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Ottawa may have to do more to tame Canadian households' high levels of debt, the International Monetary Fund said on Wednesday.
Ottawa's latest round of tighter mortgage regulations came over summer when it lowered the amortization period to 25 years from 30 years and cut the amount of money consumers could borrow against their home, among other changes.
While the real estate industry has been blaming the changes for the recent slowdown in sales, particularly in Vancouver and Toronto when November sales fell 29 and 16 percent, respectively, the IMF says more may be needed, as the debt-to-income level continues to creep higher.
The debt-to-income ratio hit another record high in the third quarter, increasing to 164.6 percent from 163.3 percent in the second quarter.
Both Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have continually warned Canadians about their record levels of debt. The Bank of Canada has in recent months taken to explicitly stating that its next move on interest rates will likely be higher, a move many economists say was put in place to push Canadians to pay off debt.
The IMF says while it welcomes the tighter regulations, it's "too early to ascertain" their full impact, adding that the cumulative effect of all of the changes taken since 2008 has slowed the "growth" of household debt.
"However, should the household debt to income ratio continue to rise, additional measures may be needed," the report warns. "Higher down payment requirements (tighter loan-to-value [LTV] limits for first buyers), lower caps on debt-service-to-income rations, and tighter LTV on refinancing are some of the possible options."
The IMF adds that house prices and residential investment as a share of GDP "remain above levels consistent with economic fundamentals."
The Bank of Canada intimated a similar concern in its latest interest rate announcement. The central bank said that while housing activity is beginning to decline from "historically high levels" and the growth in debt is slowing, it's too early to tell whether those trends will be sustained.
It went on to warn investors that the timing of its next move on interest rates will consider the "evolution of imbalances in the household sector."
In its report the IMF also said Canada will avoid housing crash similar to the one experienced in the U.S., but warned that "domestic imbalances could prove more disruptive than anticipated."