Bank of Canada Governor Tiff Macklem recently provided a stark message to Canadians: the federal government's current and projected spending is not helping the Bank of Canada's efforts to bring down high inflation and high interest rates. This position has significant implications for our economy, particularly with mortgages.
As Governor Macklem explained “It’s going to be easier to get inflation down if monetary and fiscal policy are rowing in the same direction”.
The implications of this affirmation are substantial, raising questions about the viability of the current government's economic path, which directly affects the ability of Canadians to secure affordable mortgages and, for many, to keep their homes.
In its efforts to combat inflation, the Bank of Canada has increased interest rates ten times in just 19 months, which has raised many mortgage holders’ payments. Since 2015, monthly mortgage payments have increased by 150% for a typical family home.
I recently sent out a mortgage survey to all residential households across our community and the responses are just starting to come in. So far, the vast majority of those received who have mortgages indicate it’s become more difficult and expensive to pay off their mortgage. Some say their mortgages have become so unaffordable they may lose their own homes.
In 2015, the Prime Minister promised to boost the availability of affordable housing in Canada. However, since then, rents have doubled, mortgage payments have doubled, and the down payment required to buy a home has doubled.
Before 2015, it took 25 years to pay off a mortgage. It now takes 25 years to save for a down payment. We increasingly see stories across British Columbia of people returning to the rental market because they can't afford their mortgages.
A recent Edward Jones Canada survey stated, "Canadians are stuck in a chaotic whirlwind of personal financial stress”.
Many indicators are showing the extent people are struggling. These include reports of increases in mortgage defaults, forced sales and high interest alternative lending for those who no longer meet mortgage stress tests and yet desperately want to keep their home.
All of this is worsened by a housing crisis that is failing to add new homes. According to the Canada Mortgage and Housing Corporation, housing starts are dropping nationwide including 26% down in BC and 33% down in Kelowna since last year. I speak to many people involved in construction who say the cost of debt financing due to high interest rates, increasing costs on materials and supplies due to inflation, and cost increases with the continuing low Canadian dollar is making it more difficult to go forward with projects.
Governor Macklem did affirm that by “focusing on the inflationary consequences of their spending decisions”, the federal government would significantly contribute to reducing inflation and the need for high interest rates, providing a way out of our worsening mortgage crisis.
This Remembrance Day, I hope everyone in Kelowna-Lake Country will join me in taking a moment to recognize those who bravely served Canada in times of war, conflict, and peace. We do this to honour and pay tribute to Canadians who made the ultimate sacrifice defending democracy and human rights around the world.
Kelowna City Park features the multi-partner community service memorial project of the Field of Crosses. I hope everyone who is able to takes the opportunity to honour these fallen soldiers and to purchase a poppy which helps support local veterans and their families.
You can view my Remembrance Day video tribute on my social media platforms as I paid respect at the National War Memorial in Ottawa.
Lest we forget.
If you need assistance with federal programs or have any thoughts to share, feel free to reach out, at 250-470-5075 or at [email protected].