By David Ljunggren
ST. JOHN’S, Newfoundland — Canada’s Finance Minister Bill Morneau said on Tuesday he was watching carefully for any stresses that higher interest rates may put on indebted households.
The Bank of Canada has raised interest rates twice this year so far, prompting fears that some Canadians could soon find themselves in over their heads with some housing markets facing lofty prices and debt compared with household income near a record high.
“As interest rates change, we are carefully watching the stress that that might place on Canadians,” Morneau told reporters at a two-day retreat held by the Liberal government’s cabinet.
Morneau added that the “overwhelming majority” of Canadians are on a fixed-rate mortgage. The most popular Canadian fixed-rate mortgage gets renewed every five years and would be less immediately sensitive to rate increases.
The Bank of Canada also said last week when it raised rates that it would be paying close attention to the economy’s sensitivity to higher borrowing costs, given elevated household indebtedness.
Morneau said he was also watching the housing market for signs of stabilization following measures taken by both the federal government and two provinces to rein in prices and ensure Canadians are not taking on too much mortgage debt.
Morneau said he had “nothing to report on at this stage” when asked about further government measures to cool the market.
Both the British Columbia and Ontario governments have implemented a tax on foreign buyers, while the federal government has tightened mortgage lending rules.