The associated buildup in financial vulnerabilities has been a preoccupation of the Bank for several years. Indeed, household indebtedness in Canada was rising strongly long before the global financial crisis, mainly as a result of an easing of mortgage rules some 15 years ago, financial innovation and declining interest rates.
In response to these developments, the federal government has implemented a series of more restrictive macroprudential policies—designed to ensure that new borrowing is safer. In particular, with the revised B-20 guideline that came into effect earlier this year, all new mortgage borrowing from federally regulated institutions became subject to some form of stress test to ensure borrowers can handle an increase in interest rates.