BoC official warns against playing with mortgage rules to make housing affordable

Carolyn Rogers, senior deputy governor of the Bank of Canada, holds a press conference at the Bank of Canada in Ottawa on Wednesday, March 6, 2024. THE CANADIAN PRESS/Sean Kilpatrick

The Bank of Canada's senior deputy governor is warning against adjusting mortgage rules to try to make the prospect of home ownership more affordable.

Carolyn Rogers is delivering a speech today on the mortgage market to the Economic Club of Canada in Toronto.

• Top business headlines, all in one place

"We need to resist the temptation to try to solve the housing affordability challenge by tinkering too much with the mortgage market," Rogers said in her prepared remarks.

The central bank official says improving housing affordability ultimately requires reaching a balance between supply and demand, which she says will take time.

"In the meantime, leaning too much on measures that reduce the short-term cost of financing could have long-term impacts to the financial health of households, the market and the economy," Rogers said.

The federal government recently announced it will increase the maximum amortization period for first-time homebuyers and buyers of new builds from 25 years to 30 years to help more people enter the housing market.

Rogers says that while taking out a 30-year mortgage reduces monthly payments on the average mortgage by about $200, it increases borrowers' overall interest costs by $50,000 over the duration of the loan.

The Liberal government's decision to increase the amortization period was in response to concerns that young people aren't able to enter the housing market because of how high home prices are now.

Housing affordability continues to be a top issue for Canadians after a period of high inflation and interest rates.

Rogers acknowledged there is a risk that upcoming mortgage renewals could cause households to pull back on spending by more than expected or lead to increased delinquency rates.

But she says the Bank of Canada doesn't expect that to happen.

• The information you need to know, sent directly to you: Download the CTV News App

"From a monetary policy perspective, our forecast includes the expectation that households will continue to adjust their saving and spending patterns to absorb the impact of higher mortgage payments," she said.

This report by The Canadian Press was first published Nov. 6, 2024.