With housing prices to income levels running 35% above historic norms, Mark Carney, governor of the Bank of Canada, had some words of advice to heavily indebted households, telling them Tuesday to use “prudence and caution” because borrowing costs can only go up.
Speaking to the House of Commons finance committee one week after the central bank again held its key interest rate at a near-record low of 1%, Mr. Carney said “mortgage rates are extremely attractive and that accounts for some of the move-up in [housing] valuation.”
But he added that consumers cannot rely on lending costs “staying there forever.”
Mr. Carney said when it comes to household debt “the message is one of prudence and caution,” adding that the average home price in Canada is about 4.75 times people’s income, while the historic average is closer to 3.5.
Household debt to disposable income is running at about 152.9 .
Everyday, the bubble articles keep getting churned out.
Mark "do nothing" Carney is all talk and no action. When will he deliver on his promises instead of continuing to wag his finger at us?
ReplyDeleteLow interest rates have helped fuel the bubble, but I still believe CMHC ( especially taking out the max mortgage ceiling of 380K in 2003) has helped fuel the bubble more.
DeleteThe Bank of Canada's first mandate is for inflation to be kept near 2%, but this has lead to unintended consequences like the debt bubble. Some have wondered if inflation targeting is actually detrimental to economies in the long run. I am partially in that camp. Growth is not always a good thing. An economy growing because it is based on debt is not sustainable in the long run. Canada is about to find that out.