15 December 2022 | Other

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.

Company MarketCheese
Period: 14.05.2025 Expectation: 1650 pips
Technical and fundamental background supports AUDCAD
07 May 2025 67
Elena_Dorokhina
Elena_Dorokhina

Listed among the best MarketCheese authors
1st in the segment "Currencies"
Period: 08.05.2025 Expectation: 550 pips
EURUSD to drop to 1.13000
07 May 2025 50
Period: 13.05.2025 Expectation: 240 pips
Brent crude price rebound to continue up to 65
07 May 2025 52
Period: 14.05.2025 Expectation: 1000 pips
Buying GBPUSD amid trade talks and weaker dollar with target at 1.344
07 May 2025 32
Period: 12.05.2025 Expectation: 1500 pips
USDJPY rebound fades ahead of Fed meeting
06 May 2025 66
Period: 30.05.2025 Expectation: 975 pips
Natural gas maintains upside potential within megaphone pattern
06 May 2025 67
Go to forecasts