Canadians repaying loan principal at a faster rate!

Canadians have been repaying loan principal at a rate faster than previously estimated and households can probably easily absorb a coming modest rise in interest rates.

CIBC economist Benjamin Tal published a paper last week which concluded that Canadian households deserve credit for not taking credit!

Despite being lured by low borrowing rates, they in fact pay back principal at a rate much faster than officially estimated by the Bank of Canada.  Stronger than perceived credit quality means that any increase in rates would have only limited direct impact on defaults.

Paying on Time

It's almost too good to be true.  Despite a mediocre labour market and an unemployment rate that is still too high for the liking of the Bank of Canada, debt service performance in Canada has almost never been better.  The number of personal bankruptcies has been on a clear downward trajectory over the past five years, while arrear rates in the mortgage market and in any other consumer credit portfolio are at, or near, record lows!

Original article from:  www.mcap.com

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