The Bank of Canada is out with its latest Financial Stability report. It’s mostly a risk-highlighting exercise that has little impact on financial markets but I do want to highlight one part of the report because I believe that housing market risks are mounting and prices are falling.
Among households with a mortgage, 60% are facing renewal this year or in
2026. Most of those renewing will see their payments rise because they took out
their mortgage during the pandemic when rates were very low. But the average
increase will be smaller than what we expected a year ago.
Still, if a large economic shock causes job losses, it will be harder for some
households to keep up with their debt payments.
A prolonged trade war may be that shock. It would cause demand for Canadian
exports to fall and disrupt supply chains, threatening jobs and incomes. Workers
in trade-dependent industries could find it particularly difficult to continue
managing their debt.
These numbers were released from the Toronto Real Estate Board yesterday and show sales down 23% y/y with listings up 54% y/y. The condo market is particularly dire but detached homes are cracking as well.
This article was written by Adam Button at www.forexlive.com.