IMF warns of Canadian housing bubble as rates fall

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It's the sort of news brokers hate to hear, with one organization raising the issue of further mortgage rule changes.

The International Monetary Fund (IMF) has expressed concerns over the prevailing low mortgage rates in Canada, warning that a housing bubble could transpire. Its latest World Economic Outlook also slightly dropped its expected economic growth for the country from this year to 2016.

The IMF primarily pointed to the reduction in oil prices as the main factor for the gloomier economic outlook. The predicted Canadian GDP for this year is a growth of 2.2 per cent, and 2 per cent in 2016.

The IMF also said that Canada’s housing sector may also see itself in a price bubble as low rates “encourage borrowing” among customers, the Digital Journal reported.

“If interest rates rose or there was a slump in employment many borrowers might not be able to make mortgage payments. The government has already taken some steps to make qualification for mortgages a bit stronger. Other policies to dampen demand may be required,” the report stated.  
 

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