STORY CONTINUES BELOW THESE SALTWIRE VIDEOSSavings were not encouraged during the decade ending in 2021. With prime rates from the Bank of Canada at all-time lows and guaranteed investment certificates yielding less than the inflation rate, why would anyone put money aside to lose money?
Likewise in housing! People were seeing house prices rising and rising quickly, and they wanted to enter the housing market before house prices went up further. Many were buying houses as potential investments rather than a place to live. If one cannot save by investing in guaranteed investment certificates or bonds, why not use a house as an investment?
For those who listened and prepared themselves by re-negotiating mortgages, if necessary, in 2021, came through this crisis protected. Likewise for those who had their mortgages paid off.Those who did not listen to the governor and renewed their mortgages in 2022-2023 paid a hefty price. By paying a much higher mortgage interest rate, from about two per cent to about six per cent , money is taken out of circulation, tending to reduce inflation.
The next opportunity to take advantage of lower interest rates may not be until 2024. Can we wait that long? If we do, is the housing crisis going to get worse? At least those who are renting can take advantage of higher interest rates and save for a down payment for a house.