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 that 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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