Don’t get too secure in household assets tied to home values, Carney warns

OTTAWA – The Bank of Canada governor is advising Canadians not to get overly complacent about their financial security if it is tied to home values.

Mark Carney told the Senate banking committee the levels of household debt-to-income is elevated at about 163 per cent, and he is not comforted much by the fact household worth is also “very high.”

The problem with household assets, he says, is that most are tied to real estate so they can go up and down and are not always liquid.

He says he’s seen people feel financially secure because their assets are worth more than their debt, then a shock occurs and real estate values plummet and they are unable to sell their homes, but they still have monthly mortgage payments to make.

Carney says that’s why he has been hammering away at the issue for some time.

He adds he believes “the horse is not out of the barn” yet and Canadians, as well as policy-makers, can still slow down debt accumulation.