A new report warns credit unions in the western province of British Columbia to recalculate their risks in the event that a housing market crash leads to mass mortgage default.
“Default risk is of particular concern given the continuously climbing housing price in the Greater Vancouver area,” says a report prepared for the province’s Financial Institutions Commission.
Canadian housing prices have risen more than 60 per cent since 2000, says a report by the International Monetary Fund, and Vancouver prices are second only to Hong Kong’s. The IMF warned about the possibility of a “hard landing” for a Canadian housing market it describes as “overvalued.”
At the same time, the government’s own statistics office notes the ratio of Canadian household debt to disposable income hit a new high in the fourth quarter as incomes increased at a slower pace than consumer borrowing.
Canadian households owe about $1.65 for every dollar of disposable income. This includes debt for credit cards, mortgage and non-mortgage loans.
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