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The recent slowdown in Canada’s hottest housing markets is turning a corner and a potential new price boom is threatening to frustrate would-be buyers’ hopes. The real risk to Canada’s housing market today is not a crash, but a return to nosebleed levels of price growth thanks in part to falling interest rates, said Doug Porter, chief economist at Bank of Montreal. Policymakers will have to “be ready to wield some tough measures” if they want to prevent housing costs from becoming even more unaffordable, Porter told HuffPost Canada ― though he said he would “leave it to policymakers” to decide what those should be. Watch: Why does Canada have a rental crisis, and what can be done about it? Story continues below.

The latest data from the Toronto and Vancouver real estate boards shows the markets shaking off foreign buyers’ taxes and the mortgage stress test. Home sales jumped 24 per cent in both cities in July, compared to a year earlier. Much of that has to do with more affordable mortgages. The collapse in interest rates on government debt around the world in recent months has pushed down the rates Canadian lenders can offer.

According to comparison site Ratehub, mortgage rates in Canada recently hit their lowest levels since July, 2017, and are near all-time record lows. The lowest fixed rate available at the site is currently 2.39 per cent, a drop of 0.8 percentage points since the start of this year. The Bank of Canada’s posted rate, which is used in the mortgage stress test, has also come down, to 5.19 per cent, from 5.39 per cent. This “simply pounds home the point that rates will remain low for long — or forever,” Porter wrote in a client note.

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