More stringent mortgage policies and higher interest rates appear to be paying off for Canadian households. As recently noted by the Calgary Herald, The Bank of Canada has already hiked the interest rate five times since summer of 2017 and says it’s making a difference.
According to bank officials, Canadians are in turn making adjustments to their spending habits, ultimately limiting the negative impact stricter lending guidelines are having on the housing industry. While still high, officials says household vulnerabilities are going down and credit growth is continuing to moderate.
New, high-leverage insured loans went from 20-percent in late 2016 to six-percent in the second quarter of 2018. Those are loans that are well more than quadruple a person’s annual income.
The biggest drop came in regards to the number of new mortgages that were extended to borrowers who are already highly indebted. When looking at the second quarter of 2018, those loans fell 39-percent, year-over-year.
While the debt-to-income ratio of households is still pretty high, bank officials say its stabilizing and beginning to decrease.