Rising interest rates could n
THE CANADIAN PRESS
TORONTO- Rising interest rates could have a “significant” impact on Ontario’s economy as the already ballooning household debt is projected to continue to grow, warns the province’s fiscal watchdog.
The Financial Accountability Office said in a report released Tuesday that an average Ontario household owed nearly $154,000 in 2016, up from $119,000 in 2010. Its analysis shows that paying down that debt cost an average Ontario family about $12,500 in 2016. As interest rates rise, those repayment costs will grow by nearly 25 per cent to $15,500 a year by 2021, it said.
“That really is money that will have to come out of discretionary incomes,” said the office’s chief economist David West. “It’s money that will otherwise be spent on goods and services that now will have to be diverted towards debt payments.”
West said that the change in consumer spending would slow the economy and could impact government revenues as a result.
“Consumer spending is one of the main drivers of the Ontario economy,” he said. “Going forward in our forecasts we anticipate consumer spending will slow to 1.8 per cent growth by 2021. It will steadily ramp down.”
The report attributes the growth in household debt primarily to residential mortgages.