By Nojoud Al Mallées
Carolyn Rogers gave a speech Wednesday on the mortgage market to the Economic Club of Canada in Toronto.
“We must resist the temptation to try to solve the housing affordability problem by tinkering too much with the mortgage market,” Rogers said in his prepared speech.
The central bank official says improving housing affordability ultimately requires achieving a balance between supply and demand, which she says will take time.
“Meanwhile, over-reliance on measures reducing the cost of financing in the short term could have long-term impacts on the financial health of households, the market and the economy,” Rogers said.
The federal government recently announced it would increase the maximum amortization period for first-time and new-build buyers 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 an average mortgage by about $200, it increases borrowers’ overall interest costs by $50,000 over the life of the loan.
The Liberal government’s decision to increase the amortization period was in response to concerns that young people would be unable to access the property market due to high house prices.
Housing affordability continues to be a major concern for Canadians following a period of high inflation and interest rates.
Rogers acknowledged there is a risk that upcoming mortgage renewals could cause households to cut spending more than expected or lead to increased delinquency rates.
But she says the Bank of Canada doesn’t expect that to happen.
“From a monetary policy perspective, our forecast includes the expectation that households will continue to adjust their saving and spending habits to absorb the impact of rising mortgage payments,” she said. .
This report by The Canadian Press was first published November 6, 2024.
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Last modification: November 6, 2024