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. The CMHC also says that, even though housing is not directly affected by oil, its impact on household finances will be.
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.