Royal Bank of Canada (RBC) predicts housing prices may dip as much as 15% if interest rates jump and this would be "healthy" for the country's economy.
CEO David McKay last week said he foresees some price correction, thanks to a rising rate environment.
"I don't see it to the extent that the Bank of Canada does, but I do think you could have at least 10% to 15% price correction," he told Bloomberg.
Earlier this month, the central bank said housing values across the country are overvalued by as much as 30%.
Also this month, Bank of Canada governor Stephen Poloz cautioned that “indebted households and high housing prices pose a risk to the financial system even as the country isn't in a housing bubble.”
RBC and other major Canadian lenders have seen record profits in recent years as homeowners took advantage of the lowest mortgage rates for decades. This allowed the boost in house prices and a real estate market expansion. In fact, Bank of Canada's policy interest rate has been at 1% since September 2010.
Meanwhile, economists surveyed by Bloomberg predict the central bank will start raising its overnight lending rate in Q4 2015.
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