Household debt and housing remain key risks for financial system: Bank of Canada
Canada’s housing market and high consumer indebtedness levels remain the top vulnerabilities for the financial system, but both have shown signs of easing, according to the Bank of Canada.
The central bank said in a report released Thursday that worries about the amount Canadians owe have begun to pull back, but because of the sheer size of the debt, it will remain a concern for some time.
“The two main vulnerabilities we have been watching closely are showing continued signs of easing, which is encouraging,” Bank of Canada governor Stephen Poloz said in a statement.
“Combined, the impact of higher interest rates and the changes to the mortgage guidelines have reduced credit growth and improved the quality of new lending.”
The assessment came in the Bank of Canada’s latest financial system review, which assesses key vulnerabilities that could amplify or propagate economic shocks.
Mortgage lending rules have been tightening in recent years with the
■ application of stress tests on borrowers. New rules implemented at the start of this year introduced a test for borrowers who do not require mortgage insurance and had not previously been subject to stress testing. The housing market has been noticeably cooling since the beginning of this year.
The central bank said it will monitor the extent to which borrowers who want a larger loan than they qualify for under the new federal guidelines seek out alternative lenders, such as credit unions and private lenders, who are not always subject to the federal rules.
In assessing the housing market risk, the report noted that housing price growth has slowed, led by a drop in the Greater Toronto Area. However, it said the condominium markets in Toronto and Vancouver remain strong with some evidence of speculative activity.
In addition to household debt and the housing market, the report also identified cyberattacks as a key area of concern.
“Even as defensive capacity improves across the financial system, some attacks will inevitability succeed,” the report said. “Having strong recovery plans can help to quickly restore financial system functioning and prevent a loss in confidence.”
The Bank of Canada also announced Thursday that it will no longer publish its financial system review report twice a year.
The report will become an annual review published in June and a member of the bank’s governing council will make a speech in the fall to update its assessment of the vulnerabilities and risks to the financial system.
It will also create a new financial system hub on its website that will publish research and analysis throughout the year.
The Bank of Canada’s quarterly monetary policy report will also include a more in-depth discussion of the relevant issues as warranted.
The central bank has raised its key interest rate three times since last summer, moves that have prompted the big Canadian banks to raise their prime rates which are used to set the rates charged for variable-rate mortgages and other floating-rate loans. The cost of new fixed-rate mortgages have also climbed in recent months as bond yields have risen.
One of the Humboldt Broncos hockey players injured in a bus crash that killed 16 people has been released from a Saskatoon hospital and plans to graduate from high school later this month.
Xavier Labelle, an 18-year old defenceman from Saskatoon, suffered a fractured skull, a concussion, internal bleeding and 20 broken bones on April 6 when a transport truck collided with the junior hockey team’s bus.
Ten of his teammates were among the dead, and 13 people were injured.
Labelle said in a statement it was an honour to get to know those who died in the crash.
“Coach Darcy, Coach Mark, Dayna, Glen, Biebs, Brody, Schatzy, Bouls, Swack, Lukes, Joey, Leichter, Tobes, Herold, Tommy, Hunts...I miss you all,” he said.
Those names refer to Darcy Haugan, Mark Cross, athletic trainer Dayna Brons, bus driver Glen Doerksen, play-by-play announcer Tyler Bieber, statistician Brody Hinz and players Logan Schatz, Logan Boulet, Stephen Wack, Conner Lukan, Jaxon Joseph, Jacob Leicht, Parker Tobin, Adam Herold, Evan Thomas and Logan Hunter.
Labelle said he’s still recovering from his injuries, but that he’s feeling better every day.
“I have nerve damage impacting my legs and my left arm,” he said. “I have no recollection of the crash, or for about two weeks after.
“In the early stages of my recovery, I needed help to sit up — help to do all the things we take for granted, like eating and brushing my teeth. It was awful, but today I am able to walk and look forward to eventually running and skating.”
Labelle said he’s been tutored
■ by his teachers to help him finish his high school diploma, and will graduate from Ecole CanadienneFrancaise in Saskatoon at the end of the month.
It was initially thought that Labelle had died in the crash, but it turned out he had been mixed up with another player.
His family has said they hold no ill will about the error, and Labelle thanked those who helped the Broncos “at the chaotic scene of the crash and in the immediate aftermath.”
He also thanked everyone who helped and visited him at the hospital.
“You all gave me the strength and courage that I needed to start healing and feeling better,” said Labelle.