Morgan: Higher interest rates being forecasted

Bank of Canada Governor Mark Carney has said elevated consumer debt levels represent the biggest domestic risk to our financial system.

The greatest domestic threat to our economy is that Canadians have taken on too much debt, often cashing in low interest rates to buy a home.

According to Dominion Lending Centre, currently the interest rate on a 5 year term is 2.94 per cent, a tempting low percentage for home buyers as this low rate makes it more accessible for buyers to carry substantial debt.

Bank of Canada Governor Mark Carney has been quoted as saying elevated consumer debt levels represent the biggest domestic risk to our financial system.

Why it has been in our favour to keep interest rates low to maintain the economic recovery, but it’s those low rates that are causing consumers to go out and take on more debt.

“Rates are definitely on the rise,” says Kristine McInnes, with Vernon’s White House Mortgages, predicting that will  start to see a gradual trend upward.

The risk of that is the rate increase will shock the housing market and drag down the Canadian economy, says Louis Gagnon, a Queen’s University finance professor.

“If we keep going this way and there’s an interest rate shock, the larger the shock the larger the number of homeowners that will be put in a tight spot and have to sell their homes in a market that has become illiquid because other people are doing the same thing,” he said.

McInnes adds that some of the bigger impacts to the mortgage market, other than rate, are the heavier qualifications being put on borrowers who are self-employed or without traditional income sources, CMHC guidelines and tightening of qualifying guidelines and low appraised values.

“That has a much bigger impact on qualification than rate and we are seeing some very concerning changes in those areas,” McInnes says.

Still, Canada’s banks have been ranked the soundest on the globe by the World Economic Forum in part because they avoided the subprime loans that crippled many U.S. lenders during the financial crisis.

Precautions are being taken and new guidelines will be put in place to prepare for the future possibility of raising rate increases in mortgages and the pressure that will bring on homeowners.

This time, Canada will not be caught with their hand in the cookie jar.

Just Posted

Outbreak at Okanagan hospital

Gastrointestinal illness reported at Vernon Jubilee Hospital

Kelowna public menorah lit tonight to celebrate Hanukkah

The menorah will be lit tonight after celebrations at 5 p.m. in Stuart Park

Big Band supports children with disabilities in Lake Country

Proceeds from the Okanagan Big Band performance in Vernon supports local kids

Were your hockey cards stolen?

The Kelowna RCMP are looking to reunite a hockey fan with their cards

RCMP look to reunite owner with stolen tools

Kelowna police seek to identify the owner of tablet and tools seized by RCMP

VIDEO: New series takes in-depth look at sexual harassment in B.C.

Black Press takes a hard look at sexual harassment in B.C.

Warriors ground Rockets in Moose Jaw

Moose Jaw scores five in the third period to down Kelowna in Rockets’ third game of prairie road trip

Horgan says pot smokers may face same outdoor rules as cigarette smokers

B.C. is developing its rules on recreational marijuana

Dedicated volunteers look for clues

Police appreciate work of those who provide extra eyes for missing women investigations.

Truck driver volunteers to take dog lost in B.C. back home to Alberta

Frankie, a pit bull service dog, was found wandering in the Lower Mainland

B.C. teacher suspended after explicit images projected to class

Jeffrey Rohin Muthanna had been viewing porn on a school laptop for two years

Man who pledged to give B.C. hockey team millions charged with fraud

Mike Gould has since repaid $8,000 he allegedly owed Cranbrook restaurant, owner says

Horgan on Site C: ‘dammed’ if did, ‘dammed’ if he didn’t

B.C. premier didn’t like keeping massive hydro damn project going, but felt he had to

Strong economy fuels housing sales in B.C.: report

Economist says demand for houses is being supported by a large number of millennials entering the market

Most Read