BoC not surprised at effect of interest rates on house prices, debt

Bank of Canada governor Stephen Poloz spoke over the weekend about the rising levels of household debt and the effect that monetary policy has had on house prices.

Poloz said that using policy, including interest rates, to address the increasing debt of many Canadians should be the last resort.

The ratio of debt to disposable income rose in the second quarter to a record high of 164.6 per cent, and the governor said that the central bank is watching the situation closely, but noted that “there is more to the story than the debt-to-income ratio.”

It is unlikely that there will be any further cut in interest rates when the bank makes its decision on October 21.

Many analysts are expecting that the next move will be an increase in rates with mortgage repayments edging higher during 2016.

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