The Bank of Canada said vulnerabilities from high household debt and elevated housing prices have increased and pose key risks to the Canadian financial system.
In its latest financial system review, the central bank said Thursday the twin factors have increased the downside risk to economic growth as rising rates meant to counter inflation increase the chance of households having to divert consumption towards debt repayments.
Households on average have seen their net worth increase by about $230,000 over the first two years of the pandemic, largely from rising home prices but also from the rising stock market and other gains. The bank said that the strong growth in house prices during the pandemic has boosted the economy in the short-term, but in the midterm it could weigh on economic growth.
The potentially rising costs come as house prices were up 24 per cent in April compared with a year earlier, and up 53 per cent relative to April 2020.
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