The Bank of Canada Says It Won’t Aim Borrowing Costs at House Prices: What That Means for Buyers

What Rogers actually said

On 1 October, in a speech to the Greater Victoria Chamber of Commerce and CFA Society Victoria, Bank of Canada Senior Deputy Governor Carolyn Rogers took on a question many borrowers ask quietly: should the central bank steer house prices?

Her answer, in the Bank’s own published remarks, was no. Housing, she said, “must remain an important input into monetary policy decisions,” but aiming the Bank’s lending benchmark directly at house prices “would ask monetary policy to do more than it can reasonably do—and would risk imposing costs across the broader economy.” Canadian Mortgage Trends, carrying a Bloomberg report, summarized it as housing being an input and not a target.

She framed the whole issue as a dilemma. Higher prices make housing less affordable, but they also support household wealth and economic growth. Lower prices may improve affordability, but they can weigh on wealth, slow home sales and construction, and put stress on borrowers and lenders. In her words, it “feels a bit like a trap.”

Why she calls it a blunt tool

The reasoning is mechanical rather than political. According to the speech, the Bank sets one lending benchmark for the whole economy. It cannot set one level for housing and another for everything else.

That has consequences in both directions. A higher benchmark can take some pressure off prices by reducing demand, but it also makes it harder for new buyers to qualify and raises payments for some existing borrowers, and the effects spread to spending and investment across the economy. A lower one can ease borrowing costs, but if supply is constrained, stronger demand can end up pushing prices higher, and it can add to inflation more broadly.

Rogers was explicit about the limits. Borrowing costs, she said, cannot address supply constraints: they “can’t build homes, rezone land or speed up permits.” Her closing prescription was a mix of more supply, better planning and infrastructure, regulation that protects resilience, and incentives that do not add demand to a market already short on supply.

A note on the stress test

The speech also looked back at Ontario-relevant history. Rogers recalled that OSFI introduced the mortgage stress test in 2017, when she worked there, and that it drew criticism from the mortgage broker and real estate industries who argued it would hurt affordability.

Her assessment now is two-sided. The experience since, she said, “has proven the value of the stress test”: it strengthened underwriting, gave borrowers a buffer and helped the system absorb a period of sharply higher borrowing costs. But it “did very little to make housing more affordable as prices continued to climb.” Regulation, she concluded, “can make markets fairer” and strengthen borrowers and banks, “but it can’t restore affordability.”

That is consistent with how the test works for a borrower today. It is a margin of safety on your qualifying payment, not a forecast, which we cover in what the stress test actually tests.

Where this sits next to the 28 October decision

It would be easy to read the speech as a signal about the next announcement. It is not one. Bloomberg, via Canadian Mortgage Trends, reported that the Bank next sets its benchmark on 28 October, that traders put the odds of an increase at that meeting at about 40%, and that the Bank’s benchmark currently sits at 2.25%. Those are market-pricing figures at the time of the report, not a forecast from the Bank.

The same report notes that high gasoline prices have held headline annual inflation near 3% for months, and that the Bank has warned energy costs spreading to other goods and services would raise the risk. Core measures were described as close to the 2% target on a yearly basis, with the monthly trend showing pressure building.

What the speech does clarify is the framework: the Bank will weigh housing as one input among many, and it will set its benchmark mainly according to overall inflation. We looked at the risks around that decision in forecasters split on the October decision.

What to do with this if you are buying or renewing

Three practical points follow from a central bank saying plainly that it will not manage the housing market for you.

• Plan around the payment you can carry, not the move you hope for. If your purchase or renewal only works if borrowing costs fall, it does not yet work. Test the plan against today’s terms using our mortgage calculators.
• Know your qualifying position before you shop. Lenders apply the stress test whatever the Bank does next. A pre-qualification shows where you stand under the current rules, and every figure is illustrative and subject to final lender terms.
• If you hold a variable or adjustable-payment mortgage, plan for movement either way. Rogers described the trade-offs in both directions. A structure that lets you adjust mid-term, such as the readvanceable approach on our RateShield Advance page, is worth discussing before the next decision, not after.