Rising interest rates and the recent tightening of mortgage lending standards are now having a marked impact on mortgage lending, with the three-month-on-three-month annualised growth rate of mortgage credit falling to a 17-year low in April. Consumer credit growth has also slowed markedly. Admittedly, long-term interest rate have fallen back in recent days, as potential problems in Italy and some key emerging markets have triggered a rally in safe-haven bonds. But those moves have reversed only a small part of the run-up over the past eight months. Higher long-term interest rates will continue to hold back consumption and possibly business investment too. Alongside the uncertainty surrounding future trade relationships and the softness of housing conditions that is another reason to believe that the Bank of Canada will refrain from raising its policy rate again in the next few months.
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