Compared to the US, the Canadian economy is much more exposed to both real estate activity and higher rates.

The surge in mortgage rates is putting a freeze on the US housing market, as would-be buyers are faced with a record affordability shock. But there are reasons to think that the effect on actual prices and overall economic activity will be limited. For now there are few forced sellers, and because so many US homeowners are on 30-year fixed mortgages, the impact of higher rates aren’t felt directly by most households.

 In Canada, the impact could be significantly worse.

In a new note, David Doyle and Neil Shankar of Macquarie Capital Markets Canada argue that Canada will face a more severe recession, with an economy that’s far more exposed to weakness in the real estate sector.

For one thing, Canada, unlike the US, has seen a big surge in variable rate mortgages, per their research:

Just like in the UK, they expect this reset will lead to a big hit to household balance sheets:

Furthermore, the Canadian economy is more directly exposed to to real estate and finance than the US’s

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