Here's Carney's remarks June 15, 2011:
Some key points:
Financial vulnerabilities have increased as a result. Canadians are now as indebted (relative to their income) as the Americans and the British (Chart 9). The Bank estimates that the proportion of Canadian households that would be highly vulnerable to an adverse economic shock has risen to its highest level in nine years, despite improving economic conditions and the ongoing low level of interest rates.5 This partly reflects the fact that the increase in aggregate household debt over the past decade has been driven by households with the highest debt levels (Chart 10).
The Bank manages policy for the economy as a whole, rather than any specific region or sector. In this context, what does the Bank of Canada expect for housing? In a word: moderation
For example, while measures of housing affordability remain favourable, this is largely because interest rates are unusually low. Rates will not remain at their current levels forever. The impact of eventual increases is likely to be greater than in previous cycles, given the higher stock of debt owed by Canadian households. At a 4 per cent real mortgage interest rate—equivalent to the average rate since 1995—affordability falls to its worst level in 16 years (Chart 17).10 As I have observed, some markets are already severely unaffordable even at current rates.