With bank interest rate increased by Bank of Canada, mortgage rates are increasing as well.
Stephen Poloz, the governor of the Bank of Canada, has advised Canadians who are facing higher housing costs as a result of interest hike- ‘Just buy a smaller house.’
“As we said at the time, many of these issues go down to the individual level: people who don’t qualify for a mortgage on the house they wish today have multiple avenues of adjustment, one of them being to just go ahead and buy a smaller and less expensive home,” Stephen Poloz said, while announcing the rate hike.
Excessively large homes are a liability, economically and to the environment. Heating a 2,000-square-foot home in winter, then air conditioning it in summer, makes for very high energy use and a large carbon footprint.
While the “buy smaller” method could work in smaller markets, it doesn’t work in urban environments where the market is already unaffordable, experts explained.
According to a Royal Lepage study, in Vancouver the average home priced at around $400,000 only has 1.5 bedrooms, compared to the national average of 2.7 bedrooms.
Though Poloz’s comments may come off as insensitive — especially to would-be homebuyers who watched affordability deteriorate as the Bank tripled its key lending rate over the past year, to 1.5 per cent from 0.5 per cent — there may some wisdom in what he says.
According to a PricewaterhouseCoopers (PwC) report from 2017, Canadians own, on average, the third-largest homes in the world, behind only Australians and Americans. At nearly 2,000 square feet, our homes are more than twice as large as homes in Britain, despite the fact that our families are no larger than theirs.
It’s estimated that the average home size in Canada doubled from the 1970s to 2000, though that trend has levelled off, largely thanks to high land costs in Toronto and Vancouver, which have pushed developers to build smaller homes (as have land use regulations requiring more dense neighbourhoods).