Let’s cut through the nonsense. Lower interest rates don’t make homes more affordable—they just make debt more affordable. And in a market already saturated with frothy valuations, blind bidding wars, and pre-sale condo scams disguised as investments, the last thing Canada needs is more people borrowing even more money to fight over the same five poorly built boxes.
Here’s the hard truth: when the Bank of Canada lowers its overnight rate, it doesn’t magically create more housing. It just makes borrowing cheaper. Sounds helpful, right? Except in a country where housing supply is critically low, cheaper borrowing simply means buyers can offer more for the same overpriced, rotting bungalow in East Vancouver or 480-square-foot micro-condo in downtown Toronto with no windows, no balcony, and no soundproofing.
We’ve seen this movie before. When rates were slashed to 0.25% during COVID, home prices across Canada soared. Between 2020 and early 2022, the average national sale price jumped by over 50%, according to the Canadian Real Estate Association (CREA). In some regions, like the Fraser Valley, Barrie, or Niagara, prices more than doubled. The market was on fire—not because we had a housing shortage, but because we had cheap, reckless debt fuelling demand from every direction.
People weren’t buying homes—they were bidding on lottery tickets. Investors started treating condos like Pokémon cards. Homeowners refinanced to buy investment properties. First-time buyers were told, “Just stretch a little further, rates are low.” And they did—signing on for $1.2 million mortgages with $100,000 household incomes because, hey, what could go wrong?
Everything.
The result wasn’t affordability—it was asset inflation. Lower rates didn’t reduce housing costs. They pushed them out of reach for anyone who wasn’t already in the game. A study from Scotiabank showed that price increases during low-rate periods consistently outpaced any benefit from reduced interest. The more the bank cut, the higher prices went. It’s like throwing water on a grease fire.
Even the Bank of Canada admitted it underestimated how low rates would warp the market. Mortgage debt exploded to $2.1 trillion, household debt hit 180% of disposable income, and Canada became one of the most overleveraged countries in the G7.
So no—lowering interest rates isn’t solving anything. It’s like giving a drunk more tequila and hoping they sober up. All it does is make the party louder and the crash harder.
Cheap Credit Is a Playground for Investors—and a Trap for Everyone Else
You know who loves low interest rates? Investors. Not families. Not first-time buyers. Not renters. Just investors.
Here’s the math. When rates are low, anyone with access to capital can borrow big. And when prices are rising (as they always do when rates drop), those investors get rewarded twice: once with rental income, and again when their property value inflates. It’s legalized arbitrage, and Canada’s real estate market is its personal playground.
According to Statistics Canada, by 2022, one in five homes in Canada was owned by an investor. In Toronto, that number climbed to 28%. In Vancouver, condos in downtown towers are often over 40% investor-owned, based on CMHC rental data.
And let’s be clear: these aren’t just boomers with basement suites. These are corporate landlords, private equity firms, REITs, and multi-property flippers who see homes as spreadsheets, not shelter. Low rates let them leverage more capital, take on more debt, and price out everyone else.
Worse still? They rarely even live in the communities they buy in. They often don’t live in Canada at all. We broke this down in our article "Proxy Owners and Real Estate Secrecy in B.C.", where we showed how shell companies, satellite families, and foreign students are used to park global wealth in local homes while driving up prices with no actual benefit to the community.
Meanwhile, first-time buyers are stuck fighting over scraps. They're told to “get creative”—team up with friends, buy with their siblings, or settle for a studio in a 50-year-old building with no elevator and $900/month in strata fees. The system doesn’t want them to win—it wants them to rent from the people who did.
And that’s exactly what’s happening. As investors dominate ownership, the rental market tightens, pushing rents into the stratosphere. According to Rentals.ca, average rents in Toronto now exceed $2,850/month, with Vancouver topping $3,050—a 40% increase in just 3 years.
In other words: low rates don’t help new buyers. They help old money extract even more from everyone else.
When Rates Rise, Prices Should Fall—So Why Aren’t They?
So here’s the mystery. Rates went up in 2022 and 2023. Shouldn’t that have fixed things?
Not exactly.
Yes, higher rates cooled down demand. Buyers disappeared. Mortgage pre-approvals shrank. Panic briefly set in. But here’s the thing: prices didn’t collapse—they plateaued. Why?
Because sellers refused to budge. The people sitting on gold-plated Vancouver bungalows and over-leveraged condo towers didn’t want to admit they missed the peak. So they waited. And waited. And waited. Inventory started to build, but buyers didn’t come back. Why would they? Now the same $1.2M house has a monthly payment of $6,100 instead of $3,900, thanks to higher rates.
It’s not just unaffordable. It’s absurd.
What we’re left with is a frozen market. Prices too high, rates too high, and nothing moving. According to Zolo, homes are now sitting twice as long on the market as they did in 2021. In some cities like Calgary or Hamilton, it’s even worse.
Developers are feeling it too. Pre-sale projects are stalling. Units aren't selling. And the quality of what’s already been built is... embarrassing. (We covered that in "Why Pre-Sale Condo Quality Is Declining Rapidly".) People walk into show suites and see glue-on floors, drywall seams, and paper-thin walls. No wonder they’re pulling their deposits.
The idea that raising or lowering rates will fix this mess assumes one thing: that real estate is a rational market. But it’s not. It’s driven by greed, fear, denial, and inertia. You can’t fix that with 50 basis points.
If Rates Won’t Fix It, What Will?
So what will fix the crisis? Start here:
Build more homes, but not luxury condos. Build co-ops, social housing, rent-to-own programs, and multi-family units that real people can afford.
Ban corporate bulk buying of residential housing—especially REITs and private equity.
Cap foreign enrollment at diploma-mill colleges, like we outlined in "If Foreign Students Left Tomorrow, Would Housing Prices Drop?".
Tax vacant homes, hard. Not 1%. Try 10%. Every year.
Reform zoning laws, especially in low-density cities hoarding land under the guise of “character preservation.”
Heavily tax capital gains on second+ homes and eliminate tax loopholes for assignment sales.
Oh, and stop listening to mortgage brokers on TikTok who tell you it's a “great time to buy.” If it was, they wouldn’t be telling you. They’d be buying themselves.
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