01/27/2015 08:43 EST | Updated 01/27/2015 08:59 EST

'Pay Off Debt' Searches Hit Record High As BoC Entices Canadians To Borrow More

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The Bank of Canada last week unexpectedly lowered its key lending rate, in the hope of stimulating an economy sucker-punched by falling oil prices. The idea, of course, is to make it easier to borrow.

The banks seem to be following suit quickly, with reports already coming in of lowered mortgage rates. Some analysts are even forecasting some types of mortgages will be going for below 2 per cent soon. Clearly, the people at the top want Canadians to borrow more.

But do Canadians want to? New data from Google suggests consumers may be feeling stressed out over the money they've already borrowed.

Searches for “pay off debt” hit a record high in Canada this month, according to Google, up 9 per cent compared to January of 2014.

Meanwhile, searches for savings accounts have grown 100 per cent in that time, the search engine company said, suggesting Canadians may be ready to make the switch from borrowing more to saving more.

According to Statistics Canada, average household debt hit a record high in Canada in the third quarter of last year, at 162.6 per cent of average household income.

And despite growing concerns about debt levels, a recent lending survey suggests Canadians are going to be taking on more debt in the coming months.

Credit rating analysis firm FICO says 42 per cent of risk management professionals surveyed expect Canadian consumers to take on more debt in the next quarter, up 10 percentage points from the same survey a year earlier.

“The results of our survey indicate that debt levels show no sign of decreasing,” FICO Canada managing director Kevin Deveau said in a statement.

The Bank of Canada has repeatedly described consumer debt -- driven by ever-larger mortgages -- as the top domestic risk to Canada’s economy, but the Bank’s move last week to lower borrowing costs did little to assuage concerns about consumer overindebtedness.

The bank’s move was praised by many economists who fear falling oil prices have taken the wind out of the Canadian economy’s sails, but some noted the bank’s move could make an already precarious consumer debt situation worse.

“After four years of scolding Canadians about taking on too much debt, the Bank has pretty much said ‘oh, never mind, we’ve got your back’ — despite the fact that the debt/income ratio is at an all-time high,” Bank of Montreal chief economist Doug Porter wrote.

Porter argued in a note issued Friday that the Bank of Canada’s rate cut could "backfire." It poses a threat to financial stability by encouraging higher household debt, running house prices potentially even higher and accelerating the drop in the loonie, he wrote.

The economist noted that Canada’s economy is already skewed by “negative real interest rates” (meaning interest rates below inflation) and “the cut threatens to make the skew grotesque.”

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