The potential risk from high levels of mortgage borrowing has been cited in a new study on financial system risk.
The Credit Suisse Research Institute’s (CSRI) comprehensive study assesses the potential risks arising from the surge in global debt over recent years.
It says that the US has seen a deleveraging of households since the financial crisis and its toxic mortgage debt which financed overpriced real estate.
Canada, along with Australia, Sweden, and Switzerland, are highlighted for overpriced real estate and high levels of mortgage borrowing driven by low interest rates.
However, although the report says these markets are vulnerable to setbacks, “financing structures have generally become less risky in both private as well as commercial real estate, limiting systemic risks.”
The study’s general finding is that differences in the evolution of debt are very significant, with the strongest rise in debt concentrated in a relatively small number of countries and sectors.
These include government debt in China, and risks in corporate debt markets, but overall stability is viewed optimistically due to reduced leverage in the global banking system.
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