Scotiabank’s Porter Calls Canada Bubble Fears Overblown
Greg Quinn
Other
Canadian concerns about a housing bubble are overblown in a country where credit growth is modest and the job market is stable, says Bank of Nova Scotia Chief Executive Officer Brian Porter.
“Bubble is perhaps the most overused word since the global financial crisis,” Porter said in an interview yesterday in Washington, referring to Canada’s housing market. “We are very comfortable in terms of our exposure, we think we have monitored it well, and we stress test that.”
Domestic mortgages worth about C$200 billion ($179 billion) are the biggest part of the Toronto-based lender’s balance sheet, Porter said, and the value of those assets can withstand even major jumps in unemployment or interest rates. Gains in housing in Toronto, a focus of concern among regulators after a surge in prices and condominium construction, are backed by population growth, he said.
“Canadian consumers have generally a very conservative attitude towards debt, and their household balance sheet including other assets is in very good shape,” Porter said.
Canada’s ratio of household debt to disposable income rose to 163.6 percent between April and June, close to the record 164.1 percent in the third quarter of last year, Statistics Canada said Sept. 12. The drop in the average five-year fixed mortgage rate to the lowest in decades at 4.8 percent this year has fueled unexpected gains in home prices and resales, which reached the highest in more than four years in August.
Consumer credit growth is close to the rate of inflation, between 2 percent and 2.5 percent, Porter said. Last week, Canada reported the jobless rate fell to the lowest in almost six years in September on the largest monthly increase in employment since May 2013.
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