Bank of Canada's Carolyn Rogers warns against ‘tinkering’ with mortgage market
Bank of Canada deputy governor Carolyn Rogers is cautioning policymakers against “tinkering” with the mortgage market in an effort to improve housing affordability, warning that over-reliance on such measures could have long-term negative impacts.
Recently, the federal government introduced new mortgage rules, including expanding 30-year amortizations to all first-time homebuyers and to all buyers of new builds, effective next month. It also raised the $1-million price cap for insured mortgages to $1.5 million, helping more Canadians qualify for a mortgage with a down payment below 20 per cent.
Longer amortizations and smaller down payments, however, increase risk for lenders and borrowers, Rogers told the Economic Club of Canada in Toronto on Wednesday, according to her prepared remarks.
She gave the example of a borrower who increases their amortization from 25 years to 30 years, shaving $200 of their monthly payments, but adding an additional $50,000 in interest costs over the lifetime of their mortgage.
Ultimately, Rogers said, a better balance between supply and demand will be needed to improve housing affordability, but it will take time to get there.
“In the meantime,” she said, “leaning too much on measures that reduce the short-term cost of financing could have long-term impacts on the financial health of households, the mortgage market and the economy.”
Rogers told the audience that despite widespread concern about the impending mortgage renewal wall, the Bank of Canada only considers it to be a “tail risk” to the economy. The central bank, she said, remains confident the mortgage market has fared well through the recent economic turbulence, with mortgage arrears remaining at historic lows.
“From a monetary
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