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Next recession may become problematic due to high house prices: CIBC report

Today’s high house prices and larger mortgages could make the next recession, when it comes, longer and deeper, warns a new report by CIBC Capital Markets co-authored by Avery Shenfeld, Chief Economist, CIBC Capital Markets, and senior economists Andrew Grantham and Nick Exarhos.

The highlights of CIBC Capital Markets report that was published on April 13, 2017 are:

  • A two per cent rise in mortgage rates would raise monthly payments by roughly 25 per cent on a conventional five-year mortgage.
  • Insured mortgages have left a cushion to ensure that the borrower would still be solvent, but that doesn’t mean that there wouldn’t be “a major impact” on their non-housing consumption.
  • A retreat in house prices shouldn’t trigger an economic downturn despite what happened during the U.S. sub-prime mortgage crisis.
  • Mortgage quality, one of the triggers for the U.S. housing crisis, is less of an issue in Canada due to tighter control over the vast majority of mortgages that come from regulated institutions.
  • Measures to encourage more construction today, which would help dampen price and rent inflation and lift near-term GDP growth during the building phase, could soften that future blow.

For more information click HERE.

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About CIJnews Staff

CIJnews Staff
CIJnews is an independent, dynamic and reliable online news source that serves the Canadian Jewish and Israeli communities and provides an uncensored platform for the spectrum of voices.

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