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MNI BRIEF: Canada Bank Regulator Warns On Housing Risks

(MNI) Ottawa
OTTAWA (MNI)

OSFI says banks are well capitalized but a house price correction could trigger borrower defaults and a disorderly market reaction.

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."

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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."

Keep reading...Show less