OTTAWA, Oct 25 (Reuters) – Mortgage holders in Canada are largely coping with higher interest rates but other borrowers are experiencing stress, particularly people who took out loans to buy motor vehicles, the Bank of Canada said on Wednesday.
The central bank hiked rates 10 times from March 2022 to July 2023, leaving them at a 22-year high of 5.0%. The bank said tighter lending conditions had helped cut demand for housing.
Indicators of financial stress point mainly to non-mortgage holders, it said in its quarterly Monetary Policy Report.
“Although delinquency rates for mortgage products have remained close to their all-time lows, the share of borrowers falling behind on payments by 60 days or more has continued to increase for most credit products,” it said.
“In particular, delinquency rates for motor vehicle loans have surpassed pre-pandemic levels.”
The bank said higher rates meant the pace of growth had decelerated for 85% of categories of consumer spending, with the notable exception of motor vehicle purchases.
The pandemic and consequent shortages of semiconductors meant people had been unable to buy autos, it noted, adding that “the recent increase in purchases likely reflects improved supply combined with pent-up demand”.
(Reporting by David Ljunggren, editing by Steve Scherer)
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