Rising consumer debt is a sign of confidence in the economy, with little evidence to suggest it’s reaching a crisis point, Canadian Prime Minister Stephen Harper said.
While the government is concerned with consumer debt, for the most part borrowers’ balance sheets “are good,” Harper said during an interview at his Ottawa office Wednesday. “We don’t believe there’s any data that suggests any kind of a pending crisis there.”
Canadians household debt was 163.3 percent of disposable income in the first quarter, according to Statistics Canada, near the record 163.6 percent reached in the fourth quarter of 2014. Debt loads have soared along with the country’s housing market amid low interest rates including two cuts from the Bank of Canada this year.
“Interest rates have been very low, no doubt about it,” Harper said. Canadian consumers are also confident as middle-class incomes have grown consistently, unlike other most developed countries, the prime minister said.“People have confidence in their ability to afford larger houses in the future, but obviously for those who are over-extended we’ve urged some caution.”
Canada’s residential real estate market has been labeled overvalued by organizations from the International Monetary Fund to Deutsche Bank AG as prices in Toronto and Vancouver soar. Bidding wars and flipping, or selling before taking possession, have broken out in some hot markets.
In Vancouver, prices for low-rise homes rallied 35 percent to C$1.1 million ($853,100) in June from five years ago, the highest in Canada. Toronto is the second-priciest city with prices up 45 percent to C$654,200 in the same period.