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The results of each scenario on CMHC’s regulatory capital requirements (% MCT) are as follows:
For the 2017-2021 Period
Base Case
Global Deflation
Oil Price Shock
Earthquake
Reverse Stress Test
US Style Housing Correction
Peak unemployment rate
6.6%
13.5%
8.8%
8.4%
11.3%
12%
Change in housing prices
9.0%
-25.0%
-7.8%
-0.6%
-30.0%
-30.0%
Cumulative net income/loss - Insurance
$6,476
-$3,124
$3,530
$4,445
-$1,130
-$2,047
Lowest Insurance capital (% MCT) – current MCT
408%
304%
411%
404%
262%
286%
Lowest Insurance capital (% MCT) – new MCT
235%
210%
238%
233%
190%
183%
Cumulative net income - Securitization
$2,119
$2,201
$2,078
$789
$2,287
N/A
Lowest point of available capital - Securitization
$2,224
$2,513
$2,393
$1,067
$2,198
N/A
Scenario Descriptions
Scenario
Description
Base Case
Non-stressed situation according to CMHC’s Corporate Plan.
Global Deflation
Severe and prolonged economic depression.
Oil Price Shock
Price of oil falls to US$20 per barrel in 2017 and subsequently ranges between US$20-30 for further four years.
Earthquake
Multiple scenarios of a high-magnitude earthquake that disrupts critical infrastructure and services in a major urban centre, including broader financial impacts as a result of its effects on homeowners and businesses, were run. Reporting reflects the most severe outcome of the simulations.
Reverse Stress Test
A sudden increase in interest rates leads to higher borrowing costs for both Canadian consumers and financial institutions, causing a severe drop in Canadian house prices and ultimately the failure of a Canadian financial institution.
US Style Housing Correction
A 5 percentage point increase in the unemployment rate with a 30% decline in house prices.