The Bank of Canada may be thinking about raising interest rates but there’s apparently no need because Canadians are hunkering down to cool debt obligations on their own.

“The pace of growth in household credit is no longer a reason for the Bank of Canada to move from the sidelines any time soon,” says Benjamin Tal, deputy chief economist at CIBC World Markets.

He wrote a report released Wednesday that suggests central bank intervention is not needed, especially with consumers already seeing interest payments on debt eating into 7.3% of their disposable income as of the fourth quarter of 2011, even at today’s low rates.

“Why are you raising rates? To slow down credit growth — but it’s already slowing,” Mr. Tal says. “I say let the market slow naturally. We are so concerned about this but it’s moving in the right direction.”

Toronto-Dominion Bank economist Francis Fong also weighed in, suggesting Canadians have begun to get the message about having too much debt, based on the slowdown in consumer credit growth.

Even the chief executive of one of the big five banks joined the discussion, hoping to extinguish some of the panic about Canadian debt.

“When we look at the overall marketplace, there might be pockets of vulnerability but we remain quite comfortable,” said Gord Nixon, chief executive of Royal Bank of Canada “Frankly, I’d like to see the rhetoric come down a little bit.”

None of the talk is doing much to dissuade author Gail Vaz Oxlade from her beliefs that Canadians have far too much debt.

“Yeah, yeah, I have heard it,” Ms. Vaz Oxlade says. “The number don’t lie. If the numbers say we are decreasing and only adding by 0.1%, I’m not going to argue. But the fact is we are already carrying too much debt and it’s still going up.”

She wonders whether Canadians are getting the message, if they are not actually paying down debt. She doesn’t care if more of the debt is going into long-term mortgages: “What’s the difference? That’s just debt we’ll pay three or four times more for.”

The CIBC report does note that as of March 2012, mortgage debt rose by 6.3% on a year-over-year basis, which is below the average rate of growth seen in the past two years of 7.3%.

Mr. Tal says there will be a gradual softening in the housing market with prices falling 10% in the coming year or two. He says tougher rules from regulators on loans will cool the market and notes the banks themselves are questioning values, citing “the increased use of full-scale appraisals as part of the adjudication process.”

Overall, Mr. Tal says that for the first time since 2002 consumer credit is rising more slowly than in the United States.

“Consumer credit [growth] is basically zero,” he says, adding Canadians have been optimizing their credit situation by taking high-interest credit card debt and transferring it to lines of credit.

TD’s Mr. Fong agrees that Canadians are starting to “hunker down” and pay off their debt, but at the same time he suggests a two-percentage-point increase in rates would leave many households at risk.

“It is safe to say that with household debt levels at record highs, a sizeable number of Canadians households are ill-prepared and could lead to difficulty keeping up with higher interest payments,” said Mr. Fong, who added efforts of Canadians to lock in their rates should cushion the coming blow.

Scott Hannah, president and CEO of the Credit Counselling Society, still thinks there is plenty to be worried about. “Things are pretty fragile,” he says. “Debt is still growing and we’ve got to start paying it down. We have to be concerned with the level of debt the average Canadian is carrying.”

With files 
from Bloomberg News