Moderation of home price growth has reduced the risk that Canada’s financial system would suffer a severe shock.
Fitch Ratings says that banks are still vulnerable to a significant housing price correction, especially in Toronto and Vancouver; but that recent data suggests a softening of markets rather than a slump.
The banks do remain materially exposed to highly leveraged households though which are vulnerable to weakening economic conditions.
While noting that the measures introduced at federal and provincial levels to cool markets, Fitch says that it still considers home prices in Greater Toronto and Greater Vancouver to be overvalued.
