Bank of Canada Sees Heavily Indebted Homebuyers as Key Risk

Financial stability risks have increased in Canada as the country faces higher interest rates, elevated inflation and growing geopolitical uncertainty, the nation’s central bank said.

In its annual Financial System Review released on Thursday, the Bank of Canada said it’s particularly focused on the growing number of heavily indebted households who are more vulnerable to higher borrowing costs and are carrying less equity to cushion against any significant housing market correction.

Canadians who purchased homes recently would be “more exposed” in the event of a significant price correction, according to the 57-page report. Many households stretched themselves financially to get …