OTTAWA Feb 16 Fitch Ratings on Thursday
forecast a slowdown in growth of Canadian home prices this year,
and it warned that the risk has risen of a correction in
overvalued markets like Toronto and Vancouver.
With household debt compared to income sitting at a record
high, recent tighter mortgage lending rules from the government
should help mitigate the run-up in home prices, improving
affordability, it said.
Prices will rise by just 3 percent this year, Fitch said,
substantially lower than the 12 percent gain it estimates the
market saw in 2016. Price growth this year is expected to lag
that of the United States, with prices south of the border
expected to rise by 4 percent.
The Canadian housing market has been robust in the years
since the global financial crisis, supported by low interest
However, the recent sharp acceleration in Vancouver and
Toronto home prices has raised worries of a bubble in those
Vancouver prices began to pull back from their peak last
year as the provincial government imposed a tax on foreign
buyers in the city, though Toronto has continued to rise,
industry data shows.
Fitch did not specify what price fall would constitute a
Despite the expected slowdown in home price growth across
Canada, Fitch said the number of delinquencies should remain
low, as long as unemployment does not rise.
While borrowers could also be hurt by higher interest rates,
given the high level of debt they are carrying, Fitch said the
risk of a sharp rise in interest rates is remote.
Overall, the number of mortgages that are 90 days or more
behind is expected to hold steady at 0.3 percent in 2017.
The Bank of Canada cut interest rates twice in 2015 as the
economy was hit by the oil price crash and is expected to hold
rates where they are into 2018.
(Reporting by Leah Schnurr, Editing by W Simon)