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This paper looks at the role mortgage brokers play in helping borrowers generate quotes and qualify for credit. We find that, on average, borrowers that engage with a mortgage broker pay lower interest rates. However, in about 15% of cases, borrowers are steered towards longer amortizing mortgages than they would have chosen absent a broker. Since mortgages with longer amortization have higher total interest costs over the entire life of the mortgage, this steering is expensive.

This technical report describes sampling, weighting and variance estimation for the Bank of Canada’s 2017 Methods-of-Payment Survey. Under quota sampling, a raking ratio method is implemented to generate weights with both post-stratification and nonparametric nonresponse weight adjustments.

In this issue of the Financial System Review, the Bank of Canada’s Governing Council judges that, although the Canadian finan­cial system is currently on a sound footing, risks to its stability remain elevated and have edged higher since December 2010.

We find that the rise in Government of Canada debt issuance correlates to growing participation of hedge funds in bond auctions since 2020. This increased participation supports the cost-effective distribution of Canada’s debt, but it also represents a potential vulnerability because hedge funds have a greater flight risk than other investor types.

Using micro data from the U.S. Consumer Expenditure Survey and Current Population Survey, I document that government spending shocks affect individuals differently over the life cycle.

The Bank of Canada recently launched a quarterly survey to measure the expectations of Canadian households: the Canadian Survey of Consumer Expectations (CSCE). The data collected provide comprehensive information about consumer expectations for and uncertainty about inflation, the labour market and household finance. This article describes the CSCE and illustrates its potential to offer rich information about Canadian consumers for researchers and policy-makers.

We estimate a continuous-time model with stochastic volatility and dynamic crash probability for the S&P 500 index and find that market illiquidity dominates other factors in explaining the stock market crash risk. While the crash probability is time-varying, its dynamic depends only weakly on return variance once we include market illiquidity as an economic variable in the model.

Stress testing is an important tool used by financial authorities and entities around the world to evaluate potential risks to the financial system. Kartik Anand, Guillaume Bédard-Pagé and Virginie Traclet discuss different stress-testing approaches, with emphasis on the innovative and analytically rigorous model developed by the Bank of Canada: the MacroFinancial Risk Assessment Framework (MFRAF). They also present the stress-test results obtained in the context of the 2013 Canada Financial Sector Assessment Program led by the International Monetary Fund, including the important contributions made by the use of MFRAF in the exercise.