Poloz expects soft landing

Poloz expects soft landing

Poloz expects soft landing In his opening statement before the House of Commons Standing Committee on Finance Tuesday, Governor of the Bank of Canada Stephen Poloz reiterated his belief that Canada’s housing market is set for a soft landing.

“Trends we continue to expect a soft landing for the housing market and Canada’s household debt to income ratio to stabilize,” Poloz said. “Nevertheless, the imbalances in the housing sector remain elevated and would pose a significant risk should economic conditions deteriorate.”

Poloz believes that responsible underwriting and consumer risk aversion have helped the housing market remain relatively healthy.

“We are observing, anecdotally at least, an increased awareness of this risk. Consumers are showing responsibility; for example, home buyers who opt to buy less house than they qualify for so they don’t find themselves overextended if interest rates rise,” Poloz said. “Banks, as well, are underwriting loans more carefully, ensuring that people can service their debts if rates go up.

“So, while the risk could be significant, we are comfortable that it is not outsized.”

The Governor of the Bank of Canada also believes interest rates will remain historically low for the foreseeable future.

“There is a growing consensus that when we do get home, interest rates will still be lower than we were accustomed to in the past — both because of our shifting demographics and because, after such a long period at such unusually low levels, interest rates won't need to move as much to have the same impact on the economy,” Poloz said.