Bank of Canada not seeing ‘alarm bells’ in housing market despite mortgage pain

Bank of Canada governor Tiff Macklem said Thursday he doesn't see the current levels of mortgage stress in Canada as a risk to the overall health of the housing market.

The Bank of Canada is not yet concerned about the impact of rapidly rising mortgage rates on the overall health of the country’s housing market.

That was the message from governor Tiff Macklem when he was asked after a speech to the Toronto Region Board of Trade on Thursday about how the central bank is thinking about the future of Canada’s housing market.

Macklem said the bank’s rapid increase in interest rates since March 2022 — the policy rate stands at 4.5 per cent following two consecutive decisions to hold — has effectively cooled housing activity and driven double-digit declines in home prices across many markets.

He told the crowd that the central bank sees the housing correction continuing in the months to come, though some markets are already stabilizing and even seeing prices and activity tick back up.

Macklem acknowledged, however, that the cost of slowing the economy by raising the cost of borrowing — a sustained effort to get inflation back to the Bank of Canada’s two per cent target — has made life harder for many homeowners.

Those with variable rate mortgages who purchased homes at the peak of prices during the pandemic, for instance, as well as those renewing their fixed mortgages in today’s higher interest rate environment, are in many cases facing much higher monthly payments.

“We are acutely aware that some Canadians have been very squeezed by the interest rate increases,” Macklem said Thursday.

The central bank head also flagged that mortgage delinquencies, which were quite low during the pandemic, are starting to tick back up again, though he said this was more a normalization than a cause for concern.