2014c ). Regarding which indicators can help in deciding when to loosen macroprudential policies, the policy paper says that they should be relaxed when there are signs of increased frictions in housing markets that result in a spiral of falling house prices, falling mortgage credit, and increasing defaults and foreclosures. In general, while a fall in house prices can be a useful early-warning indicator for the emergence of such frictions, a softening housing market alone is not a sufficient indicator for the relaxation of macroprudential tools, and staff should
further downward pressure on house prices. Strategic default, fire sales and contraction in the supply of credit can create negative externalities beyond the parties involved in financial contracts ( IMF, 2011b ; Geanakopolos, 2009 ; and Shleifer and Vishny, 2011 ). 28. Indicators that inform the tightening phase can be used for informing decisions to relax . Fast-moving indicators that could guide such decisions include house transaction volumes and spreads on household loans. A softening housing market is not sufficient alone to justify a relaxation. Evidence of a
. Credit Flows to Households and Corporations 8. Risks to Households from Declining Income Growth 9. Risks to Households from a Softening Housing Market 10. The Impact of the Crisis on the Corporate Sector Tables 1. Initiatives to Stabilize the Financial System 2. Selected Economic Indicators 3. Indicators of Economic Performance 4. Balance of Payments 5. Selected Vulnerability Indicators 6. Fiscal Indicators Front Matter Page Front Matter Page INTERNATIONAL MONETARY FUND CANADA Staff Report for the 2009 Article IV Consultation
softening housing market due to monetary policy tightening and prudential measures . The long credit upcycle has led to a large, sustained credit-to-GDP gap, rapidly rising house prices in major cities (e.g., Toronto and Vancouver), and localized construction booms, all amidst an already high level of household debt. However, the credit cycle has turned. As of 2019Q1, credit growth moderated to 4.8 percent year-on-year. Several rounds of policy measures have successfully reduced insured mortgage lending and improved credit quality, with the share of banks’ new lending to
house transaction volumes and spreads on household loans. A softening housing market alone is not sufficient to justify a loosening of macroprudential measures. Evidence of a systemic stress is vital, such as simultaneous decline in prices and credit, and an increase in non-performing loans or defaults. In such circumstances, loosening macroprudential policies would reduce stress in the housing market. 25. The loosening of macroprudential policies needs to respect certain prudential minima that could safeguard an appropriate degree of resilience against future