10 December 2010

“The problem is that a shock to economic conditions may affect the whole financial system including the credit quality of household loans,” – said the BoC.  “It can lead to the tightening of credit conditions and further problems in the real sector”.  

The Bank of Canada says it’s very important to pay more attention to the household debt sector: “When people get any debts, they should be ready for the consequences. They should understand the responsibility they take and be able to pay them in time”.

Based on this report we can tell that it will be very difficult decision for BoC to start rising rates again next year. We are expecting rates to stay at the same level well into 2011. Moreover, in order to protect borrowers from overleveraging, regulators and government might restart their talks about tightening in mortgage lending policies which (talks) were placed on hold earlier this year. If you feel that tightening in lending rules or increase in mortgage rates might postpone your ability to buy a house – do pre-approval and reserve fixed rates for up to 6 months.