NEW YORK (Reuters) - Canada’s soaring consumer debt is backed by solid assets, Prime Minister Stephen Harper said on Thursday, saying he was more worried about economic problems outside the country.
Canadian households now owe C$1.65 for every dollar earned, a record level that has raised alarm among policymakers. Much of the debt is in mortgages as consumers take advantage of nearly five years of low interest rates to buy homes.
But when asked about the biggest risks to Canada, Harper said they were external. “That’s what keeps me up at night,” he replied in a question and answer session at the Council of Foreign Relations in New York.
Harper followed by citing the growth of household credit in Canada.
“The assets behind it I think still speak to the fact that it’s well supported,” he said. “Financial institutions ... are the most solid in the world, but household debt has risen.”
Harper said tighter rules to curb the mortgage lending and cool the housing market have had a “noticeable impact.”
Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty have repeatedly warned consumers about the dangers of excessive borrowing. Recent reports show the personal debt burden is stabilizing and the housing sector has cooled since the latest mortgage measures in mid-2012.
Data this week bolstered hopes Canada will manage a soft landing of its hot housing market rather than a U.S.-style housing crash.
(The story corrects 4th paragraph to say “followed,” instead of “following”)
Reporting by David Sheppard; writing by Louise Egan; editing by Janet Guttsman Editing by Leslie Adler