Residential Market Commentary - Debt, housing, price acceleration, and mortgage qualification rules
The Bank of Canada continues to point at housing and debt as the two, big Bonhommes Sept-heures in the country’s economy. But the latest semi-annual Financial System Review is generally optimistic.
The Bank says that tougher mortgage qualification rules and rising interest rates seem to be having the desired effects. Since the spike last spring, year-over-year price acceleration has slowed from the 20% range to about 1.5% nationally. Sales are also well off the frenetic pace of a year ago, down more than 13% from April-to-April, according to the latest available numbers from the Canadian Real Estate Association.
The central bank adds its usual note of caution, though, saying it is still too early to know for certain whether or not the new mortgage rules are working. It notes that buyers may have moved up their purchases to beat the January 1st implementation date, or they may have been able to take advantage of pre-approved mortgages that were not subject to the tougher qualifications.
Household debt to income stood at nearly 170% at the end of 2017. The Bank is encouraged that consumer borrowing did slow over the first four months of this year, but it says the level of indebtedness remains very high and will likely take some time to ease.