In a weekly credit outlook report published Monday, Moody’s analysts William Burn and Andriy Stepanyants said shorter loan amortization periods should immediately cool home sales by requiring increased monthly payments.
“The government’s moves may have come too late, owing to the build-up in consumer debt that has already occurred.” In addition, slowing growth in household disposable income will be a challenge for consumers trying to pay down their debts, they said.
The analysts note that previous mortgage rule changes beginning in 2008 had “some effect” in countering the stimulus provided by historically lower interest rates, yet they “failed to stop Canadian household leverage from increasing.”
“Canadian consumers’ reliance on low interest rates to support high debt loads remains a risk.”
- from ‘Mortgage changes ‘may be too late’: Moody’s’, Financial Post, 25 Jun 2012 [hat-tip pennysaver]
‘Is Canada Too Smug About Its Economic Future?’, Bloomberg, 25 Jun 2012
Excerpt: “..there’s increased grumbling these days that not all is well north of the border—and not just because low interest rates and high housing prices have helped push household debt to the point where Canadians now owe an average of $1.52 for every dollar they earn. Economic growth has slowed, with annualized GDP growth up 1.5 percent in the first quarter, when the Bank of Canada had expected a 2.5 percent increase. Some of that is no doubt due to misery in other parts of the world, which has dampened demand and rattled investors. But it’s not the only factor that’s bothering Glen Hodgson, chief economist at the Conference Board of Canada, a prominent Ottawa-based think tank. Hodgson put out a commentary on June 25 entitled “Don’t Be Too Smug, Canada” that points to other challenges he feels are not being adequately addressed.”