Canadian household debt-to-income ratio hits record high in third quarter

Mon Dec 14, 2015 11:52am EST
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By Leah Schnurr

OTTAWA (Reuters) - Canadian household debt compared to income rose to a record in the third quarter as borrowing outpaced growth in disposable income, while home prices continued to climb in November, led by hot west coast markets.

The ratio of household credit market debt to income rose to 163.7 percent in the third quarter from a downwardly revised 162.7 percent in the second quarter, Statistics Canada said on Monday.

The Bank of Canada, which has cut interest rates twice this year to offset the shock of cheap oil on the resource-oriented economy, has warned of rising vulnerabilities in the household sector as Canadians have taken advantage of years of low borrowing costs.

Still, as the central bank also sees overall risks to financial stability evolving as expected, the figures are unlikely to dictate the bank's policy, said Doug Porter, chief economist at BMO Capital Markets.

The Bank of Canada will release its latest financial system review on Tuesday.

The rising debt levels have led some to worry that consumers have taken on more than they can handle, particularly in the housing market where prices have soared.

Household credit market debt, which includes consumer credit, mortgages and other loans, rose 1.4 percent last quarter with the bigger increase coming from mortgages. Separate data showed home priced edged up 0.2 percent in November.

The government took steps last week to cool parts of the housing market by forcing people who want to buy more expensive homes to provide a bigger down payment.   Continued...

A condominium construction site is seen in Toronto, March 11, 2014. REUTERS/Aaron Harris