Higher Interest Rates to Hit Younger, Middle-Income Households: Federal Analysis

Higher Interest Rates to Hit Younger, Middle-Income Households: Federal Analysis

By The Canadian Press

Credit Cards
Credit cards are displayed in Montreal in a Wednesday, December 12, 2012 file photo. The amount Canadians owe compared with their income ticked lower in the first quarter but remained near record levels as mortgage debt continued to climb. (THE CANADIAN PRESS/Ryan Remiorz)

OTTAWA – A newly released federal analysis says younger, middle-income households will feel the biggest impacts from the Bank of Canada’s gradual move towards higher interest rates.

The briefing note prepared for Finance Minister Bill Morneau examines the types of households — by income, age and region — most affected by the central bank’s rate-hiking path from extremely low levels.

The September 2017 document obtained by The Canadian Press under the Access to Information Act puts a particular focus on how rising rates will boost debt payments for highly indebted households, which are described as those with debt-to-income levels of at least 350 per cent.

The memo says 12 per cent of all Canadian households carry these heavy debt loads and are most likely to be middle-income earners, young to middle-aged, mortgage holders, and live in Ontario and British Columbia.

The Bank of Canada recently raised its trend-setting interest rate for the fourth time in a year to bring the benchmark to 1.5 per cent, its highest level since December 2008, but still low by historical standards.

The central bank raises its interest rate as a way to help keep inflation from climbing above its ideal target range of one to three per cent.

CP - The Canadian Press

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