Bank of Canada governor Tiff Macklem said he is less concerned than he was a year ago about the deluge of mortgage holders facing a painful renewal.
Following a speech to business leaders in St. John’s, NL, he told reporters on Wednesday that lowering the Bank’s policy rate from 5 per cent to 2.75 per cent over the last year eases the sting for the 60 per cent of mortgage holders who scored ultra-low rates in the early days of the pandemic and are renewing in 2025 and 2026.
“Yes, there is a reset. They will be facing a higher interest rate, but they’re going from an exceptionally low rate to kind of a normal rate, as opposed to something high,” said Macklem at the event hosted by the St. John’s Board of Trade.
“I’m not saying it’s going to be easy.”
Macklem noted that mortgage holders were stress-tested for a higher rate than the rates they will face at renewal.
Mortgage delinquencies are already rising
Mortgage holders are already missing more payments, particularly in Ontario. More than 11,000 mortgages in Ontario recorded a missed payment in Q4 2024 — nearly three times the number seen in 2022, according to Equifax.
Delinquencies were “very low” for a few years, said Macklem. “They have risen, but they’re still below pre-pandemic levels.”
“We are watching that closely. I’m not saying it’s easy, but most Canadians are keeping up with their mortgage payments.”
Renters are more vulnerable
Macklem said rather than homeowners, renters appear more at risk for falling behind.
“If you look at late payments by renters on things like car loans, they actually have risen above pre-pandemic levels,” he said.
More rate cuts ahead? Maybe, says Macklem
Macklem landed in Canada’s easternmost city to deliver a speech on the impact of U.S. trade policy on jobs and inflation.
“Since President Trump took office in January, the world has faced a dramatic escalation in tariffs and pervasive uncertainty,” he said.
“In Canada, trade has been disrupted and jobs have been lost. Businesses have re-evaluated their investment plans. Consumers have become more cautious. And Canadians have told us that they expect higher prices for many imported goods.”
He said the recent announcement that Canada and the U.S. agreed to negotiate a new economic and security relationship within 30 days is welcome news and will help restore stability to jobs, prices, and inflation.
The Bank of Canada last adjusted the policy rate in March to 2.75 per cent from 3 per cent. Macklem said that the weaker the economy and the more downward pressure on inflation, the greater the need to lower the policy interest rate.
“However, if the recent firmness in underlying inflation were to persist, it would be more difficult to cut the policy rate,” he said.
“Overall, my colleagues and I agreed there could be a need for a further reduction in the policy interest rate if the effects of U.S. tariffs and uncertainty continued to spread through the economy and cost pressures on inflation were contained.”
Courtney Zwicker is a digital reporter and associate editor for REM. Based in Atlantic Canada, she has over a decade of experience covering daily business news.