In consideration of all the factors (below), the Government and the BoC need to take another look. They are underestimating the potential damage that could come when 5%-10% of the 4,00,000 mortgage renewals can't renew.
If Senior Deputy Governor Carolyn Rogers is wrong, and 200,000 to 400,000 home owners could for forced into foreclosure, that will shift the state of ALL Canadian real estate markets putting extreme pressure on pricing. This would add fuel to the fire and create a dynamic like in 2008 when prices throughout the US and many parts of Canada and the world felt huge losses. Real estate markets across Canada could go into a tail spin.
But I have faith that our leaders are smart enough to figure this out before it all goes sideways.
Below is the baseline reasoning BoC has stopped further rate drops.
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The Bank of Canada (BoC) has been gradually reducing its policy interest rate since mid-2024, with the most recent cut bringing it to 3% in January 2025. Despite these reductions, the BoC has not accelerated rate cuts, even in the face of significant upcoming mortgage renewals and potential foreclosures. Several factors contribute to this cautious approach:1. Inflation Control: Maintaining inflation around the 2% target is a primary mandate of the BoC. Rapid or substantial rate cuts could overstimulate the economy, leading to inflationary pressures. Governor Tiff Macklem emphasized the importance of preserving the 2% inflation target to ensure price stability, especially amid economic uncertainties.
ReutersEconomic Growth and Trade Uncertainties: The Canadian economy faces challenges, including a potential trade conflict with the United States. Governor Macklem warned that prolonged trade disputes could severely impact domestic growth, potentially necessitating further rate cuts. However, the BoC must balance supporting economic activity with the risk of exacerbating inflation.
Housing Market Dynamics: Approximately 60% of Canadian mortgages are set to renew by the end of 2026, with many borrowers facing higher interest rates upon renewal. While this raises concerns about increased payment burdens and potential foreclosures, the BoC recognizes that altering monetary policy solely to address housing affordability could have broader economic repercussions. Senior Deputy Governor Carolyn Rogers noted that changes to mortgage structures alone would not resolve housing affordability issues; a balanced approach addressing both supply and demand is necessary.
ReutersCurrency Stability: Interest rate differentials between Canada and other countries, particularly the U.S., influence the Canadian dollar's value. Significant rate cuts could lead to currency depreciation, affecting import prices and potentially fueling inflation. The BoC must consider these exchange rate implications when adjusting monetary policy.
Financial Stability: While lower interest rates can ease debt servicing costs, they can also encourage excessive borrowing, potentially leading to asset bubbles. The BoC aims to support economic growth without compromising financial stability. This involves a measured approach to rate adjustments, considering the long-term implications of monetary easing.In summary, the Bank of Canada's decision to moderate the pace of interest rate reductions reflects a complex balancing act. It seeks to support economic growth and manage the upcoming wave of mortgage renewals without triggering inflation or undermining financial stability. This cautious strategy aims to navigate the Canadian economy through current uncertainties while maintaining long-term economic health.
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