In a recent interview with CBC News, Alberta Central’s Chief Economist Charles St-Arnaud discussed how Alberta’s high average debt could “squeeze” some consumers, following recent interest rate hikes from the Bank of Canada.
“It’s what I call the great consumer squeeze. Households are being squeezed financially by different sides,” said Charles St-Arnaud, chief economist with Alberta Central, which is the central banking facility for the province’s credit unions.
That “squeeze,” St-Arnaud said, will likely see households reducing their discretionary spending to offset a higher cost of living and the higher costs of servicing debt.
“The question is, what will happen to the debt-service ratio?” he said. “Because of that high level of debt, that debt-service ratio in Alberta is already one of the highest in Canada.”
For Albertans, the most visible impact of the increase could be on the province’s housing market, but it remains to be seen what other impacts may materialize as rate hikes continue.