Prominent Canadian banks’ residential mortgage portfolios are becoming increasingly vulnerable to losses in a stress scenario, although strong earnings and loss provisions are likely to help them absorb potential future market shock.
That’s the view of credit rating agency Moody’s, whose recent report on the subject highlights rising house prices in Ontario and British Columbia and a reduced rate of insured mortgages as factors behind that growing vulnerability.
In Moody’s Investors Service’s 2021 stress test, the company said that action taken by the federal government to reduce its exposure to residential mortgage lending in recent years had shifted default risk to lenders, with the past five years seeing a 20% decline (from 46% to 26%) in the proportion of government-backed insured mortgages.# SANDI HALPERN # SOLD # LEASED # MORTGAGES
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