Interest rates of 2% on $1 million = $20k/year. It is not very hard to imagine mortgage rates of 4% with the five year re-set on the typical CDN fixed rate mortgage. That doubles the non-deductible interest to $40k. Imagine a couple with household income of $120k 2/n

Suddenly interest goes from 16% of pre-tax to 33% of pre-tax, likely close 50% of post-tax. Not counting amortization, property taxes, insurance, utilities. What was a stretch at 2% becomes unaffordable at 4%. Which is tough for one couple but a problem if it is thousands 3/n

You can warn people about this until the cows come home but fear of missing out on home ownership will overpower most anything you say, and the constant price rises on homes over 20 years is tough to refute. So maybe government intervention is needed. 4/n

Making the stress test more stringent is a good way to do it. Raising the insurance costs for mortgages by 0.5% might also work. Making some young couples mad now will save a lot of tears for them and the economy in the future.