Household debt in Canada continues to cause concern. In the past week both Bank of Canada governor Mark Carney and the economic think-tank, The C.D. Howe Institute, commented in very clear terms.

In a report entitled The Rise in Consumer Credit and Bankruptcy: Cause for Concern?, The C.D. Howe points out that consumer credit accounts for about 45% of household interest payments. The report raises concerns about the sustainability of household finances and the risks to the broader economy. It cautions that Canadian consumers are vulnerable to any sharp rise in interest rates or an economic downturn.

The report echoes what Bank of Canada Governor Carney has been saying for months, and what he repeated in an interview with the Canadian Press. Carney pledged an intervention if there are “exceptional circumstances”, such as household debt threatening financial stability. He also indicated those “exceptional circumstances” are not far off. Carney warned that 10% of Canadians (20% of mortgagors according to CAAMP) are vulnerable to the inevitable normalization of interest rates. Interest hikes combined with a drop in home prices would be enough stall consumer spending and trigger an economic slowdown.

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Lee Welbanks is a Mortgage Broker with The Mortgage Centre and trusted Spring Realty mortgage expert. To learn more about your funding options please Contact Lee today. Lee will be posting these informative “Market Minutes” each Wednesday for you to enjoy. Please remember to subscribe to the Spring Realty Insider list to receive new blog post notifications, featured properties and insider access to Toronto’s hottest new developments.