In announcing a pause in the Bank of Canada’s series of interest rate hikes, Bank of Canada Governor, Mark Carney, again emphasized his concerns over the levels of Canadians’ household debt, bringing issues of debt consolidation to the foreground of economic concerns.
While noting that it “expects that private demand in advanced economies will become sufficiently entrenched to sustain the recovery,” the explanatory note accompanying the Bank of Canada’s rate announcement highlighted its concern over consumer debt levels. The “more modest growth profile” forecast by Canada’s central bank “reflects a more gradual global recovery and a more subdued profile for household spending.”
“With housing activity declining markedly as anticipated and household debt considerations becoming more important,” the Bank observed that it “expects household expenditures to decelerate to a pace closer to the rate of income growth over the projection horizon.”
Overall, the central bankers anticipate that there will be an economic “shift away from government and household expenditures towards business investment and net exports.”
All this portends a renewed emphasis on Canadian households making concerted efforts to reduce the high levels of debt taken on before the recent recession and continuing low growth. Indeed, the Bank of Canada cited “domestic considerations that are expected to slow consumption and housing activity in Canada” as primary reasons not to further reduce its monetary stimulus measures that dropped interest rates to historic levels.
Debt consolidation utilizing home equity loans or lines of credit to consolidate and reduce balances on higher interest consumer debt is likely to become an increasingly utilized strategy to pay down overall debt levels in times of slow economic and income growth.
