Stress tests for Van­cou­ver, Toronto home prices

The Hamilton Spectator - - CANADA & WORLD -

Canada’s bank­ing reg­u­la­tor is re­quir­ing banks to con­duct stress tests to de­ter­mine how they would deal with a 50 per cent down­turn in Van­cou­ver real es­tate prices and a 40 per cent cut in Toronto home prices. The key changes an­nounced Tues­day by the Of­fice of the Su­per­in­ten­dent of Fi­nan­cial In­sti­tu­tions Canada come on the heels of a let­ter it sent ear­lier this month to all fed­er­ally-reg­u­lated fi­nan­cial in­sti­tu­tions re­mind­ing them to ex­er­cise pru­dence when un­der­writ­ing home mort­gages. The reg­u­la­tor iden­ti­fied sev­eral ar­eas that it said it will be watch­ing closely, in­clud­ing the ver­i­fi­ca­tion of a bor­rower’s in­come, debt ser­vice ra­tios and the re­li­a­bil­ity of prop­erty ap­praisals. Last month, the Bank of Canada raised con­cerns about the hous­ing mar­ket.

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