Bank of Canada official calls interest rates too blunt for housing affordability

Bank of Canada Senior Deputy Governor Carolyn Rogers stated that the central bank’s key interest rate is “too blunt” to resolve housing affordability challenges on its own. Speaking in Victoria, B.C., Rogers noted that while lower rates can fuel rising prices, higher borrowing costs can prevent prospective buyers from entering the market.

Rogers highlighted the growing importance of housing in the Canadian economy, noting that residential investment now accounts for a larger share of GDP compared to business investment in equipment and machinery, a trend that has reversed since 2000. She cautioned that while declining home prices may offer relief, prolonged drops in value can negatively impact household wealth, investor confidence, and new construction.

Addressing the limitations of monetary policy, Rogers explained that interest rates cannot directly resolve supply-side issues such as land rezoning, building permits, or housing shortages. She suggested that restoring affordability requires a combination of policies aimed at boosting supply and reducing the economy's heavy reliance on rising home prices.