Interest rate protests are back

Seven months into the Bank of Canada’s rate hike spree, some Canadians are already taking to their local parks to protest higher interest rates on their mortgages. 

Driving the news: A recent video has left the internet feeling anything but sorry for a group of real estate investors (“yes I own multiple properties, but…”) protesting higher borrowing costs which have a particular impact on people who loaded up on debt buy properties. 

Why it matters: Serial real estate investors may be the first domino to fall in a recession, but the effect might not be as concentrated as you think—as of 2020, multiple-property owners held between 29% to 41% of housing stock in Ontario, BC, Nova Scotia and New Brunswick. 

  • Borrowers have to pass a stress test to qualify for a mortgage at most financial institutions, but some investors turned to private lenders or borrowed against the rising value of their existing properties, leaving them overexposed to rising rates. 

This isn’t the first interest-rate-inspired protest in Canadian history: 100,000 demonstrators converged on Parliament Hill in 1981 to take a stand against rates that reached as high as 21%

  • At that time, the US Federal Reserve had been hiking interest rates to tame inflation (feels familiar), which did work, but came at the cost of a recession and job losses.

  • The Canadian government kept its interest rate in step with the US to stop the loonie from collapsing. 

Zoom out: What happened in 1981 is a reminder that high interest rates can lead to political backlash—so far that’s limited to a small group of real estate investors that (understandably) aren't gaining much sympathy, but as the Bank of Canada tightens the screws on the economy, the reaction could grow.