Bank of Canada governor Tiff Macklem said he is less concerned than he was a year ago about the deluge of mortgage holders facing a painful renewal.
Following a speech to business leaders in St. John’s, NL, he told reporters on Wednesday that lowering the Bank’s policy rate from 5 per cent to 2.75 per cent over the last year eases the sting for the 60 per cent of mortgage holders who scored ultra-low rates in the early days of the pandemic and are renewing in 2025 and 2026.
“Yes, there is a reset. They will be facing a higher interest rate, but they’re going from an exceptionally low rate to kind of a normal rate, as opposed to something high,” Macklem said in response to a question from Real Estate Magazine at the event hosted by the St. John’s Board of Trade.
“I’m not saying it’s going to be easy.”
Macklem noted that mortgage holders were stress-tested for a higher rate than the rates they will face at renewal.
Mortgage delinquencies are already rising
Mortgage holders are already missing more payments, particularly in Ontario. More than 11,000 mortgages in Ontario recorded a missed payment in Q4 2024 — nearly three times the number seen in 2022, according to Equifax.
Delinquencies were “very low” for a few years, said Macklem. “They have risen, but they’re still below pre-pandemic levels.”
“We are watching that closely. I’m not saying it’s easy, but most Canadians are keeping up with their mortgage payments.”
Renters are more vulnerable
Macklem said rather than homeowners, renters appear more at risk for falling behind.
“If you look at late payments by renters on things like car loans, they actually have risen above pre-pandemic levels,” he said.
More rate cuts ahead? Maybe, says Macklem
Macklem landed in Canada’s easternmost city to deliver a speech on the impact of U.S. trade policy on jobs and inflation.
“Since President Trump took office in January, the world has faced a dramatic escalation in tariffs and pervasive uncertainty,” he said.
“In Canada, trade has been disrupted and jobs have been lost. Businesses have re-evaluated their investment plans. Consumers have become more cautious. And Canadians have told us that they expect higher prices for many imported goods.”
He said the recent announcement that Canada and the U.S. agreed to negotiate a new economic and security relationship within 30 days is welcome news and will help restore stability to jobs, prices, and inflation.
The Bank of Canada last adjusted the policy rate in March to 2.75 per cent from 3 per cent. Macklem said that the weaker the economy and the more downward pressure on inflation, the greater the need to lower the policy interest rate.
“However, if the recent firmness in underlying inflation were to persist, it would be more difficult to cut the policy rate,” he said.
“Overall, my colleagues and I agreed there could be a need for a further reduction in the policy interest rate if the effects of U.S. tariffs and uncertainty continued to spread through the economy and cost pressures on inflation were contained.”
Courtney Zwicker is a digital reporter and associate editor for REM. Based in Atlantic Canada, she has over a decade of experience covering daily business news.
What was a 60% LTV in Q1 2022 is now approaching 80% and high ratio territory for those who were making interest only payments. Considering a Seller Net increases that LTV to 88% the problem is far bigger than what Tiff apparently does not understand.
Canada has lost over $2 Trillion in HomeOwnership Wealth in the last 3 years. Quebec’s dollar a day day care and Montreal/Quebecs mill rate is the only thing that has kept that province from joining BC and ON who joined AB which is still been correcting since 2007.
Why has the Bank of Canada never mentioned the $2 Trillion drop in home equity? I mean come on they believed GTA home prices were increase $2700 a day in early 2022 you mean now they don’t trust the benchmark price?
As any realtor from the early 80s knows or any one mentored by one that was a high level realtor in those days ( is was such mentored by my parents) there are simple workarounds most homeowners can take to offset short term pain of rising interest rates. So why is Tiff not reaching out to the OGs of the past before the kick off?
Can the modern realtor even write a mortgage assumption clause and explain it to the seller and buyer today in a manner they won’t be charged by their provincial regualtor because the lack the nuanced understanding of it to do so?
Re-Mortgaging has always really been a thing but few Canadians had advice they could trust to do it.
Tiff and the BoC staff believe almost every fairy tale Greg Klump made up pre-Buyer Agency as being true.
Call up those OGs and ask them why SNLR and MOI has never measured what Klump and CREA convinced everyone it measured.
The problem those in this mortgage world face are incompetent mortgage brokers and predatory bank mortgage advisors without the realtor community any longer having experienced professionals to speak truth to the falsehoods.
I often wonder what percent of realtors today have ever sat across a kitchen table as the father was crying because they couldn’t afford to renew at the current rates and no one had shown them how to re-mortgage their home in order to endure a short (as in the context of their lives) period of financial compromise.
Find some OG in your office and ask them to give the Office a presentation on how to navigate the times were in. If you don’t you will have wasted a quick way to learn how to help others.
REALTORs are lucky REM still exists.