The Canadian housing market is overvalued by about 20 per cent, according to recent analysis from Fitch Ratings.

However, it states that government policy and reduced exposure to risky mortgage products mean that home prices are expected to remain flat or decline slightly in 2014.

The analysis explains that any declines would be small, due to Canada’s “strong macro-economic trends and cautious lending policies driven by government measures, which are expected to slow lending in 2014.”

Since no major fluctuations in house prices are anticipated, Fitch Ratings expects no significant changes in affordability. Mortgage rates have generally decreased over the last 25 years. Currently at record lows, rates are expected to stay relatively the same throughout 2014, but with expectations of increases thereafter. The potential for a rise in interest rates may place pressure on the housing market towards the end of 2014.

Home prices have been rising steadily over the last decade, but a slowing or reversal may be in store. As a result, the reports says that delinquency rates are expected to rise in 2014, though not by a significant amount.