Budget says demand for credit stable among Canadians
Despite the record levels of household debt last quarter, Ottawa has showed that Canadians’ appetite demand for credit has stabilized, thanks to home ownership.
Financial Post reported that Finance Minister Joe Oliver appears to have no plans of imposing further restrictions on borrowing. The budget noted Ottawa has “tightened rules on government-backed insured mortgages four times since 2008.”
“There has been an appropriate and desirable moderation in housing activity in most regional markets across Canada. Toronto and Vancouver, in contrast, have continued to experience periods of strong sales and price growth, with housing market strength in these cities supported by such factors as population growth and land scarcity,” the budget stated.
The federal budget document also said noted of the housing sector’s important contribution to the nation’s gross domestic product. However, Ottawa does not consider consumers are overstretched, citing that the interest cost of servicing debt is at an all-time low.
“Higher debt loads leave the household sector more vulnerable to income shocks or a sudden sharp increase in interest rates,” the document reads. “However, as households have accumulated debt in a very low interest rate environment, the cost of servicing that debt is at a record low.”
“The pace of household debt accumulation relative to disposable income increased between 2002 and the depths of the global recession in mid-2009, before slowing and then broadly stabilizing at an elevated level since 2012,” it added.