16 February 2018

Since July, the central bank has raised its key lending rate by 0.25% three times already, pushing it to 1.25% – its highest mark since 2009.

Although earlier CIBC said that excessive debt loads made rate increases about 50% stronger than in early 2000s, today they point to new research saying it will not affect borrowers that much.

“One-third of Canadian households don’t have any debts at all, which makes a rate hike almost a gift for them,” – said Mendes. “Nevertheless, it has two sides, as it means all of the debt is held by only two-thirds of the national economy.”

“Among those indebted, two-thirds have only non-mortgage loans, while others hold both. Almost three-quarters of the dollar-value the households owe, is represented by mortgages, while consumer credit accounts for the rest,” – he noted.

According to the bank’s report, less than 20% of all the outstanding loans are exposed to higher interest rates, but the number may go up.

Economists believe higher rates alone will not solve the issue of excessive consumer spending.

At the same time, if we combine it with slower job creation and stricter access to credit caused by the new mortgage rules, we may see a significant slowdown in the consumer spending in 2018.

Meanwhile, Craig Alexander, economist at the Conference Board of Canada, noted in January that only 7%-10% of households have extremely high debt level.