Bank of Canada's Rogers: interest rates are too blunt to target housing affordability

Victoria Shinder13 October 2026, 06:542 min read

Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, used a speech in Victoria, British Columbia, on 1 October 2026 to explain what monetary policy can and cannot do about housing affordability. The text was published by the Bank for International Settlements.

Why housing matters to a central bank. Mortgage debt is the largest share of household borrowing in Canada, and about half of all bank lending is tied to residential real estate. Rogers adds a structural point: in 2000 residential investment was 4.3% of GDP and business investment in machinery, equipment and innovation 8.3%; today that relationship is reversed, which she links to Canada's productivity challenge.

Fifteen years of policies that worked — and did not restore affordability. Rogers walks through her own career: a British Columbia panel on "shadow flipping" in 2016, whose 28 recommendations were all adopted; OSFI's mortgage stress test of 2017, which she says did what it was designed to do — strengthen underwriting and give borrowers a buffer through a period of sharply higher rates — but did very little for affordability; and Basel Committee work showing the same pattern across advanced economies. In Canada, she notes, the average house price rose about 50% in two years during the pandemic boom.

The framework review's two questions. The Bank asked, as part of its five-yearly framework review, whether monetary policy should lean more against rising house prices, and whether the CPI measures shelter costs correctly. On the first, Rogers says rates do affect house prices, but the Bank sets one rate for the whole economy: it cannot set one rate for housing and another for everything else, and rates cannot build homes, rezone land or speed up permits. On the second, the Bank looked at alternatives — more weight on house prices, different treatment of mortgage interest, rental equivalents — and found that each had advantages and its own problems, with no simple change that clearly did better. She notes that raising rates temporarily adds to measured inflation through mortgage interest costs.

Her conclusion. Restoring affordability requires more supply, better planning and infrastructure, regulation that protects resilience and incentives that do not add demand. For the central bank, the best contribution remains price stability; housing stays an important input to rate decisions, but targeting house prices directly would ask monetary policy to do more than it reasonably can.

Source: Bank of Canada, remarks by Carolyn Rogers, published by the BIS — https://www.bis.org/speeches/20261007-canadas-housing-affordability-dilemma