Housing Boom Boosting Consumer Credit

The sizzling Ottawa housing market in Canada is prompting many residents to take out lines of credit, prompting a potentially inflationary burst in consumer spending.

Homeowners across the country are taking advantage of the increase in their home equity to borrow more.

Resale house prices have risen an average of 4.4 % a year in real terms since 2001; from January 2005 to mid-2006 the cumulative rate of increase has been 10.7 % and much faster in western Canada.

While many factors, such as income and population growth, have contributed to this faster growth in credit, the rapid rise in house prices has been a significant factor.

Despite this strong credit growth, the debt-service burden of households continues to be modest, since rates on mortgages and consumer loans remain historically low.