With interest rates set to keep rising, the Bank of Canada is sounding the alarm on the risk record high house prices and an increasing number of households with high mortgage debt could have on the Canadian economy.
“In Canada, elevated levels of household debt and high house prices remain two key interconnected vulnerabilities,” the bank said in its annual Financial System Review.
Despite house prices increasing 53% nationally between April 2020 and April 2022, the bank is concerned that recent homebuyers lack the equity in their home to withstand a “significant price correction” and would “face more financial strain when they renew their mortgages at higher rates.”
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