In a traditional securitization, a special purpose vehicle sells securities backed by a loan pool and uses the proceeds to purchase the loans from the bank. There might seem to be no problem with this arrangement, as long as banks shed the risks that go along with the loans.
However, we know Canadians have accumulated extra savings during the pandemic, so there is a risk that consumer spending has more momentum than we expect, making inflation more persistent. As labour demand eases from excessive levels, pressure on wages and prices—and therefore inflation—should also recede. And of course, we will continue to monitor the adjustment in housing activity and prices.