CMHC President Evan Siddall warned that Canadian household debt has grown alongside housing prices.

The heated housing markets in Vancouver and Toronto have spread to other parts of Canada, and the disposable income that Canadian residents have to spare on home payments has not kept pace with the rise in home prices, according to Canada Mortgage & Housing Corp. (CMHC) President Evan Siddall.

In a speech given at the Bank of England on Friday, Siddall said that as housing prices has grown, household debt and the concentration of Canadian net worth in real estate have grown alongside them. “The conditions that we now observe in Canada concern us,” he said. “Increased household borrowing could be jeopardizing our economic future.”

In an effort to cool its housing markets, Canada has tightened its mortgage rules and expanded its “stress test” for borrowers to ensure that they can afford higher insurance rates. Siddall believes that this expanded test will highlight areas of economic vulnerability. “This interest rate buffer will specifically help offset the highly stimulative effect of low interest rates,” Mr. Siddall said.

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