The trend of lenders borrowing more is something that will definitely last forever but with leading Canadian banks cajoling customers to borrow more, it is quite surprising that Canadian customers are allowing themselves to be deceived by banks to add on more debts.
Low interest rates of banks is luring a lot of customers to borrow more than usual and many borrowers and lenders do not deem it fit to neglect such lower rates.
However, this poses a big threat for the overall economy as a slight increase in interest rates will bring complete chaos between banks and customers.
Martha Durdin, president and CEO of the Canadian Credit Union Association stated that the amount of rates are very low which is driving up the lending rates of customers and this situation is not only evident in banks. Other financial institutions are also going to a similar scenario.
She went on to add that banks and financial institutions rely on margins hence fees and other techniques to generate funds are very relevant.
But this low amount according to a head of one credit union affects credit unions in respect to attracting customers.
Nevertheless, the tightening of amounts has become a global issue which has been ongoing for years. But Canadians have now become willing borrowers and data justifies the reason why many Canadians are taking on more debts.
People across the country have been drawn to taking more debt as the cost of housing has risen above limits in recent years.
The real estate market especially in the country’s largest cities have become so expensive that even some of the people considered ad wealthy are struggling to afford the average home prices in these cities.
A similar situation also occurred in the U.S wherein low interest rate was initiated to aid the country free itself from an earlier economic crash.
However, Canada is moving in a different direction as although the Bank of Canada had intended that interest rates will help elevates people from their economic crisis, low interest rates in the country is unfortunately encouraging customers to borrow more.
People with dreams on buying homes and had their dreams dampened by high housing cost have seen the opportunity to actualize their homeownership dreams by borrowing more.
Notwithstanding, Canadians need to be mindful as this pace in which low interest rates is going cannot last forever with major banks warning of a housing collapse in major real estate such as Toronto.
It goes beyond doubt that the borrowing rate of customers has increased recently and any slight change in interest rates will have serious implications on them. The low interest rates is also a two way thing as banks stand to gain immensely as amounts get bigger but for Canadian customers, it is a complete opposite story.