I’m listening, Mr. Carney

Bank of Canada Governor, Mark Carney, has been trying to send a message to Canadians for some time now. I guess he thinks we’re not listening.

Yesterday, he warned us again that things weren’t just as rosey as one may think. Some experts tell us that Canadian’s are not only still racking up debt, they’re actually doing it at a faster pace than our neighbours to the south. No wonder Mr. Carney keeps sending us a message. Despite the overnight lending rate being hiked three times this year, interest rates are still unnaturally low. Many of us (myself included) cringe a little every time the rate goes up one-quarter of one percent.

Across the pond in Britain, their government slashed hundreds of thousands of public sector jobs, and other government spending. Their streets exploded with protests, anger and dismay. Check out some pics online if you didn’t see the news. Something similar can happen just about anywhere, even here.

Seems Mr. Carney is quite concerned that we’re not getting the message.  Imagine the challenges he faces when making the decision around the overnight lending rate? On one hand, he wants to keep interest rates low enough to continue to fuel the economy, allow jobs to be created, allow Canadians to stay the course.  On the other hand, as long as he keeps the rates low, some of us have lulled ourselves into a sense of thinking it’ll always be that way. If that wasn’t true, why are we continuing to dig our debt holes deeper, and at an aggressive rate?

Some of us have a short memory, right? I still wince after the first couple of weeks of snow.  I should know by now (after 47 winters) that snow comes and stays for a few months. But there’s still some notion in the back of my mind that maybe this year we’ll get away without it. To my credit, there really wasn’t much snow in Toronto last year. I almost did get away with it!  What are the odds of it being a mild winter again?  In my experience, 47 to 1.

I recall negotiating the mortgage when my ex-husband and I purchased our second house. I was so elated at the time that the interest rate was just under 10%.  Man, in those days, anything under 10% was brilliant! Now, all of my mortgage products are under 5%. I’d have some hardship if the rates were actually back where they were in the late 1980’s, back at that sweet sub-10% rate.

When I talk about my goal to pay off my debt, I specifically mean my consumer debt — the balance that’s currently sitting on my line of credit, which is NOT below 5% interest. Once that’s paid off, Mr. Carney will still be looking at me along with all those other Canadians and fretting. Once the line of credit is gone, I’ll still be sitting on a lot of mortgage debt. As a Canadian with four mortgage products, two at variable rate, I need to listen to Mark Carney very carefully.

My biggest mortgage loan is up for renewal in February 2012. It’s hard for me to imagine what the landscape will look like then. Presumably, as a country, we’ll be in a reasonable recovery period. But who’s to say? I may not be able to secure a loan under 5% by 2012. Since I’m pretty fond of living here, I’d better continue to listen to Mr. Carney.




4 responses to this post.

  1. I hear you! I have a couple of friends that just built a new house at a low rate (not locked in). I can’t forget my sister losing her house and having to declare bankruptcy back in the early 1980’s. I think her mortgage rate was somewhere around 18% – eek!

    Did you hear about the riots over in France over raising the age limit for social security? The times, they are a’changing. And how come we never have riots in Canada? 🙂


    • Oh Geeze, yes. The couple we bought our first house from wanted us to take over their mortgage, at 22%. Yikes.

      Having lived through the G20 earlier this summer, I’d have to say we did have some charactistically “unCanadian” activity. Sadly saw a G7 riot in Ottawa a few years ago too. They seem to occur
      when world leaders gather here. The stuff in Britain is pretty wild stuff. I’ll be happy just to snuggle up at home here.


  2. Not only are we accumulating more debt as Canadians we are saving less than ever too. In fact, in a recent quarter we actually saved a negative amount. I’m not quite sure how anyone can save a negative amount of money but we did it. We used to take such pride over being in better financial shape than our southern neighbours, that is no longer the case. Our economy is too closely linked to the U.S. to be unaffected by their economic challenges.
    My concern is that we have to “spend” our way out of this current economic crisis, at least that is what we are told. Spending and buying more products will create jobs and people with jobs spend more money and so continues the circle of consumerism until another bubble bursts. I’m afraid (not really) that people are not going to spend at the accelerated rate of the past couple of decades and thus an economic recovery is not going to be the rosy picture we all hope it could be. We’d better start getting used to having less – including less jobs. IMHO.


  3. I’m afraid that you’re probably right Jane. It surprises me that we weren’t impacted more by the recession down south. Sometimes I feel like I’m on another planet when I read the blogs and hear the news down there.

    At the end of the day, I think all we can do is do the prudent thing as individuals. There’s a bright side to it too – a friend of my dad’s sold his farm in that era and got a 10 year term deposit pulling 19%! Safe AND lucrative! My dad bought an annuity paying out 12% guaranteed for 20 years. So opportunities will be there for people who have some assets and cash available if the economy starts going wonky and interest rates go crazy again. I hate to say I’m looking forward to it because that seems wrong, but…


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