It’s the end of another work week and that means it’s time for another Friday Free-for-all!
This is our regularly scheduled end of the week news round-up and open topic discussion thread for the weekend, here are a few recent links to kick off the chat:
–Royal Bank ‘closely monitoring’ housing
–CIBC can weather housing crash up to 30%
–Pumping Tax Free Zones
–Metro house sales plummet
–Home sales down 63% in first weeks of August
–Foreign buyer tax in four charts
–How can Vancouverites afford to buy?
So what are you seeing out there? Post your news links, thoughts and anecdotes here and have an excellent weekend!
A new report issued by US ratings agency Fitch says that fast-rising home prices and record levels of household debt pose a threat to the credit portfolios of Canadian banks.
The agency examined the exposure of Canada’s six largest banks to mortgage risk and found that household debt fuelled by mortgage credit expansion in Canada is the largest threat to credit profiles.
“These are quite high levels of debt for households and the movement in house prices, we don’t think this is sustainable in the long term,” said report author Fabrice Toka, senior director at Fitch.
The six banks have a combined $730-billion in mortgage exposure and an additional $182-billion in home equity loan exposure, the report noted.
High unemployment or interest rate shock “could aversely affect the ability of leveraged homeowners to meet their mortgage obligations,” the report said.
The risk testing scenario looked at drops of 1 to 10% and sees CIBC and RBC as the most exposed to mortgage value risks. The debt-to-income ratio in Canada is currently higher than it was in pre-recession US, but Fitch points out that there are structural differences in our housing market.
Here’s the full article in the Financial Post.