Following up on the last story about Canadian household debt warnings from the Bank of Canada Devore posted a link to this BNN interview with Mark Carney. Canadian debt levels are now higher than those found in the US, rising 7% just in the last year.
Here’s the note from Devore’s comment:
Some key points I heard:
– On mixed messages (rates low, but don’t borrow): we’re targeting inflation. Period. F has regulatory and legislative tools available to restrict borrowing.
– On tightening of lending rules: changes earlier in the year slowed consumer borrowing, but borrowing still growing faster than incomes, further tightening almost certain, 25 years amorts within realm of possibility.
– On asset-based lending: while debt is up, so are assets. But you cannot lend solely based on assets, ability to service is very important. Asset based lending tends to inflate asset prices, which drives further lending, in a cycle, not sustainable by any economy, assets eventually (de-)revalued.
– No country can grow debt faster than incomes sustainably.
Fairly light and polished, but there was no optimistic talk of future growth, prosperity, rising (asset/house) prices, employment, everything was very cautionary and low key. That the BoC is sounding alarm bells before an election, rather than keeping a happy face lid on things, I think is quite telling, and that they are expecting significant movement in the near term, and are just covering their bases.