![\"us-canada-housing-crash\"](\"https:\/\/www.livabl.com\/articles\/wp-content\/uploads\/2017\/06\/us-canada-housing-crash.jpg\")
<\/a><\/p>\nPhoto: Oleg Shpryko\/Flickr<\/a><\/em><\/p>\n Major US-based credit-rating agency Fitch Ratings has some good news \u2014 and some bad news \u2014 for Canada\u2019s housing market.<\/p>\n First, the good: \u201cKey structural features will safeguard Canada from repeating the US housing crisis,\u201d says Fitch in a news release.<\/p>\n And then the bad: \u201cUnsustainable home prices and record high household leverage render the Toronto and Vancouver housing markets increasingly vulnerable to a steep price correct.\u201d<\/p>\n Increasingly, comparisons are being made between the current conditions observed in the Canadian housing market and those that existed prior to the subprime mortgage crisis collapsed US real estate.<\/p>\n Especially as Home Capital Group has become the subject of much attention.<\/p>\n The spotlight has been on the alternative or subprime mortgage lender ever since the Ontario Securities Commission, a provincial regulatory agency, said it didn\u2019t disclose knowledge of broker fraud when it first discovered it.<\/p>\n \u201cHowever, Canada is unlikely to mirror the declines and fallout experienced during the US housing crisis due to major differences in the housing and mortgage finance systems,\u201d says Fitch Director Kate Lin in a statement.<\/p>\n \u201cCanadian banks are subject to rigorous oversight and regulations requiring prudent mortgage lending and underwriting standards,\u201d Lin continues.<\/p>\n The Fitch director adds that Canadian credit quality is strong, whereas the same could not be said about the US mortgage market before the crash.<\/p>\n In its latest Financial System Review, the Bank of Canada recently noted an improvement in the quality of high-ratio mortgages in Canada.<\/p>\n These mortgages in which the loan-to-income ratio for the borrower surpasses 450 per cent only accounted for a 10 per cent share of all new mortgages in this year\u2019s first quarter.<\/p>\n That\u2019s down from the same period last year, when the share of these mortgages was well above 15 per cent.<\/p>\n Lin notes that before the US crash, nonprime loans accounted for about 50 per cent of the total volume of originations.<\/p>\n \u201cThe Canadian government has also been proactive in managing the risk of the nation\u2019s housing market by taking unprecedented steps to tighten credit and limit speculation,\u201d Lin adds.<\/p>\n But Hilliard MacBeth, a financial analyst, recently suggested that increasing mortgage quality might not be all it seems.<\/p>\n \u201cHigher prices and new rules are driving people to find more innovative and risky ways of coming up with the higher downpayments for a home purchases, increasing their risk,\u201d he writes in his latest Hilliard’s Weekend Notebook report<\/a>.<\/p>\n<\/a><\/p>\n