Checking up on Canada’s financial system

But the main vulnerabilities remain significant

The financial vulnerabilities that existed before the pandemic still exist. That’s why we’re keeping an eye on the financial health of households, businesses and financial institutions as the recovery progresses.

Housing market imbalances

The price of houses rose sharply throughout the pandemic. After some moderation it has picked up again, but we’re closely monitoring the risks that come with this shift. If house prices drop again quickly, this could delay household spending.

High levels of household debt

During the pandemic, some households were able to save more. This is partly because there were:

• limited opportunities to spend during lockdowns
• unprecedented government supports

At the same time, household debt climbed as more people took out mortgages, and those mortgages were bigger on average. Financially stretched households have little breathing room to manage any disruption to their income or a rise in the cost of servicing their debt.

Climate change

Climate change and its effects have clearly accelerated. The floods in British Columbia are a devastating example of the risks extreme weather events pose to homes, businesses and other assets. Climate-related risks also include those that come from transitioning to a low-carbon economy.

We’ve been collaborating with partners from all over the world to better analyze and assess the climate-related risks to our financial system.