That said, new and pending rules for housing finance should help mitigate this vulnerability. Last year, the government introduced stricter rules for high-ratio mortgages—that is, where the down payment is less than 20 per cent of the value of the home. These rules are continuing to improve the quality of new high-ratio mortgages.
The process is, I have come to appreciate, more complicated and subtle than this caricature. For example, when there have been important shocks (e.g., unexpected rise in oil prices or an increase in the minimum wage), model simulations of the effect of the shocks will provide a point of departure for the initial judgmental forecast.