Yes, you read right. Mark Carney has taken a good look at our debt situation and after his review – he’s encouraged! After months and months of hearing the Bank of Canada governor warn us about the heaps of debt we’re taking on, Mark Carney is finally happy. At least somewhat.
Carney spoke before the Commons Finance Committee yesterday and told Parliament that not only are we lessening the amount of debt we take on, we’re also taking on fewer variable mortgages, meaning that fewer of us will be in trouble when he decides to raise the interest rates. At the meeting yesterday he said, “I will note that the proportion of variable debt of new mortgages has gone down quite substantially and is running in the low teens.” Carney went on further to say that debt accumulation has declined to 4% annual growth, down from the previous 10%; and those variable mortgages that are now in the low teens have fallen there after sitting at the 30% mark for quite some time.
Carney pointed to the government regulations and stricter rules on home equity lines of credit in Canada, and new rules implemented on the banks by the OSFI, as the reason the economy is currently evening out, and bring our household debt to 151% of disposable income. Still quite a bit, sure, but down from the 155%-156% levels we saw late in 2011. And even though the number is dropping, Carney reiterated that it’s this debt that is the biggest threat to the Canadian economy.
Pointing to the housing market, and to mortgages in certain parts of the country, Carney admits that he still has some concerns, particularly over Toronto mortgages and even more particularly, on condo units in the city. “The level of housing activity, particularly the level of condo activity in some metropolitan areas is quite high. In fact in Toronto reaching levels last seen in the 1980s…and we have some concerns over those developments,” he noted.
Aside from mortgages and the interest rate, Carney also pointed to the fact that Canada needs to become a bit more self-sufficient and stop relying on countries where the economy is still quite sluggish – particularly the United States. Carney points to Asia and South America as being the most opportunistic for Canada right now, but also suggests that we seize opportunity right here at home; maybe in the form of energy efficiency, says Carney.
“We can make our economy much more productive in its use of resources, in its energy efficiency, and that is a tremendous gain for this economy from a productivity perspective; but it’s also a tremendous export opportunit.”
