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A combination of regulatory policy changes and rising interest rates is helping to cool the Canadian housing market, which is good for banks, says New York-based Fitch Ratings in a report published Wednesday.

According to the report, there are signs the Canadian housing market is moderating, with price gains slowing in hot markets such as Toronto and Vancouver, and sales volumes slowing on a national basis.

The rating agency points to several reasons for the cooling off in housing, including new mortgage underwriting guidelines, which went into effect at the start of the year, along with rising interest rates.

The tougher underwriting standards for so-called “high-ratio” mortgages, “has likely reduced the pool of eligible borrowers and is one of the reasons why mortgage volumes have slowed,” the report states.

The proportion of insured mortgages has also declined to 45% in the second quarter from 52% in the previous year, likely due to policy changes that are reducing the number of loans that are eligible for mortgage insurance.

As well, higher interest rates is affecting prospective new and existing borrowers.

Th orderly slowdown that appears to be materializing is good for the banks. “[Banks’] ratings would be sensitive to a more rapid and severe adjustment in home prices,” the report states.