Bank of Canada official says key interest rate is “too blunt” to fix housing affordability alone

The Story

Senior Deputy Governor Carolyn Rogers says monetary policymakers are struggling to find effective tools to address persistent housing affordability challenges, arguing that the Bank of Canada’s key interest rate is “too blunt” to fix housing affordability alone.

Rogers made the remarks in Victoria, B.C., where she described the complex interplay between housing, regulation, the economy and the central bank.

She said lower home prices can offer some buyers relief in certain markets, but prolonged declines in value can also weaken household wealth, investor confidence and the broader economy.

Rogers said lower interest rates tend to push home prices higher, while higher borrowing costs can limit which prospective buyers can qualify, leaving affordability issues unresolved when relying on interest-rate changes.

She also pointed to the mortgage stress test and other measures aimed at reducing instability, saying those regulations can help maintain stability while simultaneously raising barriers to buying a home.

Rogers said restoring housing affordability requires a combination of policies that boost supply while reducing the economy’s dependence on continually rising home prices.