Canadian mortgage interest rates must remain low for now, while households must be wary of taking on too much debt, said a senior Bank of Canada official Agathe Cote.
The Canadian economy rebounded sharply from a shallow recession in 2009. But growth began to slow in the latter half of 2010, reflecting both a still fragile U.S. economy and three Canadian interest rate hikes between June and September.
The Bank of Canada has left rates steady since then, pending more evidence that the recovery is on solid footing.
The bank fears that near record-low interest rates - designed to help cushion the worst of the recession - are persuading Canadians to take on too much debt. It says this could have harmful consequences once rates rise. But Cote said debt levels are just one factor the bank takes into account when setting policy, and it is primarily focused on achieving its 2 percent inflation target.
The bank next sets rates on January 18 and markets see no change in rates at that time. However, a Reuters poll last week revealed most of Canada's primary securities dealers expect the Bank of Canada to resume raising interest rates sometime in the first half of this year.
Statistics Canada data showed the value of Canadian building permits unexpectedly tumbled 11.2 percent in November from October - a sign the once-hot housing sector continues to soften. Cote said steps to curb household debt are starting to have an impact, but credit continued to grow faster than income.
Canadian government officials say they are cautiously optimistic the economic recovery will continue, while sounding alarms about the challenge posed by the weak U.S. economy, the European debt crisis and a strong Canadian dollar.
A central bank survey showed that companies were optimistic about the next 12 months, but many expect only modest growth, in part due to strong competition and moderate demand. ca.reuters.com
Mortgage Interest Rates Will Remain Low
![Mortgage Interest Rates Will Remain Low]()
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