The central bank will raise interest rates in July as consumer debt and house prices drop, although household debt remains high after the central bank imposed stricter mortgage rules in January, according to Bloomberg.
Although fully aware of the dangers of withstanding debts, Bank Governor Stephen Poloz believes that “solid” economic expansion “will support Canadians’ ability to manage their debt, even at a time of rising interest rates.”
The country's economy has been backed up by debt-fueled consumer spending for the last 10 years. This lead to a strong upward trend in home prices, specifically in Toronto and Vancouver. Now consumer debt and house prices are dropping after the central bank imposed stricter mortgage rules in January.
Part of the central bank’s report are the signs of overheating that characterized the country’s housing market such as in Toronto and Vancouver's condominium markets. In these areas, consumers will feel the impact of higher rates, but they will also be distributed over time as only about half of mortgages will be affected by increased borrowing costs.
It was also announced that the central bank will raise interest rates again in July.
Vancouver faces oversupply of residential properties
Slow economic growth expected this year
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