Freeland Says Dream of Home Ownership ‘Alive and Well’ Despite High Interest Rates

Deputy Prime Minister and Minister of Finance Chrystia Freeland speaks during a news conference on the next phase of the government’s economic plan at the National Press Theatre in Ottawa, on Nov. 28, 2023. The Canadian Press/Justin Tang

Finance Minister Chrystia Freeland says the Canadian dream of buying a first home is “alive and well,” despite current high interest rates.

“Last week I announced that there are now more than 500,000 tax-free first home savings accounts; that’s really important because what that shows is the dream of buying your first home is alive and well, and Canadians are investing in that dream,” Ms. Freeland said Jan. 22 during a press conference at a federal cabinet retreat in Montreal.

Reporting on the main topics of conversations at the retreat, which was aimed at supporting the middle class, Ms. Freeland mentioned the apartment loan construction program, which she said is on track toward getting 100,000 more apartments built. The government’s Housing Accelerator Fund, which is meant to spur the creation of housing supply, will “deliver 300,000 new homes,” she said.

Responding to a reporter, Ms. Freeland acknowledged the “challenge” that high interest rates pose as a key determinant of housing affordability.

An analysis by Scotiabank attributes a significant portion of the recent increase in Canadian interest rates to government expenditures. The report examined the extensive spending practices across various government levels, including the federal government’s financial aid during the pandemic.

The study suggests that government spending is responsible for approximately 2 percent of the 4.75 percent rise in interest rates experienced in Canada over recent years. The Bank of Canada’s interest rate is currently set at 5 percent.

“I think all Canadians also recognize the challenge that high interest rates are posing as inflation comes down, that is something that we want to support,” Ms. Freeland said.

She noted the inflation rate has come down from a high of 8.1 percent in June 2022 to 3.4 percent this past December, and that the Bank of Canada’s interest rate increase played a hand in it.

“Our government has been and is committed to supporting the Bank of Canada in the work of ensuring that inflation can come down so that interest rates can come down as well,” she said.

“Because we do recognize, as does every single Canadian, that high interest rates are a … challenge for a home builder looking to build more homes … They’re a challenge for a young Canadian looking to buy a first home.”

Inflation rose, according to Ms. Freeland, because of the shutdown of the economy due to the COVID-19 pandemic. She added it was unsurprising that Canadians are “exhausted” and have “economic whiplash.”

In its 2022 report, the Canada Mortgage and Housing Corporation established an objective of building 3.5 million new homes by the year 2030. To achieve such an ambitious target and improve housing affordability, it will be necessary to undertake a massive construction effort amounting to an annual build of 741,000 homes until the decade’s close.