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Macklem - Watching Mortgage Reset Risk With Particularly Good Data

CANADA
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  • Q on macro and rate setting impact from large upcoming mortgage resets.
  • Macklem: Mortgage holders are a little less than 40% of households. Roughly half of them have reset and while that hasn’t been easy, by and large the indicators of their financial stress have remained quite low.
  • Going forward, the base case is that those households will find it difficult when those renewals happen and have already reduced other spending in preparation. It does suggest that the effects of higher interest rates take some time to work through the economy and will continue to restrain household spending.
  • That’s something we take into account as we think about what interest rates need to be to get back to target.
  • Mortgage holders are one of the areas we have particularly good data on, with the distribution of mortgages and resets – we can get pretty good estimates of the macroeconomic impact of that.
  • That’s a vulnerability even if it’s been going pretty well. If the economy was to slow much more sharply than our base case, all of a sudden that vulnerability is really at risk of crystalizing.
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  • Q on macro and rate setting impact from large upcoming mortgage resets.
  • Macklem: Mortgage holders are a little less than 40% of households. Roughly half of them have reset and while that hasn’t been easy, by and large the indicators of their financial stress have remained quite low.
  • Going forward, the base case is that those households will find it difficult when those renewals happen and have already reduced other spending in preparation. It does suggest that the effects of higher interest rates take some time to work through the economy and will continue to restrain household spending.
  • That’s something we take into account as we think about what interest rates need to be to get back to target.
  • Mortgage holders are one of the areas we have particularly good data on, with the distribution of mortgages and resets – we can get pretty good estimates of the macroeconomic impact of that.
  • That’s a vulnerability even if it’s been going pretty well. If the economy was to slow much more sharply than our base case, all of a sudden that vulnerability is really at risk of crystalizing.