For the second time in as many months, we’re seeing an attention grabbing headline from the Canadian Mortgage and Housing Corporation.
Back in October, it was the discussion over a “red” warning for Canada’s housing market, prompted by fears of overvaluation, which included Vancouver.
Canada’s federal housing agency is now reporting results of their stress tests over their exposure to the Canadian market, and resulting profit and losses from different economic scenarios.
It’s been a while since we’ve been reminded how quickly interest rates can move higher, but all one has to do is simply go back one week to find an answer to that question.
None of the CMHC’s findings by any means forecasts.
However, a simulation of the scenario – of interest rates drastically climbing – shows it could lead to a 30 per cent decline in home prices, and over a billion dollar loss to the agency.
That’s obviously more extreme as their base-case scenario, based on a consensus of economic forecasts seeing home prices climbing 9 per cent over the next 5 years, and no losses to the agency.