Bank of Canada is warning about sharply growing housing debt level
Almost a third of recent homebuyers in Canada who had high-ratio mortgages, wouldn't be able to qualify for the same mortgage now, as they wouldn’t meet the new requirements introduced by the government last fall.
That’s one of the facts included into the central bank’s twice-a-year report, which focuses on the strongest risks to the national financial system.
The report called the Financial System Review points to a well-known issue as the main threat to Canada’s economy – a high debt level caused by sharply growing real estate prices.
Last year, Ottawa took several steps on reducing the debt level. For example, today the government requires stress tests for borrowers’ financial state in order to prove they can afford paying down their loans in case of an interest rate hike.
According to the BoC’s report, released on December 14, nearly one-third of high-ratio mortgages, which were provided to borrowers before September 2016, wouldn’t qualify under the current rules.
In spite of those new measures, the Bank sees even more homebuyers who take larger debts that they can afford with their income level. The Bank says about half of new high-ratio borrowers in Toronto exceed this threshold. In Vancouver, it’s 39%. In Toronto, such large mortgages are spreading to Oshawa and Hamilton, as well.
"In those markets, we can see the proportion of mortgages with ratios higher than 450% doubling during the previous three years, rising from 10% to even 25%," – the Bank says.
Nationally, almost a third of borrowers who got their high-ratio mortgagees last year wouldn’t be able to qualify under the new requirements today.