Photo: James Bombales

Industry watchers have long worried about Canadians’ high household debt levels, which are some of the highest in the world. As interest rates continue to rise, should we be bracing for a potential housing market crash?

Not according to the Chartered Professional Accountants of Canada (CPA), which just released a new report on the housing market’s stability, titled The Real Story Behind Housing and Household Debt in Canada: Is There Really a Risk?

“Beyond prices and debt levels, Canada shares far fewer similarities with the US than you might think. This becomes very apparent when you look at just one measure; credit quality,” writes Francis Fong, CPA Canada’s Chief Economist.

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In other words, the country is less vulnerable to the type of crash seen in the US in 2008. Credit quality is a measure of an individual’s ability to repay debt. While Canadians’ may have more debt to deal with than they should, they’re still reasonably good at paying it down at regular intervals.

“In contrast to the situation a decade ago in the US…the number of borrowers with high credit quality has risen from 66 percent in 2002 to 88 percent in 2017,” reads the report. “In turn, the number of low-credit-quality buyers shrank from 17 percent to three percent over that period.”

The report does flag one potential problem — the rise of non-regulated lenders over the past year, as Canadians looking to secure a mortgage, but unable to pass a stricter mortgage stress test, turn to alternative sources for funds.

Still, it concludes that the stricter qualifying rules should considerably reduce the chance of a crash anytime soon.

“The Canadian system seems likely to be ready for prospective challenges, even if the economy softens here or abroad,” reads the report.

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