albert Pego / iStock /Getty Images

Canada’s inflation rate fell to its lowest level in more than three years.

Article content

Interest rates have dropped three times since the spring to 4.25% and are trending toward more reductions that will help ease the stress of borrowing costs for new home buyers and mortgage renewals.

And in two weeks’ time, the minimum wage in Ontario is increasing.

The economic picture is suddenly a lot more brighter after a few years of serious struggle.

However, one number that needs improvement in the province is getting more shovels in the ground to build more homes.

On Tuesday, Statistics Canada published its consumer price index which showed inflation across the country slowed to 2% in August, down from 2.5% in July and the lowest since February 2021. In Ontario, the inflation rate was measured at 2.1%.

Lower gasoline prices was the main factor for the slowdown.

Article content

Article content

That news will likely lead to another interest rate cut by the Bank of Canada on Oct. 23 as well as future reductions, a mortgage expert says.

Recommended from Editorial

1. 

   Canada’s inflation rate hits 2% target, reaches lowest level in more than three years

2. 

   CMHC says annual pace of housing starts in Canada slowed in August

“The Bank of Canada’s long-awaited goal has been achieved, with inflation falling to its target of 2%, along with significant decreases in the core measures,” Penelope Graham, a mortgage expert at Ratehub.ca, said in a news release.

“While the central bank’s cutting cycle is already well underway, today’s reading further strengthens the rationale for additional cuts in the months to come.”

That is good news not only for upcoming mortgage renewals but also for prospective home buyers who have been on the sidelines due to higher borrowing costs.

Article content

However, home building has been down over the past year in the province, averaging less than 100,000 per month since November before rebounding in July with more than 106,000 home starts.

RECOMMENDED VIDEO

More homes need to be built to lower the costs of housing across the country, according to Canada Mortgage and Housing Corporation Chief Economist Bob Dugan.

“Growth in actual year-to-date housing starts has been driven by both higher multi-unit and single-detached units in Alberta, Quebec and the Atlantic provinces,” said Dugan.

“By contrast, year-to-date starts in Ontario and British Columbia have decreased across all housing types. As the housing shortage continues, higher levels of construction are needed to restore affordability in Canada’s urban centres.”

Article content

Meanwhile, Graham said the central bank will likely turn its focus to the economy and whether it is losing steam too quickly.

“While a quarter-point cut is most likely in their upcoming October announcement, the language used by the Governing Council at that time will indicate if monetary policy needs to be loosened at a quicker pace,” said Graham, hinting at potentially larger interest rate cuts in the future.

While the economic numbers are trending in the right direction, an increase in the minimum wage in Ontario to $17.20 per hour from $16.55 is set to take effect on Oct. 1.

A worker earning the general minimum wage will see a pay increase of up to $1,355. The province said more than 935,000 residents were making at or below $17.20 earlier this year.

Article content