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Bank of Canada: Households may be more impacted by interest rates

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A senior official at the Bank of Canada says the number of highly indebted households appears to be back on the rise as pandemic aid from governments winds down.

In a speech today to conference held by the Ontario Securities Commission, deputy governor Paul Beaudry says unprecedented federal aid and restrictions that limited where consumers could spend helped bolster the finances of Canadian households during the pandemic.

But now he says that vulnerabilities linked to elevated household debt appear to be on the rise again after a slight pause.

Beaudry says bank calculations suggest the share of highly indebted household should this year surpass the pre-pandemic peak recorded in 2019.

He partly points to a long period of historically low interest rates as a reason for why households took on more debt.

It’s why he is warns the economy is likely now more sensitive to any increase in borrowing costs.

This report by The Canadian Press was first published Nov. 23, 2021.

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