According to a prominent expert, the Canadian housing market is facing a substantial risk of destabilization. The escalating level of debt that Canadians have accumulated relative to their incomes places many individuals in a precarious position if mortgage rates continue to increase. Phillip Colmar, a partner and Global Strategist at MRB Partners, expressed his concerns in an interview with BNN Bloomberg, highlighting the likelihood of rising mortgage rates in the future. He went so far as to caution that Canada might be on the brink of experiencing the most substantial housing bubble in history. Colmar attributed the soaring housing prices in Canada to the Bank of Canada's monetary policy, which has facilitated easy access to money for nearly two decades. He particularly emphasized the danger posed by the simultaneous rise in mortgage rates and the excessively high debt-to-income ratios that currently prevail in the country. Colmar underscored that having a credit bubble underneath a housing bubble is a particularly alarming scenario, given the astronomical amount of Canadian leverage in relation to income, along with the notable increase in debt servicing.
Despite efforts by Canadian banks to stabilize the housing market, Colmar remains convinced that a collapse is inevitable. He stressed the existence of a tangible risk wherein higher mortgage rates, an increase in unemployment, or the onset of the next recession could trigger a deleveraging cycle for the housing market. In summary, the Canadian housing market faces considerable uncertainty due to the substantial debt burdens carried by Canadians in comparison to their incomes, coupled with the potential for rising mortgage rates, all of which could ultimately lead to a significant downturn in the market.
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