Bank of Canada: Interest Rates Won't Solve Housing Unaffordability

Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, recently made a significant statement regarding housing affordability in Canada. In a speech delivered in Victoria, British Columbia, Rogers emphasized that interest rates alone cannot solve the issue of housing unaffordability.

Rogers noted that while lower interest rates can make mortgages cheaper and allow more buyers to enter the market, they can also lead to higher prices if new homes are not being built or approved quickly enough. She described monetary policy as a 'blunt tool' that can influence demand but cannot speed up permitting, change zoning, or add infrastructure.

The Bank of Canada's tools, such as the mortgage stress test, primarily make households and the financial system more resilient rather than making homes cheaper. Rogers stressed that lasting affordability depends on policy choices outside the central bank, particularly expanding housing supply and infrastructure.