The Time Bomb under Canada’s Economy: Soaring Household Debt, and Suddenly Delinquencies!

[marmar]

The Time Bomb under Canada’s Economy: Soaring Household Debt, and Suddenly Delinquencies!
by Wolf Richter • September 16, 2015


The Bank of Canada has been fretting about the ballooning debt of Canadian households. Last year, it repeatedly called it a risk to “financial stability,” perhaps in preparation for raising its benchmark interest rate. Then Canada’s economy tanked.

In July, when the freaked-out Bank of Canada cut its benchmark rate for the second time this year, it admitted that the rate cut comes at the price of “financial stability risks” which “remain elevated.” Governor Stephen Poloz added: “Of particular note are the vulnerabilities associated with household debt and rising housing prices.”

These rate cuts didn’t do much to support Canada’s resource economy that has been spiraling down in the wake of the commodities rout. But they made up for it by inflating the housing bubble even further.

The Teranet–National Bank house price index, released September 14, hit new records every month this year. In August, it was up 5.4% year-over-year. Note how the index has soared since the peak of the prior housing bubble that ended with the Financial Crisis:



The index masks what Marc Pinsonneault, senior economist at NBF’s Economics and Strategy, calls the “dichotomy” of Canada’s housing market. In some cities, price increases are cooling, year over year: Victoria +3.2%, Edmonton +0.8%, Calgary +0.7%. In other cities, prices are actually falling year-over-year: Winnipeg -0.4%, Ottawa-Gatineau -0.4%, Montreal -0,5%, Quebec City -0.7%, and Halifax -1.4%. ...................(more)

http://wolfstreet.com/2015/09/16/time-bomb-under-canadas-housing-bubble-makes-a-loud-tick/

[HooptieWagon]

1. The falling price of oil...

...will pull the rug out from under tar sands extraction, also.

[Fred Sanders]

2. How is an economy "spiralling down" manage a budget surplus, near full employment and GDP

still growing, albeit slowly due less to falling oil prices than to massive government incompetence?