Small, loosely-regulated lenders in Canada who rode a pandemic housing boom to offer mortgages at high interest rates are now showing signs of stress as a spike in living costs pushes some homeowners toward a default, Reuters reported. Canada's C$2 trillion ($1.5 trillion) mortgage market is dominated by the "Big Six" major banks that include Royal Bank of Canada and TD Bank.

A former member of the Bank of Canada’s governing body says that he believes the central bank will start cutting interest rates in about six months if inflation pressures ease as expected, Bloomberg News reported. Policymakers will wait until they see underlying price pressures cool, even if the economy has entered a period of excess supply, former Deputy Governor Paul Beaudry said. “I wouldn’t see the potential of rate cuts until probably the July decision,” Beaudry said in an interview with Avery Shenfeld, the chief economist at Canadian Imperial Bank of Commerce.

The Canadian economy bounced back sharply in the final quarter of 2023, driven by higher goods production and shipments and stronger U.S. demand, Bloomberg News reported. Preliminary estimates say gross domestic product grew 0.3% in December, Statistics Canada reported Wednesday in Ottawa. That followed a 0.2% expansion in the previous month, exceeding forecasts for 0.1% in a Bloomberg survey of economists. Overall, the industry-based numbers point to growth of 1.2% on an annualized basis in the final three months last year, reversing a third-quarter contraction.

A Canadian landlord is sounding out potential buyers for a downtown Toronto office tower, testing a market that’s been largely frozen since interest rates started shooting up nearly two years ago, Bloomberg News reported. Dream Office Real Estate Investment Trust has hired CBRE Group Inc. and Toronto-Dominion Bank to market 438 University Ave., according to marketing documents. The company also remains open to offers for another building at 655 Bay St., which was put up for sale more than a year ago.

The Bank of Canada (BoC) held its key overnight rate at 5% on Wednesday and said that while underlying inflation was still a concern, the bank's focus is shifting to when to cut borrowing costs rather than whether to hike again, Reuters reported. The BoC governing council has held rates steady at four consecutive policy meetings after last hiking in July. Annual inflation in December accelerated to 3.4%, still higher than the central bank's 2% target but below a June 2022 peak of 8.1%.

Four of Canada's biggest pension funds managing nearly C$1 trillion ($742 billion) in assets have begun a major expansion into private credit, moving into an area previously dominated by banks, Reuters reported. Canada Pension Plan (CPP) Investments, Ontario Teachers' Pension Plan (OTPP), Ontario Municipal Employees Retirement System (Omers) and OPTrust told Reuters they intend to increase their exposure to private credit - typically tailored loans to companies underwritten by non-banks.

Canada's banking regulator is to step up its focus on money laundering issues and will work with the country's financial intelligence agency to tackle such incidents, the regulator's head said on Friday, Reuters reported. "The intensity of money laundering risk is under-appreciated ... what you can expect from us is more focus on that issue," Peter Routledge, superintendent of Financial Institutions (OSFI) said at TD Securities annual conference.

More people and businesses in Nova Scotia filed for insolvency over the last year than in any other 12-month period since 2020, another signal of growing financial stress after bankruptcies steeply declined during the COVID-19 pandemic, CBC News reported. The figures come as tens of thousands of businesses across the country, including many in Nova Scotia, face a Thursday deadline to pay back the bulk of their pandemic-era Canada Emergency Business Account (CEBA) loans.

Canada's annual inflation rate rose as expected in December, data showed on Tuesday, and underlying prices pressures remained, dashing hopes that the central bank would shift into rate-cut mode early this year, Reuters reported. Annual inflation rose to 3.4% in December from 3.1% in November, matching estimates by economists polled by Reuters. On a monthly basis, consumer prices matched expectations as well and fell 0.3% from November.

Armed with a multibillion-dollar war chest, Canada is offering money to cities to ditch zoning restrictions that thwart residential construction as the country deals with an acute housing shortage, the Wall Street Journal reported. Canada’s Liberal government is targeting municipal-government rules that, among other things, limit the number of units and stories per lot in a bid to increase density in the country’s cities.