{"id":8459,"date":"2021-03-31T20:52:45","date_gmt":"2021-03-31T20:52:45","guid":{"rendered":"https:\/\/www.pantheregroup.com\/2021\/03\/31\/mounting-debt-worrying-as-canadians-stretch-to-chase-rising-home-prices-says-bank-of-canada-governor\/"},"modified":"2021-03-31T20:52:45","modified_gmt":"2021-03-31T20:52:45","slug":"mounting-debt-worrying-as-canadians-stretch-to-chase-rising-home-prices-says-bank-of-canada-governor","status":"publish","type":"post","link":"https:\/\/www.pantheregroup.com\/2021\/03\/31\/mounting-debt-worrying-as-canadians-stretch-to-chase-rising-home-prices-says-bank-of-canada-governor\/","title":{"rendered":"Mounting debt &#8216;worrying&#8217; as Canadians stretch to chase rising home prices, says Bank of Canada governor"},"content":{"rendered":"<p> \n<\/p>\n<div id=\"\">\n<header aria-label=\"Beginning of Article\" class=\"article-header\">\n<nav aria-label=\"Breadcrumb\" class=\"breadcrumbs\">\n<h2 class=\"visually-hidden\">Breadcrumb Trail Links<\/h2>\n<ol class=\"breadcrumbs__items list-unstyled\">\n<li class=\"breadcrumbs__item\"> News <\/li>\n<li class=\"breadcrumbs__item\"> Economy <\/li>\n<\/ol>\n<\/nav>\n<p class=\"article-subtitle\"> But Tiff Macklem stops short of suggesting a policy response is necessary <\/p>\n<div class=\"article-meta\">\n<div class=\"published-by\">\n<p>Author of the article:<\/p>\n<p> <span class=\"published-by__author\">Bianca Bharti<\/span> <\/div>\n<div class=\"published-date\">\n<p>Publishing date:<\/p>\n<p> <span class=\"published-date__since\">Mar 31, 2021<\/span> \u00a0\u2022\u00a0 <span class=\"updated-date__since\">20\u00a0minutes ago<\/span> \u00a0\u2022\u00a0 <span class=\"published-date__word-count\">3 minute read<\/span> \u00a0\u2022\u00a0 <span>  <span class=\"comment-bubble\"> <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" height=\"16px\" viewbox=\"0 0 24 24\" width=\"16px\"><path d=\"M4,0 C2.93914,0 1.921718,0.421428 1.171572,1.171572 C0.421428,1.921718 0,2.93914 0,4 L0,24 L3.846,20.158 L4,20.16 L20,20.16 C21.0608,20.16 22.0782,19.73858 22.8284,18.98842 C23.5786,18.23828 24,17.22086 24,16.16 L24,4 C24,2.93914 23.5786,1.921718 22.8284,1.171572 C22.0782,0.421428 21.0608,0 20,0 L4,0 Z M2,4 C2,3.46956 2.21072,2.96086 2.58578,2.58578 C2.96086,2.21072 3.46956,2 4,2 L20,2 C20.5304,2 21.0392,2.21072 21.4142,2.58578 C21.7892,2.96086 22,3.46956 22,4 L22,16.16 C22,16.69044 21.7892,17.19914 21.4142,17.57422 C21.0392,17.94928 20.5304,18.16 20,18.16 L4,18.16 L3.048,18.126 L2,19.174 L2,4 Z\"\/><\/svg><\/span> 13 Comments  <\/span> <\/div><\/div>\n<figure class=\"featured-image\"><picture class=\"featured-image__ratio featured-image-category__economy\"><source media=\"(min-width: 1200px)\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/mortgage0331.jpg?quality=90&amp;strip=all&amp;w=564&amp;type=webp,&#10;            https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/mortgage0331.jpg?quality=90&amp;strip=all&amp;w=1128&amp;type=webp 2x\" type=\"image\/webp\"\/><source media=\"(min-width: 1200px)\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/mortgage0331.jpg?quality=90&amp;strip=all&amp;w=564&amp;type=jpg,&#10;            https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/mortgage0331.jpg?quality=90&amp;strip=all&amp;w=1128&amp;type=jpg 2x\" type=\"image\/jpeg\"\/><source media=\"(min-width: 768px)\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/mortgage0331.jpg?quality=90&amp;strip=all&amp;w=472&amp;type=webp,&#10;            https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/mortgage0331.jpg?quality=90&amp;strip=all&amp;w=944&amp;type=webp 2x\" type=\"image\/webp\"\/><source media=\"(min-width: 768px)\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/mortgage0331.jpg?quality=90&amp;strip=all&amp;w=472&amp;type=jpg,&#10;            https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/mortgage0331.jpg?quality=90&amp;strip=all&amp;w=944&amp;type=jpg 2x\" type=\"image\/jpeg\"\/><source media=\"(max-width: 767px)\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/mortgage0331.jpg?quality=90&amp;strip=all&amp;w=288&amp;type=webp,&#10;            https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/mortgage0331.jpg?quality=90&amp;strip=all&amp;w=576&amp;type=webp 2x\" type=\"image\/webp\"\/><\/picture><figcaption class=\"featured-image__caption image-caption\"><span class=\"caption\">In February, Bank of Canada Governor Tiff Macklem said the housing market was showing signs of &#8220;excessive exuberance,&#8221; in the central bank&#8217;s first indication of concern as national real estate prices had jumped 25 per cent from the year before.<\/span> <span class=\"credit\">Photo by Ernest Doroszuk\/Toronto Sun\/Postmedia Network<\/span> <\/figcaption><\/figure>\n<\/header>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>Bank of Canada Governor Tiff Macklem said he\u2019s seeing \u201cworrying\u201d signs in Canada\u2019s hot housing market, in which households are taking on increasing levels of debt to chase rising prices.<\/p>\n<p>The central bank had largely stayed quiet on the housing market until February, when Macklem said it was showing signs of \u201cexcessive exuberance\u201d as national real estate prices jumped 25 per cent from the year before.<\/p>\n<p>\u201cSince then, the housing market has continued to run strong across a variety of dimensions; price increases have continued at a pretty high rate,\u201d Macklem said in an interview with the Financial Post on Wednesday.<\/p>\n<p>\u201cIf you look at the household indebtedness, you are seeing, on average, the loan-to-value ratios are getting higher, particularly in the uninsured space. That suggests that Canadians are stretching and that is worrying.\u201d<\/p>\n<p>The central bank and other authorities are facing mounting pressure to address the overheating housing market, which the Canada Mortgage and Housing Corporation warned last week is becoming increasingly vulnerable to economic shocks.<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section class=\"ad\">\n<h2 class=\"visually-hidden\">Advertisement<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-1\">\n<div class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>However, CIBC\u2019s deputy chief economist Benjamin Tal warned that just because the housing market is hot, does not mean the central bank should act.<\/p>\n<p>\u201cThat\u2019s not his domain, that\u2019s the finance minister\u2019s domain,\u201d he told the Post. \u201cPeople have to understand that he will cross the line if he starts talking about macroprudential policies.\u201d<\/p>\n<p>Macklem himself stopped short of suggesting a policy response is necessary.<\/p>\n<blockquote>\n<p>What gets us worried is when you start to see extrapolative expectations, or people starting to speculate on this, and houses become assets as opposed to something we live in<\/p>\n<p>Bank of Canada Governor Tiff Macklem<\/p>\n<\/blockquote>\n<p>\u201cFrom our perspective, monetary policy is a blunt tool. It\u2019s a macro-economic instrument. We have to look at the whole economy. The whole economy needs monetary policy support to support the recovery, get people back to work and get inflation back on target,\u201d he said.<\/p>\n<p>Tal reiterated Macklem\u2019s view.<\/p>\n<p>\u201cThe housing market is one part of the economy,\u201d he said. \u201cAs a society, we have never been so sensitive to the risk of higher interest rates\u2026. Every small increase in the interest rate can have a significant impact on the housing market and therefore, (Macklem) would like to see the market slow down before we have to raise interest rates.\u201d<\/p>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section class=\"ad\">\n<h2 class=\"visually-hidden\">Advertisement<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-2\">\n<div class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>While the market continues to rise, some of Canada\u2019s biggest banks have been leading the calls for a policy response of some kind.<\/p>\n<p>In a report on Monday, Royal Bank of Canada senior economist Robert Hogue said the near-term outlook for homebuyers is \u201cgrim.\u201d<\/p>\n<p>\u201cSmaller markets are losing some of their affordability advantage, which adds stress to buyers willing to move to a different town to find a home they can afford,\u201d he wrote.<\/p>\n<p>Last week, Hogue said policymakers needed to address the \u201coverheating\u201d in markets as it threatens to destabilize the economy, suck money from more productive areas and exacerbate inequality.<\/p>\n<p>Bank of Montreal senior economist Robert Kavcic, in a Tuesday report, said \u201cpolicy makers need to act immediately, in some form, to address the home price situation before the market is left exposed to more severe consequences down the road.\u201d<\/p>\n<section aria-labelledby=\"moreTopicLabel5621635612299987562070688823483763\" class=\"more-topic\" data-carousel-icon-button=\"\" data-carousel-type=\"list\"><button aria-hidden=\"true\" class=\"more-topic__button-prev\" data-carousel-prev=\"\" tabindex=\"-1\" title=\"previous\" type=\"button\"\/><\/p>\n<ol class=\"more-topic__items list-unstyled\" data-carousel-slide-list=\"\" tabindex=\"0\">\n<li class=\"more-topic__item\" data-carousel-item=\"\"><picture class=\"more-topic__item-image\"><img decoding=\"async\" alt=\"Sales of homes valued at $4 million or more in the Greater Toronto Area saw a 157 per cent jump in activity.\" class=\"lazyload\" src=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/luxury-houe0330.jpg?h=96&amp;strip=all&amp;quality=80\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/luxury-houe0330.jpg?h=96&amp;strip=all&amp;quality=80,&#10;                                    https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/luxury-houe0330.jpg?h=192&amp;strip=all&amp;quality=80 2x,&#10;                                    https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/luxury-houe0330.jpg?h=288&amp;strip=all&amp;quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"><span class=\"more-topic__item-text-clamp\"> Affluent millennials and wealthy families sitting on a pile of cash are the latest drivers of high-end Canadian real estate <\/span><\/h3>\n<\/li>\n<li class=\"more-topic__item\" data-carousel-item=\"\"><picture class=\"more-topic__item-image\"><img decoding=\"async\" alt=\"Residential construction in Canada has not kept pace with the population over the past five decades.\" class=\"lazyload\" src=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0325housing.jpg?h=96&amp;strip=all&amp;quality=80\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0325housing.jpg?h=96&amp;strip=all&amp;quality=80,&#10;                                    https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0325housing.jpg?h=192&amp;strip=all&amp;quality=80 2x,&#10;                                    https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0325housing.jpg?h=288&amp;strip=all&amp;quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"><span class=\"more-topic__item-text-clamp\"> Here&#8217;s how government can cool housing prices without hurting homeowners <\/span><\/h3>\n<\/li>\n<li class=\"more-topic__item\" data-carousel-item=\"\"><picture class=\"more-topic__item-image\"><img decoding=\"async\" alt=\"A luxury home for sale in West Vancouver, British Columbia.\" class=\"lazyload\" src=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0331luxury.jpg?h=96&amp;strip=all&amp;quality=80\" height=\"96\" loading=\"lazy\" srcset=\"https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0331luxury.jpg?h=96&amp;strip=all&amp;quality=80,&#10;                                    https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0331luxury.jpg?h=192&amp;strip=all&amp;quality=80 2x,&#10;                                    https:\/\/smartcdn.prod.postmedia.digital\/financialpost\/wp-content\/uploads\/2021\/03\/vw0331luxury.jpg?h=288&amp;strip=all&amp;quality=80 3x\" width=\"96\"\/><\/picture>\n<h3 class=\"more-topic__item-text\"><span class=\"more-topic__item-text-clamp\"> The great generational wealth transfer is fuelling the luxury property market <\/span><\/h3>\n<\/li>\n<\/ol>\n<p><button aria-hidden=\"true\" class=\"more-topic__button-next\" data-carousel-next=\"\" tabindex=\"-1\" title=\"next\" type=\"button\"\/><\/section>\n<\/section>\n<div class=\"ad__section-border article-content__ad-group\">\n<section class=\"ad\">\n<h2 class=\"visually-hidden\">Advertisement<\/h2>\n<div class=\"ad__container\">\n<div class=\"ad__inner\" id=\"ad__inner-3\">\n<div class=\"ad__placeholder\">\n<p> This advertisement has not loaded yet, but your article continues below. <\/p>\n<\/p><\/div><\/div><\/div>\n<\/section>\n<\/div>\n<section class=\"article-content__content-group\">\n<h2 class=\"visually-hidden\">Article content<\/h2>\n<p>While the state of the market can be explained to some extent by a fundamental shift in demands, there are other factors, like speculation, at play, the governor said.<\/p>\n<p>\u201cWhat gets us worried is when you start to see extrapolative expectations, or people starting to speculate on this, and houses become assets as opposed to something we live in. There certainly are some signs of extrapolative expectations,\u201d Macklem said.<\/p>\n<p>\u201cIf Canadians are basing their decisions on the kinds of price increases that we\u2019ve seen recently are going to continue indefinitely, that would be a mistake. They\u2019re not sustainable.\u201d<\/p>\n<p><em>Additional reporting by Kevin Carmichael<\/em><\/p>\n<p data-async=\"\"><em>\u2022 Email: bbharti@postmedia.com | Twitter: <a class=\"twitter-follow-button\" data-evt=\"click\" data-evt-typ=\"User Interaction Click\" data-evt-val=\"{\" control_fields=\"\" source=\"\" type=\"\" name=\"\" target=\"\" url=\"\" vertical=\"\" position=\"\" pixels=\"\" link=\"\" href=\"https:\/\/twitter.com\/biancabharti\" rel=\"noopener nofollow\">biancabharti<\/a><\/em><\/p>\n<p data-async=\"\">Listen to Down to Business for in-depth discussions and insights into the latest in Canadian business, available wherever you get your podcasts. Check out the latest episode below:<\/p>\n<p> <iframe loading=\"lazy\" frameborder=\"0\" height=\"360\" id=\"\" src=\"https:\/\/html5-player.libsyn.com\/embed\/episode\/id\/18542855\/height\/360\/theme\/legacy\/thumbnail\/yes\/direction\/backward\/\" style=\"--height: 360px; border: none\" width=\"360\"><\/iframe> <\/p>\n<\/section>\n<section class=\"article-content__share-group article-delimiter\" data-evt=\"beforeunload\" data-evt-typ=\"scroll-depth\" data-evt-val=\"{\" control_fields=\"\" of=\"\" page=\"\" viewed=\"\" story=\"\">\n<h2 class=\"visually-hidden\">Share this article in your social network<\/h2>\n<\/section>\n<div class=\"widget article-content__widget-group article-content__widget-group--slot1\">\n<section aria-labelledby=\"TheLogic1734834931790303566751068431887970\" class=\"feed-section feed-section--partner-story list-widget--partner-story the-logic\" data-async=\"\">\n<div class=\"widget-title widget-title--partner-story flex-align-center row row--no-padding--left row--no-padding--right\">\n<p> In-depth reporting on the innovation economy from The Logic, brought to you in partnership with the Financial Post. <\/p>\n<\/p><\/div>\n<\/section>\n<\/div>\n<div class=\"widget article-content__widget-group article-content__widget-group--slot2\">\n<section aria-labelledby=\"TopStoriesNewsletter655190561838512432810998387760734\" class=\"newsletter-widget\" data-account-id=\"b9d3df2fccd108b5eff3c44f573b2cd6\" data-target-list=\"FP_HeadlineNews\" data-widget=\"newsletter\">\n<div class=\"newsletter-widget__body\">\n<h2 id=\"TopStoriesNewsletter655190561838512432810998387760734\">Top Stories Newsletter<\/h2>\n<p class=\"newsletter-widget__text\">Sign up to receive the daily top stories from the Financial Post, a division of Postmedia Network Inc.<\/p>\n<div aria-hidden=\"false\" class=\"newsletter-widget__bottom js-form-main\">  <small> By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. 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Please try again <\/p>\n<\/p><\/div>\n<\/section>\n<\/div>\n<footer aria-label=\"Article Comments\" class=\"article-footer\">\n<section class=\"comments__section\" id=\"comments\">\n<h3 class=\"widget-title comments-anchor\" id=\"comments-area\">Comments<\/h3>\n<p class=\"comments__section-disclaimer\"> Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications\u2014you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. 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