Experts don’t see lower interest rates increasing household debt

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Although an interest rate cut has the potential to increase consumer spending some analysts are suggesting this time will be different. With the banks stalling on passing on the BoC rate cut to borrowers there is no immediate rush to take out new loans anyway, but even if lending rates do drop, as expected, economic uncertainty is likely to prompt caution. With economic uncertainly both here and globally, many Canadians will opt to use the extra cash from lower loan repayments, together with savings already being made from lower gasoline prices, to build up a ‘war chest’ of savings. Most people expect that despite the recent rate cut and the possibility of another before the year ends, there will then be increases. Borrowing more when the rates come down will only increase exposure to those higher rates at a time when job security and house prices are not necessarily heading higher.