Thursday, January 19, 2012

2% rate hike would spell trouble for 2 million Canadian homeowners

2-point rate hike would spell trouble for 2 million: TD
TD estimates that a rise in interest rates of two percentage points would mean trouble for about 10 per cent of Canadian households with debt, in terms of meeting their commitments. That, Mr. Alexander said, is because more than 40 per cent of income after tax would be earmarked for debt servicing.

"This is not the bulk of Canadians and it does not suggest a U.S.-style problem, but it does represent close to 2 million households," he said.
Prices are set at the margin on the way up and the way down. That's a whole lot of distressed selling.

"Given the fact that Canadians are increasingly viewing the prevailing level of interest rates as normal, there is an extremely high probability that it will be very unsettling to Canadians when interest rates do rise, even if they do so gradually," he said.
This is truly U.S.A bubble-esque. Banks qualifying on carrying costs, not total debt load. Only after the crash will it be obvious why this is such a problem. It should be obvious to more than this one analyst, right now.

Hat tip: Jsan commenting at

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