When it comes to risks in the housing market, Routledge said OSFI “is preparing for the possibility but not predicting that the housing market will experience sustained weakness throughout 2023.”, in particular, because monthly payments on these mortgages in the rising rate environment can fail to cover even the interest in some cases.
“It’s not so much banks can force them. They can work with them constructively to help them manage that risk out there,” Routledge said. Meanwhile, inflation, the potential rise of borrower defaults, and ongoing supply chain issues are already putting pressure on construction and development which, along with office assets, are the sub-segments of commercial real estate facing the most uncertainty in the coming year.
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