Remember back in 2008 when the whole world’s economy decided to have a bit of a meltdown? Not exactly a fun time. Central banks everywhere scrambled to stop the bleeding, and their favourite tool was slashing interest rates. In Canada, rates dropped from about 4.5% all the way down to nearly 0.25% in a blink. Mortgage rates followed suit, hitting historic lows. On the surface, that sounds brilliant, right? Cheap borrowing! More buying power! Everyone wins!
Well, not exactly. Here’s the twist: while cheap money sounds like a gift, it ended up being a bit of a double-edged sword. See, when borrowing gets super cheap, suddenly everyone and their dog wants to buy a house. First-time buyers jump in, investors smell opportunity, and demand goes through the roof. But here’s the rub—supply didn’t magically appear to meet that demand. Zoning rules, slow approvals, and high construction costs meant new homes weren’t coming online fast enough.
So what happened? Prices shot up. And unlike the United States, where the housing market had a sharp, painful correction, Canada’s banking system stayed relatively stable. That sounds like a good thing—and in many ways it was—but it also meant no reset button got pushed. Prices just kept climbing, year after year, like a cheerful but terrifying escalator to the clouds.
Now here’s where monetary policy gets really interesting. By pumping more money into the economy and keeping rates low for so long, central banks accidentally turned housing into a red-hot financial asset. Homes stopped being just places to live and started competing with stocks, bonds, and other investments. Money supply expanded fast, asset prices rose together, and housing became tightly tied to financial markets. That’s great if you already own a home. Not so great if you’re trying to buy your first one.
But don’t despair—there’s a way forward. Policymakers are starting to realise that interest rates alone can’t solve this. We need smarter tools: targeted support for first-time buyers, incentives for building more homes faster, and maybe even cooling measures for investors. The Bank of Canada has already started raising rates again to cool things down. It’s a balancing act, for sure.
The bottom line? Low rates got us into this mess, but they won’t be the only way out. With a mix of patience, smart policy, and a bit of luck, we can find that sweet spot where homes are affordable again. And honestly? That’s a future worth working toward. Cheers to that!
Links to Michael Ruge, Affordable Apartments and his Initiatives:
Solving the Housing Crisis? Michael Ruge Says It Starts with Funding
Owning Real Estate Without the Risk: Daven Michaels & Michael Ruge
