A Bank of Canada official explains what monetary policy can — and cannot — do for affordability
Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, delivered a blunt message to Victoria's business community: Canada's housing affordability problem cannot be solved by the central bank alone — and expecting otherwise risks creating new ones.
Speaking at the Greater Victoria Chamber of Commerce and CFA Society Victoria, Rogers traced the origins of the affordability dilemma through her 15-year career spanning British Columbia's regulatory landscape, the Office of the Superintendent of Financial Institutions (OSFI), and international banking bodies.
In each role, she found that well-designed policy addressed a real risk but left the core dynamic intact: housing becoming ever more deeply tied to household wealth, the stability of the financial system, and the health of the broader economy.
That dynamic is visible in the numbers. In 2000, residential investment accounted for 4.3% of Canada's gross domestic product while business investment in machinery, equipment, and innovation sat at 8.3%.
Today those proportions are largely reversed. Roughly half of all bank lending is now tied to residential real estate, a level of exposure that means home price movements carry consequences far beyond the housing sector itself.
The gap between prices and incomes has only widened, with home prices rising roughly 53% between 2015 and 2025 while incomes grew approximately 13%.
Tiff Macklem of the Bank of Canada has warned that tariffs and rising energy prices are pulling the economy in different directions, while Andrew Grantham of CIBC Capital Markets says attention is shifting toward the next wave of economic data.https://t.co/40ldBWDI1a
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 30, 2026
A blunt tool for a complex problem
The mortgage stress test, introduced under Rogers' tenure at OSFI in 2017, is her sharpest illustration of the bind regulators face.
It gave borrowers a buffer against rate risk and strengthened financial system resilience through the 2022–23 rate cycle. It did not arrest price growth.
The same logic applies to rate movements. Lower rates ease monthly costs but fuel demand in a market already constrained by supply.
"Monetary policy can influence demand across the economy—including demand for housing. But it is a blunt tool," Rogers said.
"We set one interest rate for the whole economy. We cannot set one rate for housing and another for everything else. And interest rates cannot directly address supply constraints. They can’t build homes, rezone land or speed up permits."
During the COVID-19 pandemic, the Bank cut its benchmark rate to a floor of 0.25% to cushion the economy from an unprecedented shock.
Average home prices rose roughly 50% over two years as cheap credit met tight supply and surging immigration.
Rogers acknowledged the Bank's role without dismissing it.
"The story is more complicated than low interest rates. But that doesn't let monetary policy off the hook," she said.
What the Bank's framework review found
As part of its five-year monetary policy framework review, the Bank examined two questions Rogers said Canadians were right to raise — whether the central bank should lean harder against rising home prices, and whether Canada's inflation measure accurately captures the shelter costs households are actually bearing. Neither question yielded a clean answer.
As Canada Mortgage and Housing Corporation (CMHC)'s latest housing supply data flags a growing affordability risk for Canadian brokers and buyers, the measurement challenge remains unresolved. Higher rates push up mortgage interest costs, which then feed into the consumer price index in ways that appear to work against the central bank's own objective.
"The most important lesson we took from our review is that we need to explain these trade-offs better and be clear with Canadians about what monetary policy can and cannot do," Rogers said.
Real progress on affordability, she argued, requires more housing supply, better planning and infrastructure, and a deliberate effort to reduce Canada's economic dependence on perpetually rising home values.
Those levers rest with federal, provincial, and municipal governments, not the Bank of Canada.
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