Bank of Canada buys nearly $7bn in mortgage bonds from March to June

The Bank of Canada has purchased nearly $7 billion in mortgage bonds over a period of four months, according to data from the federal government.

The central bank saw its Canada Mortgage Bonds (CMBs) in administration grow from $513 million in March to $7.45 billion in June, representing a massive 1,351.85% increase during that relatively short time frame.

And while this is massive growth by any measure, this should also be viewed in the context of the COVID-19 pandemic’s unprecedented impact, Better Dwelling said in its analysis of the government numbers.

“The scale of this buy wasn’t really clear until the latest mortgage credit data,” Better Dwelling said. “At the end of June, outstanding residential mortgage credit reached $1.68 trillion, rising $29.24 billion from March. That means the BoC injected $1 into CMBs, for every $4 increase in outstanding mortgage credit.”

However, while Canadian housing sales activity is indeed steadily regaining its pre-pandemic strength, Better Dwelling argued that the pace of recovery is not commensurate with the volume of CMBs purchases.

“If you factor in the pent-up demand, buyers delayed by pandemic restrictions, it gets a little more wobbly,” Better Dwelling said. “Purchase volumes are just a little higher than normal, and ditto with price gains. What’s surprising is the amount of stimulus injected, only resulting in a relatively normal market. … Markets become less and less sensitive to stimulus, as more of it is injected.”