«In line with past reports, the Bank of Canada continues to identify
elevated household debt and overvaluation in the housing market as the biggest risks to the financial system.»
«Recent stock market volatility and
elevated household debt could also dampen sales.»
The expected sharp decline in economic activity and employment also represented a possible trigger for Canadian financial stability risks related to
elevated household debt.
On the domestic front,
elevated household debt levels continue to be a concern and would deter the central bank from cutting rates further.
«That should be viewed as a positive development by the Bank of Canada, though progress on reducing the «key vulnerability» of
elevated household debt will likely be very slow.»
«That should be viewed as a positive development by the (Bank of Canada), though progress on reducing the «key vulnerability» of
elevated household debt will likely be very slow,» RBC economist Josh Nye wrote in a research note.
Not exact matches
They also fear that at such
elevated levels, many Canadian
households would be unable to withstand a financial shock such as a loss of income, or a sudden spike in interest rates that raised
debt services charges.
Although the
household debt to net worth ratio has declined considerably from its peak, it is still around 26 percent, well above the already
elevated average of the past decade (Chart 19).
At the same time, it warned risks remain
elevated, particularly high
household debt levels, and measures to rein in loans to the most highly indebted
households will take time to work.
«That said, the further deterioration in the oft - cited
debt metric will serve to strengthen the Bank of Canada's appraisal that
elevated household indebtedness remains a key vulnerability to financial stability,» Cooper wrote.
Poloz then specified that these uncertainties comprise: inflation, the degree of excess capacity, continued softness in wage growth, and the
elevated level of
household debt.
In May, Moody's downgraded all of Canada's big six banks, with the rating agency pointing to soaring
household debt and
elevated housing prices.