The second scenario we looked at involved a significant house price correction in the greater Toronto and Vancouver areas. Such a correction would hit the British Columbia and Ontario economies, affecting spending on housing and related goods and services. There would be some spillovers to other regions and sectors of the economy.
Bank balance sheets would also be affected in this scenario, leading to tighter lending standards. The likelihood of this second scenario occurring is greater than the first. However, its impact would be less severe, and we don’t anticipate that a house price correction would trigger the widespread rise in unemployment assumed in the first scenario.