Extreme scenario testing by the Canada Mortgage and Housing Corporation (CMHC) warns that if oil falls to $35 a barrel and remains there for next year, house prices could plunge 26% with unemployment dropping 12.5%. However, when accounting for the global deflation that would be likely in such a scenario, those figures would decline to 44% and 16% respectively. Whilst highly unlikely, CHMC uses the scenarios to set the capital levels for the mortgage loan insurance business and concludes that it has sufficient capital without the need for a government bailout. Currently, strong employment figures and low interest rates have bolstered housing prices which rose 6% in the year to October, although the outlook for five years is not so clear cut, with projections ranging from a 4% fall to a 6.5% rise.
Extreme scenario testing by the Canada Mortgage and Housing Corporation (CMHC) warns that if oil falls to $35 a barrel and remains there for five years, house prices could plunge 26% with unemployment dropping 12.5%. However, when accounting for the global deflation that would be likely in such a scenario, those figures would decline to 44% and 16% respectively. Whilst highly unlikely, CHMC uses the scenarios to set the capital levels for the mortgage loan insurance business and concludes that it has sufficient capital without the need for a government bailout. Currently, strong employment figures and low interest rates have bolstered housing prices which rose 6% in the year to October, although the outlook for next year is not so clear cut, with projections ranging from a 4% fall to a 6.5% rise.