This article was written and submitted by Tim Hudak , CEO of the Ontario Real Estate Association (OREA), Canada’s largest provincial real estate association.

On June 5, the Bank of Canada will have another chance to reduce interest rates, after declining to do so yet again in May. It is beyond time for the Bank to act; Canadians need lower rates now.

The rationale for keeping rates high for so long has been to fight inflation. But the latest Statistics Canada data show the Bank’s core inflation measures within its 1-3% target range, with 3-month annualized rates on those core measures remaining below 2%.

The data show that inflation is under control, and this fully justifies a June interest rate cut, with more later.

Yet Canadians do not believe prices are under control. Ipsos recently released a poll of top issues in 29 countries and found that Canadians are more concerned about inflation than respondents in 26 of them. Only in Turkey and Singapore do more people identify inflation as one of their top three issues.

In fact, 54% of Canadians saw inflation as a top issue, just ahead of 51% in Argentina, where the annual inflation rate though April was 289%.

A big part of the reason for this concern is mortgage costs. According to Statistics Canada’s breakdown of April CPI, shelter costs overall increased 6.4% year over year, and mortgage interest costs specifically increased an astonishing 24.5%.

And, if anything, these averages understate the shock to many Canadians’ household budgets. The majority of Canadian homeowners opt for fixed rate mortgages, with five-year terms being most common. A family refinancing in June 2024 has been paying an interest rate from 2019, and will suddenly have hundreds of dollars a month less available in a family budget that was already tough to balance.

Refinancing costs are hitting more families every month. The Canada Mortgage and Housing Corporation (CMHC) estimated that 45% of all mortgages are up for renewal in 2024 or 2025.

Tim Hudak, OREA CEO

Canadians buying homes face twin pressures from high prices driven by scarce housing supply and stubbornly high interest rates. It’s no wonder the Minister of Finance said in her budget speech that “Millennial and Gen Z Canadians... look at their parents’ lives and wonder: how will I ever be able to afford that?”

While interest rates are the Bank of Canada’s domain, government can also do more. Although the federal government got headlines by re-introducing 30-year mortgages, unnecessary restrictions undermine the benefits. Not only did it limit 30-year mortgages to first-time buyers, punishing people who previously bought starter homes or condos; even for those buyers, it inexplicably limited 30-year mortgages to newly built homes only, with a maximum value of $1M. Those handcuffs should come off, and 30-year mortgages should be allowed, period.

Behind the scenes, government agencies with vast sway over housing are directionless, or worse. CMHC has an acting chair, an acting CEO, and no clear mission. OSFI (the Office for the Superintendent of Financial Institutions) has been clamping down on obscure but important rules for banks, increasing the amount of capital they have to hold and thus making it harder to lend to homebuilders and homebuyers. A Cabinet that is fond of “whole-of-government approaches” could certainly use one on housing, where its own agencies thwart the government’s objectives on the most important issue in the country.

At the same time, there were some helpful steps in the federal budget, particularly in encouraging more housing supply. Allocating funds to infrastructure like water and sewage helps to get homes built. Making surplus government lands available for housing and providing tax incentives for purpose-built rental housing will make a difference. And the federal government is eager to work with provinces and municipalities to reduce barriers like red tape affecting modular homes, and unnecessary zoning restrictions.

Canada’s crisis of housing affordability has been decades in the making and is only going to get solved if the whole government works towards that end.

Where government is already easing restrictions and encouraging housing supply we need more, and faster. Where agencies are putting up barriers, they need to be told to get in line. Most urgently, the Bank of Canada must respond to inflation rates that have met the targets it set and deliver interest rate relief beginning in June.