CIBC – usually one of the most accurate of the banks when it comes to economic predictions re-buttes the Bank of Canada’s analysis of Canada’s credit market.

“Make no mistake: Canada is not doomed to see a U.S.-style housing and mortgage blow-up,” says Chief Economist Avery Shenfeld in the bank’s latest Economic Insights report. “There are three lines of defense for those with high debt service ratios that the BoC analysis ignored.

“One, some mortgage holders will have substantial home equity, even allowing for a house price slide, and could downsize. Two, others have high debt payments because they are making accelerated pay-downs of principal, which they could stop. Three, history suggests that many will jump into fixed mortgages in time to avoid the full brunt of the variable rate shock.

“The result is that the number of Canadians truly at risk could be substantially less than the (Bank of Canada’s) estimate.”

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