High house prices and debt loads associated with them are a major vulnerability to Canada’s economy, the Bank of Canada said Thursday, warning buyers who bought during the pandemic that the impact of even slightly higher mortgage rates could be dramatic.
In its Financial System Review, the central bank said that while the country’s financial system is strong and weathered the pandemic well, the economy remains vulnerable because of elevated debt levels tied to the country’s increasingly expensive housing market.
“Even as the average household is in better financial shape, more Canadians have stretched to buy a house during the pandemic,” Bank of Canada Governor Tiff Macklem said Thursday. “And these households are more exposed to higher interest rates and the potential for housing prices to decline.”
The bank said that assessing risks related to high household debt levels has become…
