as 170 per cent – or almost twice as fast as mortgage debt – and now accounts for 12 per cent of the overall stock of household debt. since these secured loans are offered at a lower interest rate than unsecured loans, consumers have used part of the funds to pay down other debts. microdata suggest that roughly one - third of the loans are used to that effect, while about 20 per cent are used to invest in financial assets. the remaining half is spent on current consumption and renovating or purchasing another property. over time, there has been a marked increase in the share of home - equity - backed debt held by older households, an outcome that may not be too surprising since older households have generally owned their houses longer and have significant equity in them. 3 the overall conclusion based on the microdata and the research is that lower interest rates for secured lending and increased access to credit as house prices rose have helped fuel net increases in credit and have supported household spending in canada in recent years. going forward, house price gains are unlikely to provide the same support to household wealth as they have in recent years. this, combined with the fact that the level of household debt has reached a record high, leads us to expect that the growth of household expenditures will slow to a pace closer to that of income. there are risks, on both the upside and the downside, to the outlook for canadian household spending. on the upside, household spending could be stronger than expected if growth in incomes were to rebound more rapidly than the bank projects, or if borrowing continues to exceed income growth. in our projection, we expect slow growth in personal disposable income owing to the withdrawal of fiscal stimulus, announced compensation restraints by governments and a slow recovery in average hours worked. on the downside, if there were a sudden weakening in the canadian housing sector, it could have sizable spillover effects on other areas of the economy, such as consumption, given the high debt loads of some canadian households. while residential investment declined in the second half of 2010, it still remains near historically high levels. the bank expects some further weakening into 2011, reflecting subdued income growth and declining affordability, but not a major correction. see m. iacoviello, “ house prices, borrowing constraints and monetary policy in the business cycle ” the american economic review 95, no. 3 ( 2005 ) : 739 – 64. see also : m. b. roi and r. mendes, “ house prices

david dodge : summary of the latest monetary policy report opening statement by mr david dodge, governor of the bank of canada, at a press conference following the release of the monetary policy report, ottawa, 14 april 2005. * * * this morning, we released our april monetary policy report. in the report, we said that the global economy has been unfolding largely as expected, and the outlook for the canadian economy is essentially unchanged from that in january's monetary policy report update. there is increasing evidence that the canadian economy is adjusting to major global developments, including the realignment of currencies and higher commodity prices. the bank expects canada's economy to grow by about 2 1 / 2 per cent in 2005 and 3 1 / 4 per cent in 2006, with growth this year and next coming primarily from strength in domestic demand. to continue to support aggregate demand, we decided to leave the target for the overnight rate unchanged at 2. 5 per cent on 12 april. the bank continues to judge that the economy is operating slightly below its production capacity, and we expect that it will move back to full capacity in the second half of 2006. core inflation is expected to return to 2 per cent around the end of 2006. based on the scenario implied by oil - price futures, total cpi inflation is projected to remain slightly above 2 per cent this year, and to move slightly below 2 per cent in the second half of 2006. in line with this outlook for growth and inflation, a reduction of monetary stimulus will be required over time. this outlook is subject to both upside and downside risks and to uncertainties. the risks include the pace of expansion in asia and the prices of oil and non - energy commodities. a further risk relates to the resolution of global current account imbalances. should these imbalances persist, the risk of a disorderly correction would grow over time. most of the uncertainties with respect to the canadian outlook relate to how the economy is adjusting to the relative price changes associated with major global developments. monetary policy continues to facilitate the adjustment process by aiming to keep inflation at the 2 per cent target and the economy operating near its production capacity.