Risks to Canada’s financial system from elevated consumer debt and house prices are easing, the central bank said, while the “sheer size” of what families owe means the danger will persist for some time.

Stricter mortgage rules including a broader stress test that began in January appear to be deterring some of the riskiest borrowers, the Bank of Canada said Thursday in Ottawa. Price gains for single-family homes in Vancouver and Toronto have slowed markedly, the central bank said in its semi-annual Financial System Review.

“These vulnerabilities are expected to persist for some time, although we have seen continued signs of easing,” Governor Stephen Poloz told reporters. He also said a “solid” economic expansion “will support Canadians’ ability to manage their debt, even at a time of rising interest rates.”

Canada’s economy has been powered for the last decade by debt-fueled consumer spending, leading to a surge in home prices, particularly in Toronto and Vancouver. Poloz has raised rates three times since last summer and investors predict the 1.25 per cent benchmark will climb again at the next meeting in July.

Poloz didn’t comment directly on the future rate path, but said risks to monetary policy from global trade tensions feel like they have risen lately. The central bank will include any drag from new tariffs into the next economic forecast, he said, adding they would likely lead to consumers paying more for many products.

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Thursday’s report reiterated the central bank’s view that the housing market is supported by economic growth that is boosting incomes. There are still signs of the overheating that characterized the country’s housing market -- for instance, the central bank pointed to “some evidence of speculative activity” in the Toronto and Vancouver condominium markets -- but the general tone was that risks are in hand.

Consumers will feel the impact of higher rates, but the pain will be spread out over time because only about half of mortgages in any given year are affected by increased borrowing costs, the central bank said.

“Higher levels of debt mean that interest rate increases will have a larger effect on households’ financial positions and consumption spending than they had in the past,” the bank’s report said.

Household debt -- mortgages and consumer debt such as credit cards -- has swollen to $2.1 trillion, and as a share of income tops the Group of Seven. Two-thirds of that is mortgages.

The report suggests the central bank will raise interest rates again in July, Royce Mendes, an economist at CIBC World Markets, said in a note to investors. “Interest rate hikes will come at a gradual pace and settle at lower levels than in prior cycles” because of the risks, he wrote.