Debt ra­tio creeps higher

Cana­di­ans owe more in re­la­tion to in­come


The amount house­holds owe, rel­a­tive to their in­come, crept higher in the sec­ond quar­ter, even as mort­gage bor­row­ing con­tin­ued to slow, Sta­tis­tics Canada said.

The agency said Fri­day credit mar­ket debt as a pro­por­tion of house­hold dis­pos­able in­come in­creased to 169.1 per cent as growth in debt out­paced in­come.

In other words, Cana­di­ans owed $1.69 in credit mar­ket debt for ev­ery dol­lar of house­hold dis­pos­able in­come.

The ra­tio was up from 168.3 per cent in the first quar­ter, how­ever it was down from 169.7 per cent in the sec­ond quar­ter last year.

BMO Cap­i­tal Mar­kets eco­nomic an­a­lyst Priscilla Thi­ag­amoor­thy noted the in­crease was “well be­low sea­sonal norms” and one of the small­est sec­ondquar­ter in­creases since 2000.

“De­spite edg­ing slightly higher in Q2, the closely watched house­hold debt-toin­come ra­tio ap­pears to have fi­nally turned the cor­ner from all-time highs,” Thi­ag­amoor­thy wrote in a brief re­port.

“The key take­away here is that bor­row­ing cooled with the hous­ing mar­ket as house­holds ad­justed to a slew of pol­icy changes in­clud­ing tighter mort­gage rules and grad­ual rate hikes.”

House­hold debt has been iden­ti­fied as a key vul­ner­a­bil­ity for the fi­nan­cial sys­tem by the Bank of Canada, how­ever the cen­tral bank noted ear­lier this year that the risk has less­ened.

On a sea­son­ally ad­justed ba­sis, house­holds bor­rowed $19.6 bil­lion in the quar­ter, down from $22.2 bil­lion in the pre­vi­ous quar­ter.

The de­crease came as de­mand for con­sumer credit in­creased, but was more than off­set by a de­cline in both mort­gage and non-mort­gage loans.

The de­cline in mort­gages came as the hous­ing mar­ket slowed amid tighter mort­gage rules and ris­ing mort­gage rates.

Rates for five-year fixed mort­gages have been ris­ing as yields on the bond mar­kets, where the banks raise money, have also climbed higher.

Mean­while, rates charged for vari­able rate mort­gages have also climbed as the Bank of Canada has raised its key in­ter­est rate tar­get.

On an un­ad­justed ba­sis, house­hold credit mar­ket debt, which in­cludes con­sumer credit, and mort­gage and non-mort­gage loans, to­talled $2.16 tril­lion.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.