CENTRAL BANK: CONSUMER DEBT SHRINKING BUT MORTGAGE DEBT RISING RAPIDLY
May 20, 2021
By Bob Komsic
The Bank of Canada warns of rising risks from household debt and of a hot housing market.
In its annual review of financial systems, the central bank says many households have taken on large mortgages compared with their income, further limiting their flexibility to deal with a financial shock such as job loss.
Bank Governor Tiff Macklem says Canadians need to be very cautious about buying homes they cannot afford in a time of crisis.
”Canadians need to be prudent in taking on new debt.
It’s important to understand that the recent rapid increases in home prices are not normal,” observes Macklem.
”If house prices and household incomes were to fall in the future because of a shock to the economy, some households cold need to cut back on spending.
This would slow the economy and possibly put stress on the financial system,” according to the central bank.