“Household debt numbers are coming up to U.S. levels, so that is causing us a concern,” Clark, 64, said today in an interview on Bloomberg Television.
Canada’s situation is different from what happened in the U.S. that led to a housing correction, according to Clark. Canadian household debt rose to a record 153 percent of disposable income in the third quarter of 2011 as borrowing increased, Statistics Canada said Dec. 13. That compares to 146 percent in the U.S.
“There’s nothing going on in Canada like what happened in the United States because the banks own the mortgages, we put them on our own balance sheet,” Clark said. “But it doesn’t mean we couldn’t have a problem where we grew too fast the household debt and housing prices rose.”
The Canadian government prefers that banks “tweak” their own lending standards rather than it imposing “major tightening” of mortgage-lending rules, Clark said.
“They’re worried that the Canadian economy is slowing down right now and that’s taking out a bazooka,” Clark said.
Toronto-Dominion, the country’s second-largest bank, has raised borrowing costs for higher-risk borrowers while offsetting that by cutting rates for people with good credit, Clark said.