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Economic Viewpoint

Mortgage Debt in Canada: A Ticking Time Bomb?

May 25, 2023

Canadians shoulder a high level of household debt. While strength in underwriting standards suggests there is some buffer for households, the sharp increase in interest rates is likely to cast a long shadow for years to come. In the near term, many lenders have been flexible with borrowers, but that flexibility could cause issues down the road. Our simulations indicate that many mortgage holders will face a large increase in their monthly mortgage payments, which could be as high as 40% at renewal. That suggests that Canadians will continue to dedicate an elevated share of their income towards debt payments. While this doesn’t put Canada on the verge of catastrophe, it will be a structural factor that could weigh on Canadian economic growth over the medium term.

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