The Bank of Canada says the key vulnerability in the financial system of increasing household debt is concentrated among younger Canadians.
In its latest assessment of the country’s financial health, the central bank says those most indebted borrowers tend to be younger than 45 and usually earn less, which would put them more at risk of drops in income caused by an economic downturn.
These higher-risk borrowers tend to be in Ontario, Alberta and B.C.
But while income growth is failing to keep pace with mounting mortgage credit, the vulnerability of household debt’s likely to fade as the economy picks up.
The Bank of Canada’s semi-annual financial system review also points to weak spots caused by soaring house prices and risks such as a severe recession, spike in unemployment and a prolonged stretch of low commodity prices.