Scotiabank Earnings Report Q1 2019

Households Can Sustain Higher Rates Real interest rates are still negative and will turn only mildly positive in 2019 • Scotiabank Economics expects the Bank of Canada to raise its target overnight rate an additional 100 bps by Q1/2020 Average mortgage borrowers have only just begun renewing their loans at higher interest rates Further Rate Hikes Ahead from BoC & Fed % 8 7 CO 6 Fed Funds Target Rate (Upper Limit) 5 5 + 3 2 1 0 93 98 Little Change in 5-yr Mortgage Rates at Renewal 50 5-yr difference, basis points 0 -50 -100 forecast -150 ВОС Overnight Target Rate -200 -250 -300 03 08 13 18 Sources: Scotiabank Economics, Haver Analytics. 12 13 14 15 16 17 18 19 10 11 Sources: Scotiabank Economics, CMHC. Scotiabank® 47

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