Carney Urges Canadian Households To Be Cautious With Borrowing

25 April 2012 10:00am - Crage Campbell

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Carney Urges Canadian Households To Be Cautious With Borrowing

Bank of Canada governor Mark Carney advised heavily indebted households to use “prudence and caution” because borrowing costs can only go up. Speaking to the House of Commons finance committee Carney said “mortgage rates are extremely attractive and that accounts for some of the move-up in housing valuation.” However, he added consumers cannot rely on lending costs staying where they are. Home prices in Canada are 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%. Carney said, “Household spending is expected to remain high relative to GDP as households add to their debt burden, which remains the biggest risk.”

Carney also spoke about the economy saying that despite recent improvements to the outlook for Canadian and global economies, significant risks remained. “The three main upside risks to inflation in Canada relate to the possibility of higher than expected oil prices, stronger than expected growth in the UK and stronger momentum in Canadian household spending.”

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