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A housing crisis like the one that occurred in the United States beginning in 2008 could result in a 35-percent decline in B.C. home prices, warns a new report by the ratings agency Moody’s Investors Service.

In a summary of the report, the Financial Post notes that such an economic downturn is unlikely to occur because Canada’s banking system includes safeguards that America’s did not. For example, compared to the United States in 2008, Canada has a lower rate of subprime mortgages and mortgage insurance that is guaranteed by government.

But the report notes that if such an event occurred, Canadian homeowners and the banks backing them would stand to lose a lot.

The country’s largest banks could lose up to $12 billion while mortgage insurers could lose an additional $6 billion.

While repeatedly noting that a severe economic downtown is unlikely to occur, the report explains that the current state of Canada’s economy does share certain similarities with that of the United States in 2008.

“Rising household debt relative to income in Canada, along with rapidly increasing house prices, has created similar conditions to those in the United States prior to the financial crisis of 2008,” the Financial Post article reads.

The report calls attention to rising levels of debt.

“While mortgages tend to be high quality in Canada compared to U.S. home loans at the time of the crisis, the Moody’s report also notes that higher debt levels make Canadian consumers vulnerable to an employment or interest rate shock that would exacerbate their debt-servicing burden,” the article reads. “There was almost $1.6 trillion in mortgage debt outstanding at the end of March, including home equity lines of credit, more than double the amount outstanding 10 years ago.”

The report cautions that consumer debt can affect housing markets by making people more susceptible to changes in employment status, price increases, and higher interest rates.

It also mentions “overvaluation concerns” and states overvaluation may “raise uncertainty around collateral values”.

Over the past three years, the benchmark price for residential properties in the region covered by the Real Estate Board of Great Vancouver increased by 48.3 percent.