Oct 15, 2026
One of the senior officials at the Bank of Canada just gave Canadians shopping for a home or mortgage a big reality check: interest rates are too blunt to fix housing affordability.
Speaking to business leaders and financial analysts in early October, Bank of Canada (BoC) Senior Deputy Governor, Carolyn Rogers, argued that interest rates — the primary monetary policy tool used by the BoC — are too crude to solve housing affordability. Raise rates and fewer buyers qualify for mortgages and loans; cut rates and, with supply still tight, prices can climb again.
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Her message lands even with the Bank’s next rate decision scheduled for the end of October — and at a time when the last of the pandemic-era five-year mortgages come up for renewal.
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For buyers and borrowers alike, the smarter move is to plan around the rate you can get today, not the one you’re hoping for.
What did the Bank of Canada’s No. 2 actually say about rates and housing?
Rogers is second-in-command at the BoC, so when she focused on Canada’s housing affordability dilemma, people took notice, particularly because she was admitting that Canada’s central bank wouldn’t be delivering a solution to housing affordability any time soon.
Her core point is that monetary policy can’t target housing on its own. “We set one interest rate for the whole economy,” she said.
She also emphasized the limit interest rates have on the housing market cycle. As she explained in a BoC article, rates “can’t build homes, rezone land or speed up permits.”
Rogers also pushed back on the idea that low rates alone caused the run-up. Population growth, limited supply, zoning constraints and speculative buying all played a role. To illustrate her point, Rogers referred to data that shows that during the pandemic boom — when rates sunk to all-time lows — Canada’s average house price rose about 50% in two years.
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Why would falling home prices hurt, not help?
Rogers also explained in the BoC article how falling home prices could hurt Canadians: “Rising prices made housing less affordable, but they also supported household wealth and economic growth.” While she acknowledged that falling home prices would help housing affordability, she pointed out that it would “also reduce household wealth, slow economic activity and can put stress on borrowers and lenders.”
Turns out home equity underpins much of Canadians’ net worth.
“Mortgage debt makes up the largest share of household borrowing, and home equity underpins much of household net worth and access to credit. This shapes how Canadians spend, save and borrow,” she wrote.
Current state of Canada’s housing market
The national average sale price of a home in Canada was $668,219 in August, up just 0.6% from a year earlier — during the same time frame, housing sales fell 6.9%. According to Canadian Real Estate Association (CREA) Senior Economist Shaun Cathcart, rising inflation risks and possible rate hikes are strong headwinds across the Canadian real estate markets.
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The impact on buyers and homeowners
For buyers, a rate drop would mean only modest relief at best.
For current homeowners who bought near the peak with a small down payment, a rate drop could prompt softer sale prices and property values, and that can mean thinner equity and fewer options if money gets tight.
Could the Oct. 28 decision lower your mortgage costs?
For Canadians — homeowners, borrowers and businesses — waiting on the next rate announcement will probably be a disappointment. Why? Probably because it won’t bring immediate relief.
On Sept. 2, the BoC held its policy rate at 2.25%, for the seventh straight hold. At that time, the BoC warned risks due to inflation had increased amid high oil prices and new tariffs — and could strengthen the argument for a rate hike, even if it’s a blunt tool.
Going into the October rate decision, Desjardins, the Quebec-based financial co-operative, expects the rate to hold in October and through to year end. However, that hold will end in 2027, with rates rising half a percentage point in the first half of next year.
Renewing a pandemic-era mortgage? Here’s what to expect
Over the next year, the last of the five-year fixed-payment mortgages signed during the pandemic will renew. That’s about 12% of all outstanding mortgages in Canada. According to the BoC’s 2026 Financial Stability Report, those borrowers can expect payments to rise about 15% on average. In this example, a $2,000 monthly payment would climb to roughly $2,300.
The mortgage stress test offers one bright spot. The Office of the Superintendent of Financial Institutions (OSFI), Canada’s federal banking regulator, sets the minimum qualifying rate for uninsured mortgages. It’s the greater of your contract rate plus 2% or 5.25%. But OSFI doesn’t expect lenders to apply it to uninsured borrowers who simply switch lenders at renewal without borrowing more. That gives renewers real room to shop around.
Here’s what to do if you’re buying a home or shopping a mortgage renewal
If you’re buying
- Get pre-approved so you know what you qualify for at today’s stress-test rate
- Budget for payments at the qualifying rate, not just the contract rate
- Don’t time your purchase around a rate cut or further price drop
If you’re renewing
- Contact your lender early and get competing quotes from other lenders
- Run your budget assuming a 15% payment increase
- Weigh term length carefully: a shorter term offers flexibility if rates fall, while a longer one locks in certainty if they rise
- Build a cash cushion before your renewal date
Senior Deputy Governor Rogers was clear: Real progress on housing affordability will take more than rate change; it will require more supply, better planning and time. Until then, the most reliable lever is your own budget. As Rogers put it in her article, affordability won’t come back by “asking any one policy to do more than it can,” and that includes the BoC’s next rate call.
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Romana King, Senior Editor at Money.ca, also writes for various North American publications and the RKHomeowner blog. Her book, House Poor No More, is an Amazon bestseller and five-time award winner, including the 2022 New York CPA Society's Excellence in Financial Journalism (EFJ) Book Award.
