The dramatic rise of Canadian mortgage costs has pushed inflation up by 3.3% year-over-year, according to the latest Consumer Price Index report from Statistics Canada.
Canada’s mortage cost index rose 30.6% in July from a year earlier as those renewing mortgages were hit by higher borrowing costs that have followed interest rate hikes by the country's central bank. The index increase follows a similar spike in June of 30.1%. The July numbers represent the fifth straight month of record increases in the category.
If the mortgage shock were subtracted from the equation, the index increase would be 2.4%, closer to the inflation target set by the Bank of Canada.
However, inflation would have been higher had the price of gasoline not fallen 9.2% in July. When that drop is not taken into account, inflation for July rose to 4.1%, and 4.0% in June.
Energy prices fell 8.2% in July and 14.6% in June. Gasoline was 12.9% less expensive than one year earlier following a 21.6% drop in June.
Some mortgage holders have been hit by sticker shock on refinancing following times of much lower interest rates, which hit a record low in October 2021.
Those low rates prompted some homeowners to take out floating-rate mortgages. That type of loan has become about 70% more expensive to finance since reaching their lowest point.
In July, the Bank of Canada approved a 100-basis-point increase in its benchmark rate to 2.5%. The move represented the largest Canadian rate hike in 25 years and placed Canada at the top of G7 nations for interest rates.
Last month the Bank of Canada stated that its goal of getting inflation back to the 2% target will probably come in mid 2025, rather than the start of 2025.