“U.S. ratings agency Fitch examined the exposure of Canada’s six largest banks to mortgage risk and found that household debt fuelled by mortgage credit expansion in Canada is the largest threat to credit profiles.
‘We’re not talking about a U.S.-style situation at this juncture’
“These are quite high levels of debt for households and the movement in house prices, we don’t think this is sustainable in the long term,” said report author Fabrice Toka, senior director at Fitch.
The six banks have a combined $730-billion in mortgage exposure and an additional $182-billion in home equity loan exposure, the report noted.
High unemployment or interest rate shock “could aversely affect the ability of leveraged homeowners to meet their mortgage obligations,” the report said.”
- National Post, 21 May 2012
“Canada’s central bank should move its benchmark target for the overnight rate above its current one per cent level or risk unsustainable increases in the country’s inflation rate and real estate market, the Organization for Economic Co-operation and Development said today.
The bank has held the rate steady at one per cent for the last 13 consecutive policy meetings, dating back to September 2010, the longest the bank has held steady since the 1950s.
“If rates go up something like we are suggesting then mortgage rates will be in more like the five per cent range. People should think twice about continuing to leverage up in order to buy more house than maybe they really need” said OECD economist Peter Jarrett
The OECD made a similar suggestion to Canada’s central bank a year ago, and was ignored.”
- CBC, 22 May 2012