Financial System can ‘Absorb’ Shock of Higher Interest Rates, Canada’s Banking Regulator Says

Low interest rates have allowed a generation of Canadians to become comfortable with previously unheard-of levels of debt. Higher interest rates may be unpleasant but banks have been bracing us for this trend for some time as evidenced by the stress-tests imposed on mortgages. Currently, you have to qualify for a mortgage both at your offered rate and at the higher of 5.25% or 2% higher than your offered rate, just in case. The governor of the central bank has made it clear that interest rates will rise again this year – a change that I fully support. While I appreciate that low interest rates stimulate growth; but they also hurt retirees and enable complacency. In fact, I would love to see the Bank of Canada schedule its future rate increases rather than allow speculation before each announcement. That way, Canadians can plan accordingly.

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