The International Monetary Fund (IMF) says as Canada’s uninsured mortgage market booms, some borrowers are able to circumvent tighter mortgage rules meant to put the brakes on a hot housing market.
The IMF also said “the country needs to achieve the right mix of policies to support growth and economic rebalancing while also mitigating risks in its housing markets and from high household debt”.
“Targeted macroprudential policies” might be needed to address housing sector vulnerabilities, it added.
The IMF’s latest statement also argued the national real house price overvaluation is in between 7% and 20%, saying that Canadian’s soaring debt levels and overvaluation in the housing sector represent “the main domestic vulnerabilities.”
The Washington-based fund also revealed that it expects a soft landing in Canada’s housing market, given “a solid labor market and low mortgage rates.” This is echoed by many economists who believe it can be attributed to the repeated rounds of tightening of the rules for insured mortgages in the past 10 years.
Meanwhile, the IMF also said it anticipates a 2.2% growth for Canada’s 2015 economy despite the weaker Canadian dollar.
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