![]() “When it comes to bumpiness in the recovery. Over the past few months, some have warned that it could lead to a deferral cliff once benefits - such as Canada Emergency Response Benefit and mortgage deferrals - run out. Khan cited increased savings rates as an example of a fundamental shift with potential to affect how quickly the economy recovers from Covid-19. While there are some parallels, the rebuilding process from a pandemic remains more uncertain compared to a wildfire, the research said. That’s the number one pre-existing condition that was there when the pandemic struck.” Now, at the national level, what we’ve been concerned about for many, many years is the high level of household debt. “In Fort McMurray, when the wildfires hit, that’s an area that had already been struggling for some time with the decline in oil prices that had occurred about a year or so prior, so financial stress was quite high. “One thing that’s always very important when you’re facing a large negative shock is the initial conditions,” said Khan. ![]() But the wildfires, like the Covid-19 pandemic, were a sudden shock. The 2008 conditions set off a lengthy recession due to “an underlying fragility in the global financial system,” the research suggested. He compared the Covid-19 pandemic to a natural disaster, such as the 2016 wildfires in Fort McMurray, Alta., which also involved a mortgage deferral recovery plan.īank of Canada research found that while the wildfires caused a bigger spike in employment insurance filings than the 2008 recession, the EI trend reversed much faster after the fires than in 2008. Khan, who spoke at the Move Smartly Toronto Real Estate Summit on Monday, has been studying mortgage defaults. What the deferrals are doing is they’re essentially buying time for that process to unfold.” “Ultimately what matters most when it comes to defaults is people having a job, having their incomes. “The fact that these deferrals have been available is really, really important,” said Khan. ![]() Khan said breaks from mortgage payments have bought home owners some time to get back to work amid the Covid-19 pandemic and economic downturn. ![]()
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