We believe high household debt relative to disposable income has made the market more susceptible to market stresses like unemployment or interest rate increases. The ratio reached a high of 164.1% in third-quarter 2013 before declining slightly in the following two quarters. Fitch projects unemployment will likely remain in its current 7% range. But low interest rates are unlikely to fall further. Rising interest rates could pressure the market more than others given high borrower leverage and the short-term structure of Canadian mortgages.
Fitch believes the Canadian government has taken several proactive steps in recent years to mitigate some of the risks to the housing market. The underwriting guidelines for loans insured by the
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
U.S. Structured Finance
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Source: Fitch Ratings
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