Cana­di­ans ease up on debt binges, hous­ing cools

Saskatoon StarPhoenix - - FP SASKATOON - GREG QUINN

OTTAWA Canada’s debt to dis­pos­able in­come ra­tio de­clined by the most on record in the first quar­ter, boost­ing con­fi­dence the coun­try ’s house­holds can han­dle higher bor­row­ing costs.

The ra­tio fell to 168 per cent in the first three months of 2018, from 169.7 per cent in the prior pe­riod, Sta­tis­tics Canada said Thurs­day. The 1.7-per­cent­age point de­cline was the most in data back to 1990, and fol­lows an al­most con­tin­ual run of in­creases to a record 170 per cent in the third quar­ter of 2017.

Credit-mar­ket debt rose just 0.3 per cent Jan­uary to March, re­flect­ing the low­est vol­ume of mort­gage bor­row­ing in nearly four years. Dis­pos­able in­come rose 1.3 per cent.

Mean­while, a sep­a­rate Sta­tis­tics Canada re­port showed the coun­try’s new hous­ing price in­dex was flat in April, and Toronto prices posted the first 12-month de­cline since 2009.

The fig­ures sug­gest risks from the decade-long, debt-fu­elled hous­ing boom are mod­er­at­ing, clear­ing the way for the Bank of Canada to con­tinue in­creas­ing in­ter­est rates to more nor­mal lev­els.

Mod­er­at­ing hous­ing costs “will give the Bank of Canada breath­ing room to main­tain a grad­ual pace of tight­en­ing,” An­drew Kelvin, se­nior Canada rates strate­gist at Toronto Do­min­ion Bank in Toronto, said in an email.

Real es­tate ex­ec­u­tives and pol­i­cy­mak­ers have said mort­gage growth should slow this year af­ter tougher fed­eral rules took ef­fect. Some buy­ers have also been de­terred by high prices in Van­cou­ver and Toronto, and by higher bor­row­ing costs.

Mort­gage bor­row­ing fell by $2 bil­lion to $13.7 bil­lion in the first quar­ter, com­pared with the prior three-month pe­riod, Sta­tis­tics Canada said.

Home price over­val­u­a­tion in Toronto has been eas­ing and the risk of a price bust across the prov­ince of Ontario has faded to “low,” from “mod­er­ate” last year, Canada Mort­gage and Hous­ing Corp. said Thurs­day. The fed­eral hous­ing agency also said Ontario’s ris­ing pop­u­la­tion and in­comes should sup­port home prices af­ter some weak­ness early this year.

Toronto’s new-home price in­dex fell 0.5 per cent in April from March, the fourth straight de­cline. In Van­cou­ver prices have been flat for four straight months.

Still, dan­gers re­main. Poloz said last week that the sheer size of the debt means the ten­sions will per­sist for some time.

Bloomberg

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