Bank of Canada governor Mark Carney warned Canadians about increasing levels of household debt — a debt which has been in part driven by the central bank’s own policy of ultra low interest rates. A web poll conducted by COMPAS Inc. found Canadian CEOs are in agreement with Carney.
Around 90% of the respondents said Carney is right to express concern about debt. “Excessive debt has done a huge disservice to those who can least afford it,” wrote one respondent.
The CEOs are also worried about a potential Canadian housing bubble that could burst when interest rates rise again. “We may be in for another housing-based financial crash,” wrote one CEO. “What many fail to realize is that if you have a low interest rate and high mortgage loan amount, a single point increase in the interest rate can significantly increase one’s monthly payments.”
Finance Minister Jim Flaherty has also said recently he will consider clamping down on lax mortgage lending practices, and potentially require a higher down payment when buying real estate. That is a wise solution, according to the CEOs. Roughly two-thirds of the respondents want to see both tighter lending standards and higher down payments.
But there are other solutions, as well, according to one CEO. “Both government and mortgage lenders must provide better education on the subject of the cost of borrowing,” wrote the CEO. “This education must be done to advise, rather than to create fear.”