- BoC: We remain concerned about household indebtedness and rapid rise in house prices
Market news
20 May 2021
BoC: We remain concerned about household indebtedness and rapid rise in house prices
In the latest Financial System Review Summary, the Bank of Canada's (BoC) policy-makers say:
- Many households have taken on large mortgages compared with their income, so have less flexibility to deal with unexpected events
- Some people may be buying homes now because they expect prices to keep climbing, and this is a concern
- If house prices and household incomes were to fall in the future, some households could need to cut back on spending; this would slow the economy and possibly put stress on financial system
- Potential demand for liquidity in bond market is growing faster than what banks can supply in times of high stress
- Financial system could be vulnerable to sudden spike in demand for cash
- Assets that are exposed to climate risks are generally mispriced. This can leave investors and financial institutions exposed to sudden losses due to severe weather events and transition to low-carbon economy
- Other challenges on horizon include: viability of some businesses when government supports end; continued reliance of some firms on high-yield debt; growing threat of cyber attacks; rapid evolution of cryptoasset markets
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