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Sr. Deputy Governor Rogers Speech Highlights: Interest Rates Normalizing

BOC
  • "Monetary policy worked: not painlessly, but it did get inflation under control without creating the sharp economic downturn that many feared. Interest rates have started to come down, and we have the prospect of further normalization ahead," Senior Deputy Carolyn Rogers says in Toronto speech.
  • 60% of outstanding mortgages will renew over the next two years and most of those borrowers face a significant increase in their payments, she said. 
  • "Our forecast includes the expectation that households will continue to adjust their saving and spending patterns to absorb the impact of higher mortgage payments. And as interest rates come down that impact will fade, and consumption will gradually pick up." 
  • BOC warns that there is a risk in "tinkering too much" with the mortgage market. Longer amortizations and smaller down payments could potentially increase cost for lenders, which will be passed on to borrowers. BOC also says past policies discouraging leverage and encouraging strong underwriting have been effective.   
  • Housing affordability boils down to supply and demand that will take time to re-balance. "In the meantime, 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."
  • "Even if the economy is getting back to something approaching normal, we’re still expecting a future with more economic volatility and generally higher interest rates than we saw over much of the past two decades."

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