Canadian Inflation Is The Highest Since The Mid-80s If Mortgages Are Excluded

Canadian inflation is the highest in decades, and it’s even higher for those without a mortgage. Statistics Canada (Stat Can) data shows growth of the Consumer Price Index (CPI) hit a 31-year high in March. But when mortgage interest costs are excluded, inflation is even higher — the highest growth in the agency’s data set. Mortgage costs have been rising recently, but they’re still low enough to weigh the whole inflation index lower.

Canadian Inflation Is Rising At The Fastest Rate In 31-Years

Canadian headline inflation climbed at the highest rate in over three decades. CPI’s annual growth reached 6.7% in March, about 3x higher than a year before when it was just above the central bank’s target. This was the highest headline CPI reported in Canada over the past 31years, according to Stat Can. But wait, there’s more!

Canadian Annual Inflation Growth

The annual percent change in the cost of consumer goods for Canadian households, as measured by the Consumer Price Index (CPI).

Source: Statistics Canada; Better Dwelling.

Excluding Mortgage Cost, Inflation Is Even Higher

When mortgage costs are removed from the calculations, headline inflation pushes even higher. Annual growth of CPI excluding mortgage interest costs reached 7.2% in March. It was an increase of 1.1 points from a month before, and it’s a whole 0.5 points higher than CPI. 

Canadian Annual Inflation Growth Excluding Mortgage Interest

The annual percent change in the cost of consumer goods for Canadian households, as measured by the Consumer Price Index (CPI) excluding the cost of mortgage interest.

Source: Statistics Canada; Better Dwelling.

Stat Can data for CPI excluding interest costs only goes back to the early ’80s, but it’s never been higher.  If you’re not in the small group of people renewing their mortgage at a lower rate, you’re not facing the highest inflation in 31 years. You’re actually facing the highest inflation since the mid-80s. 

Mortgage Costs Weigh Down Inflation Costs

If it wasn’t clear, how mortgage interest is measured lowered inflation. Stat Can uses an index they call the Mortgage Interest Cost Index (MICI) to measure this. It looks at a 5-year average of mortgage costs, since that was the most common term before 2020. They weigh it more heavily towards recent data, but there are obviously some issues here.

Mortgage interest costs are climbing but they’re still at pre-2020 levels. It doesn’t matter if lower interest costs raise the price of homes, lower rates can bring down CPI shelter. In this case, mortgage interest costs are weighing it down substantially.