Thursday, June 16, 2011

Chief Banker Warns Canadians


Mark Carney
Many Canadians Vulnerable
When Interest Rates Rise

Addressing Canadians from Vancouver, Bank of Canada Governor Mark Carney says that Canadians are vulnerable to both an economic shock and interest rate hike.

Cheap credit, while it has stimulated the economy has also caused a rise in real estate prices which is based more on fear and greed rather than supply and demand. Greed among speculators and fear among buyers who see it as a now or never time to get into the housing market.

Canadians are as deeply in debt, relative to income, as consumers in Britain and the US were when they suffered a financial meltdown in 2008 and 2009.

The Governor of the Bank of Canada said in no uncertain terms that we should not be lulled into a false sense of security by the current low interest rates. He noted that over the life of a mortgage, interest rate will often be much higher.

Comment: Even a rise in interest rates of 1% could mean many people currently carrying a mortgage would no longer be able to, when you consider other household debt.

allvoices

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