{"id":189744,"date":"2018-11-15T05:09:19","date_gmt":"2018-11-15T10:09:19","guid":{"rendered":"https:\/\/canadianinquirer.net\/v1\/?p=189744"},"modified":"2018-11-15T05:09:19","modified_gmt":"2018-11-15T10:09:19","slug":"mortgage-risks-fading-thanks-to-higher-rates-tougher-rules-bank-of-canada","status":"publish","type":"post","link":"https:\/\/canadianinquirer.net\/v1\/2018\/11\/15\/mortgage-risks-fading-thanks-to-higher-rates-tougher-rules-bank-of-canada\/","title":{"rendered":"Mortgage risks fading thanks to higher rates, tougher rules: Bank of Canada"},"content":{"rendered":"
\"\"<\/a>
\u201cIt took a long time for that vulnerability to accumulate and it’s going to take some time for it to diminish.” (File Photo Bank of Canada<\/a>)<\/figcaption><\/figure>\n

OTTAWA \u2014 The\u00a0Bank\u00a0of\u00a0Canada\u00a0provided a closer look Wednesday at just how much stricter mortgage rules and higher interest rates have helped slow the entry\u00a0ofnew households into the category\u00a0of\u00a0\u201ddeeply indebted borrowers.\u201d<\/p>\n

The lofty levels\u00a0of\u00a0household debt has been a key concern for the\u00a0Bank\u00a0of\u00a0Canada\u00a0as it gradually raises its trend-setting interest rate, which it has already hiked five times since the summer\u00a0of\u00a02017.<\/p>\n

To determine the pace\u00a0of\u00a0future hikes, the central\u00a0bank\u00a0has closely watched how well households are adapting to higher borrowing costs, particularly when it comes to those that are significantly overstretched.<\/p>\n

So far, the\u00a0bank\u00a0has said Canadians have been making spending adjustments in response to rate hikes and the arrival\u00a0of\u00a0stricter mortgage policies. At the same time, the\u00a0bank\u00a0has reported that credit growth has continued to moderate and household vulnerabilities, while still elevated, have edged down as a result.<\/p>\n

The\u00a0bank\u00a0has also credited tougher federal mortgage rules for contributing to the improvement.<\/p>\n

A staff analytical note published by the\u00a0bank\u00a0Wednesday offered more details about the impacts\u00a0of\u00a0new guidelines and rising interest rates.<\/p>\n

\u201cThe number\u00a0of\u00a0new highly indebted borrowers has fallen, and overall mortgage activity has slowed significantly,\u201d said the research paper, co-authored by\u00a0bankstaffers Olga Bilyk and Maria teNyenhuis.<\/p>\n

\u201cTighter policies around mortgage qualification and higher interest rates are having a direct effect on the quality and quantity\u00a0of\u00a0credit.\u201d<\/p>\n

The analysis said mortgage stress tests introduced two years ago have reduced the share\u00a0of\u00a0new high-leverage, insured loans \u2014 those\u00a0of\u00a0more than 4.5 times a borrower’s annual income \u2014 to six per cent in the second quarter\u00a0of\u00a02018 from 20 per cent in late 2016.<\/p>\n

Another federal rule change this year, aimed at high-leverage yet uninsured mortgages, dropped the share\u00a0of\u00a0these new loans to 14 per cent in the second quarter\u00a0of2018, compared with 20 per cent a year earlier.<\/p>\n

\u201cThe most-pronounced decline has been in the number\u00a0of\u00a0new mortgages extended to highly indebted borrowers, which fell by 39 per cent year-over-year in the second quarter\u00a0of\u00a02018,\u201d the research paper, which also noted there have been impacts from regional housing market policies.<\/p>\n

Speaking to reporters Wednesday,\u00a0Bank\u00a0of\u00a0Canada\u00a0senior deputy governor Carolyn Wilkins said the debt-to-income ratios\u00a0of\u00a0households remain \u201creally high,\u201d but have stabilized and are beginning to move down.<\/p>\n

\u201cIt took a long time for that vulnerability to accumulate and it’s going to take some time for it to diminish,\u201d said Wilkins, who was participating in the launch\u00a0of\u00a0the\u00a0Bankof\u00a0Canada’s new digital hub that will feature research and analysis on financial stability issues.<\/p>\n

\u201cWhat we were hoping to see would be a continuing improvement in the quality\u00a0of\u00a0the loans because what that does is, over time, put the economy on a more-solid footing to withstand whatever adverse developments that might occur.\u201d<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

OTTAWA \u2014 The\u00a0Bank\u00a0of\u00a0Canada\u00a0provided a closer look Wednesday at just how much stricter mortgage rules and higher interest rates have helped …<\/p>\n","protected":false},"author":44,"featured_media":189750,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[19,18,16],"tags":[],"class_list":["post-189744","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","category-news-ca","category-news","mauthors-andy-blatchford","mauthors-the-canadian-press"],"_links":{"self":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/189744","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/users\/44"}],"replies":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/comments?post=189744"}],"version-history":[{"count":0,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/posts\/189744\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/media\/189750"}],"wp:attachment":[{"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/media?parent=189744"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/categories?post=189744"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/canadianinquirer.net\/v1\/wp-json\/wp\/v2\/tags?post=189744"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}