Amid higher house prices, rising indebtedness ‘worrisome,’ central bank official says

Indebtedness is rising the most among those already deep in debt, Bank of Canada Deputy Governor Sylvain Leduc told a House of Commons finance committee on Monday. “House prices are going up, people are reaching maybe a bit more and getting a bit more indebted.”

Leduc said the rising indebtedness is “worrisome,” as the economic pictures “might change very quickly, putting people under stress, under duress.”

"So having to repay their loans, their debt, might be more complicated, putting stress not only on the macroeconomy but also on the financial system as a whole," he said.

Canada's long housing boom has prompted policymakers to tighten mortgage lending rules several times in recent years in a bid to cool the market and avoid the kind of housing crash that happened in the US, Reuters reported.

Leduc said Canada’s financial system would remain resilient, should there be a large and persistent rise in unemployment. "We've conducted model simulations to analyze the effects of such a shock and found that the buffers in the Canadian financial system would be sufficient to absorb its impact.”

CREW

We hope you are finding our Blog informative and enjoyable to read while keeping you up to date with the ever changing real estate market.

Please feel free to contact me via Direct/Text or e-mail at any time and my team will be pleased to assist you, family members and friends with all your real estate needs. Referrals are always welcome!