The Bank of Canada had a couple of notable
messages for consumers as it left its benchmark interest rate at 1% for the 25th
setting in a row.
First, the bank remains committed to moving rates up. Although the language
used was somewhat softer than in the past the Bank said that an increase was
not imminent, but “over time” it would likely raise rates as the situation
Second, the bank made it clear that the increasing imbalance in household debt
is one situation that could trigger a rate increase. The ratio of household
debt to income now stands at 163% and it continues to grow. The bank continues
to warn that this is the number-one domestic threat to the Canadian economy.
That threat got some reinforcement from a new survey that indicates nearly
three-quarters of Canadian homeowners feel they would be in a significant
financial squeeze if their mortgage payments increased even slightly. Nearly a
fifth said a 10% increase would put them in jeopardy of not being able to
afford their home. The same proportion said they have dipped into savings to
meet their mortgage obligations.