Canada household debt-to-income ratio slips from record high

Fri Mar 14, 2014 11:53am EDT
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By David Ljunggren

OTTAWA (Reuters) - The ratio of Canadian household debt to income in the fourth quarter of 2013 slipped from a record high while net worth rose, bolstering the Bank of Canada's belief that the housing market is in for a soft landing.

The central bank and the Conservative government have long fretted that near record low interest rates might prompt people to take on too much debt, especially big mortgages that could increase the chances of a housing crash.

Statistics Canada said the ratio of household debt to income in the fourth quarter of 2013 slipped to 164.0 percent from a record 164.2 percent in the third quarter.

Last week, the Bank of Canada said recent data supported its view that there would be a soft landing in the nation's housing market and the household debt-to-income ratio would stabilize.

"Today's results should be mildly encouraging for policymakers, and suggest that the Bank of Canada's view that imbalances are evolving 'constructively' is reasonable," said Doug Porter, chief economist at BMO Capital Markets.

Mortgage borrowing grew by C$13.0 billion ($11.7 billion) in the fourth quarter, considerably less than the C$21.0 billion recorded in the third quarter.

The increase in mortgage debt was just 1.1 percent over the previous quarter compared to the average quarterly growth of 1.8 percent seen over the past six years.

The figures though are not seasonally adjusted and could well reflect the fact that the fourth quarter is traditionally a quieter time for house purchases.   Continued...

Condo buildings are seen under in construction in Toronto June 19, 2009. REUTERS/Chris Roussakis