The Bank of Canada says the Canadian housing market is still highly vulnerable despite rising interest rates and tight mortgage rules.

Just last week, The Bank of Canada credited high interest rates and stricter mortgage rules for reducing mortgage risk. Now, Bank of Canada Senior Deputy Governor Carolyn Wilkins says, the problems posed by the housing market aren't going away as fast as we think.

READ: Tougher Rules And Higher Rates Fade Canadian Mortgage Risk

"The vulnerabilities are down but they are still high," Wilkins said at a conference on Thursday.

In the last 16 months, the Bank of Canada has increased interest rates five times. And Canadians seem to have adjusted their spending accordingly.

That doesn't mean we are in the financial clear.

A recent report from the Office of the Superintendent of Bankruptcy Canada, insolvency rates in Canada are set to rise as early as next year.

READ: Are Bankruptcy Rates In Canada Rising?

According to the report, based on 20 years worth of data, bankruptcies start to increase just two years after interest rates begin their rise. The most recent round of increases began in mid-2017.

Of course, the bank is closely monitoring the effect of these monetary policies and the adaptation of Canadian households. After all, these two factors are key in setting the pace for more hikes.

Personal Finance