The Canadian economy’s most significant vulnerabilities remain to be inflamed housing prices and unprecedented household debt levels, according to the latest report from the Bank of Canada.

This is despite several signs that financial risks have begun to ease, the Bank’s study noted.

“Better economic conditions and several new policy measures support prospects for additional progress,” BoC noted in the report, as quoted by the Financial Post.

“Our financial system continues to be resilient, and is being bolstered by stronger growth and job creation, but we need to continue to watch financial vulnerabilities closely,” Governor Stephen Poloz said in a written statement released alongside the Bank’s November Financial System Review.

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Canada’s economy saw the fastest growth rate among G7 countries with its 4% growth in the first half of 2017. The surge was driven in part by some fiscal stimulus measures introduced by Ottawa, along with higher business investment, improved exports, and consumption spending. However, this trend is expected to wind down by the end of the year and through to 2019.

Meanwhile, the rate of borrowing has increased by around 5% per cent compared to a year ago, significantly outstripping wage growth. Household debt levels have ballooned in response to outsized growth of real estate prices, especially in markets like Vancouver and Toronto.

However, the BoC report noted that recent developments might suggest that policy changes like mortgage stress tests have started to reduce Canada’s financial risks. The bank said that the tightened rules introduced by the Superintendent of Financial Institutions (OSFI) will restrict as much as 10% of prospective Canadian homebuyers, representing approximately $15 billion in loans every year.

The Organisation for Economic Co-operation and Development (OECD) agreed with the assessments in its November economic outlook, which warned that the red-hot housing market and burgeoning household debt levels remain key risks to the economy.

The OECD added that the impact of Vancouver’s foreign buyers’ tax has diminished, suggesting that Toronto’s tax could have a similarly limited effect on prices.

“Provincial government measures have also temporarily slowed house price growth, but some – notably Ontario’s expanded rent controls – risk discouraging the supply of new housing. Macro-prudential policies will need to be tightened further if rapid increases in house prices and debt resume.”