The Bank of Canada highlighted early signs of financial stress among Canadian households as one of the key risks in the financial system. The unprecedented increase in interest rates has raised the costs for households, a vulnerability if a recession were to occur.
“Elevated interest rates and declining house prices have reduced the financial flexibility of many households,” reads the bank’s Financial System Review released on Thursday.
Due to the increased expense of servicing mortgages, homebuyers have relied more on credit card debt, which has exceeded pre-pandemic levels.