Experts don’t see lower interest rates increasing household debt

Experts don’t see lower interest rates increasing household debt

Experts don’t see lower interest rates increasing household debt 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. 
96 Comments
  • @kiltedbroker 2015-01-26 12:43:10 PM
    I don't know... My experience is that people rarely exercise restraint. First question when meeting a new client is usually "How much can I qualify for", with the second being "Are you sure I don't qualify for more". (My experience mostly being with FTHB).

    People spend what they make and take their buying power to the limit. I don't think economic uncertainty is prompting caution for the average Canadian... the average Canadian is unaware of most things mortgage related.

    If it's available, it will be used. I don't believe this time will be any different, however even if prime drops, I don't think this will have a huge impact as most people go fixed because they qualify at contract rate instead of the benchmark (to qualify for more).
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  • Steve 2015-01-26 1:30:05 PM
    Mortgage Interest rates are not the problem. Its the 0 payment for 12 month cards which charge 29%. Its the points cards and travel cards which encourage people to borrow instead of paying real cash. Its the car loans that allow people to add debt on top of the actual car debt. Its the payday loan companies and its the credit card companies... NONE of this have anything to do with overnight lending fees.
    Government needs to fix that predatory lendin before they worry about a 3,4 or even 5% mortgage debt
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