Canada’s housing market, despite its hot spots, is not a significant risk to the economy due to regulation of mortgage lending. That’s the conclusion of a report by the Bank of Canada which looked at Canada and similar economies with comparable macro policy frameworks.
Deputy Governor Lawrence Schembri’s analysis discovered that house prices have been rising relative to household income for about 20 years and driving forces have included a shift towards urban living, growing population – including migration – lower interest rates and improving credit conditions. However he found that tighter lending conditions have improved credit-worthiness of borrowers, with average credit scores increasing.
Although he acknowledges that rising house prices have increased household debt it is well-managed and does not create a significant risk against a strong financial system.
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