Toronto (Canada), May 20 (EFE) .- The Bank of Canada warned this Thursday of the risk of a real estate bubble in some cities and said that the increase in the cost of housing is not sustainable since prices have grown by up to 30 % since the start of the pandemic.
The Canadian monetary authority issued a report on the country’s financial system, in which it warned that the main domestic vulnerabilities ‘are those linked to imbalances in the housing market and high household debt’, which have intensified since the pandemic.
Currently, the percentage of new mortgages with a loan-to-income ratio above 450% stands at 22% after a substantial increase in the second half of 2020.
That number is higher than what existed in the country before, in 2016, the Canadian authorities imposed stricter rules to reduce subprime loans.
The Bank of Canada considered that, given the high number of households that dedicate a substantial part of their income to paying mortgages, any problem in the country’s economy would affect the ability of many Canadians to meet their monthly payments.
“The vulnerability associated with high household debt is significant and has increased over the last year,” the central bank noted.
The Bank of Canada said that the real estate markets around Toronto and Montreal, the country’s two main urban centers, are overvalued and that Ottawa, the capital, is following the same trend.
The Governor of the Bank of Canada, Tiff Macklem, assured during the presentation of the report that “it is important to understand that the recent rapid increases in the price of houses are not normal.”
The central bank recalled that interest rates, which are currently at the lowest levels in the country’s history, will rise in the future, which will make many households unable to cope with mortgages.
The Bank of Canada also said that the volatility of cryptocurrencies is becoming an increasing vulnerability of the financial system and that, although these assets still do not have a systemic importance, that situation could change in the future. EFE
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