Canadians are borrowing mortgage debt at one of the most rapid rates in history, and with good reason. Bank of Canada (BoC) data shows borrowers were getting rock bottom rates in November. The rates are actually so low, they’re now way below inflation. Canada now has negative real mortgage rates, which are as close to free money as borrows can get. Is there any wonder why there’s a mad dash to borrow, even while inventory is limited?
Real Mortgage Rates
Real mortgage rates are the cost of a mortgage adjusted for inflation. Lenders are in the business of making money, and generally don’t lend for a loss. A loss would include returning less than inflation, since the repaid money would have less buying power.
That’s why rates tend to climb with inflation, except in unusual circumstances. Those circumstances are generally:
- Deflation. If a lender expects deflation, they’re…
