Loan repayments in Canada are now higher than at the Bank of Canada rate of 13%

According to economist David Rosenberg, consumer debt payments in Canada are much higher today than in 1990. Interest rates were perceptibly higher at that time, a signal that the debt burden in the economy was extremely high.

In order to combat inflation, the central bank of Canada decided to significantly increase borrowing costs, and therefore the household debt service ratio increased. Two years ago, this indicator was at a low level due to falling interest rates and government aid payments related to COVID-19.

According to Rosenberg, it is worth thinking about the fact that today, with the central bank's key rate of 4.25%, the consumer spends more on debt-service payments from income than it was at the rate of 13% about thirty years ago.

Last week, commercial banks in Canada increased their base lending rates to 6.45%. This happened after the central bank of Canada raised the key rate by 0.5% to 4.25%, which was the highest value since the beginning of 2008.

Rosenberg also added that the current situation with the quality of consumer credit in Canada should not be embellished.