MNI BRIEF: Canada Bank Regulator Warns On Housing Risks

Canada's federal banking regulator on Thursday refreshed warnings that lenders and borrowers are at risk from a housing boom fed by low interest rates and surging prices.

"Heightened housing market activity and historically unprecedented price increases across Canada are leading to increasingly leveraged borrowers, that increases the systemic exposure to a housing price correction," OSFI's debut Annual Risk Outlook report said. "While lending institutions are currently well-capitalized and appear to be financially resilient, such a sequence of events could lead to borrower defaults, a disorderly market reaction and broader economic uncertainty and volatility."

The agency is reviewing its mortgage stress test and broader B-20 lending guidelines. OSFI also identified other risks including cyber attacks, climate change and fragile corporate debt funding. The agency's chief Peter Routledge told MNI in December the system has solid buffers but housing may remain imbalanced for a while as supply catches up with demand.