Tiff Macklem, Governor of the Bank of Canada, said that ‘structural problems’ in the market are not helping with inflation, making the bank’s task harder than usual. By structural problems, Macklem appeared to be referring to the physical lack of housing in the market.
Steps have been taken to address the issue by stimulating new house building that will help ease competition and lower prices. Such stimulation measures include a boost to financing provided by the government, while tax breaks have also been included to help encourage developers to build more homes.
The Senior Deputy Governor of the Bank of Canada, Carolyn Rogers, welcomed these initiatives and was pleased to see the government take much-needed action. These policies help spur the building of new homes, making the market more affordable and helping to ease inflation.
Ms Rogers went on to say that approximately 20 percent of the Bank of Canada’s lenders can no longer keep up because what they pay in interest is no longer matched by repayments, resulting in mortgage balances growing. As such, the Bank of Canada is watching the mortgage renewal cycle for signs they need to step in.
Recent interest rate hikes have also made things harder for many homeowners. However, many of these people affected will likely have some assistance in repaying their mortgages by having the terms of their loan extended to help spread the payments and make them more affordable.
Canada started to see house prices come down in 2022 as increasing interest rates made home-owning less affordable. However, prices increased in February when the Central Bank said it would pause rate hikes. House prices started to fall again four months later.
Overall, the cost of housing in Canada remains higher than before the pandemic, particularly those in smaller cities. Potential home buyers can expect to pay upwards of $1 million in Vancouver and Toronto, while renters have also been with average rents in Canada exceeding $2,000.
However, government interaction and a recovering economy will help restore some balance, making homes and other holdings more affordable.
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