Bank of Canada claims financial system will withstand risks of rate hikes

Growing threats to stability caused by interest rate hikes and inflation are currently posing serious difficulties for many Canadian households. But, as said by a representative of Canada’s main financial authority, the country’s financial system is able to withstand such threats.

This position was expressed by Carolyn Rogers, Senior Deputy Governor, during her speech in Ottawa. As it was said by Rogers, threats and risks for the country can be alleviated by reforms adopted in the financial sphere after the 2008-09 crisis. The mentioned reforms were aimed at shoring up capital and liquidity buffers. She also underlined that authorities don’t expect any “severe” downturn in the economy and, therefore, notable job losses.

In Roger’s opinion, there is plenty of reason to believe that the Canadian financial system is sustainable enough to overcome the current challenging period.

At the same time, Rogers noted that interest rate hikes might harm those who purchased real estate with a variable rate mortgage. According to her words, there have been about 670,000 new mortgages taken with variable rates since the beginning of the pandemic, and nearly half of all loans taken since mid-2021 are also variable rate mortgages.