At a 4 per cent real mortgage interest rate – equivalent to the average rate since 1995 – affordability falls to its worst level in 16 years (Chart 17).10 As I have observed, some markets are already severely unaffordable even at current rates.
Since 2008, the federal government has taken a series of prudent and timely measures to tighten mortgage insurance requirements in order to support the long-term stability of the Canadian housing market. These will reduce the possibility that prices are further driven up simply through higher leverage.