R2 - Household Analysis
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Can the characteristics of new mortgages predict borrowers’ financial stress? Insights from the 2014 oil price decline
We study the relationship between characteristics of new mortgages and borrowers’ financial stress in Canada’s energy-intensive regions following the 2014 collapse in oil prices. We find that borrowers with limited home equity were more likely to have difficulty repaying debt. -
Consumer Cash Withdrawal Behaviour: Branch Networks and Online Financial Innovation
The physical network of bank branches is important in how consumers manage their cash holdings. This paper estimates how consumer withdrawal behaviour responds to the distance they must travel to their branch. -
Detecting exuberance in house prices across Canadian cities
We introduce a model to detect periods of extrapolative house price expectations across Canadian cities. The House Price Exuberance Indicator can be updated on a quarterly basis to support the Bank of Canada’s broader assessment of housing market imbalances. -
Update on housing market imbalances and household indebtedness
Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified. -
Household indebtedness risks in the wake of COVID‑19
COVID-19 presents challenges for indebted households. We assess these by drawing parallels between pandemics and natural disasters. Taking into account the financial health of the household sector when the pandemic began, we run model simulations to illustrate how payment deferrals and the labour market recovery will affect mortgage defaults. -
The Formation of House Price Expectations in Canada: Evidence from a Randomized Information Experiment
We conduct a randomized information experiment leveraging the Canadian Survey of Consumer Expectations. We provide causal evidence that respondents revise both their short- and medium-term expectations of future house price growth in a way that is consistent with observed short-term momentum in house prices. However, empirically, house price growth tends to revert to its mean in the medium term. -
Disentangling the Factors Driving Housing Resales
We use a recently developed model and loan-level microdata to decompose movements in housing resales since 2015. We find that fundamental factors, namely housing affordability and full-time employment, have had offsetting effects on resales over our study period. -
Non-Resident Taxes and the Role of House Price Expectations
In recent years, the governments of Ontario and British Columbia have imposed taxes on purchases by non-Canadian residents of residential properties in certain jurisdictions. -
Fundamental Drivers of Existing Home Sales in Canada
Existing home sales’ share of Canada’s economic pie has been rising in recent years, and variation around this trend has resulted in outsized contributions to changes in real gross domestic product (GDP). In this context, we use a cointegration framework to estimate the level of resale activity across the Canadian provinces that is supported by fundamentals—namely, full-time employment, housing affordability and migration flows—to help look through the volatility.