UPDATE 1-Canada Q4 household debt-to-income ratio hits record

Thu Mar 12, 2015 8:34am EDT
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OTTAWA, March 12 (Reuters) - Canada's household debt-to-income ratio rose to a record high in the final quarter of 2014, hitting 163.3 percent from 162.7 percent in the previous quarter, Statistics Canada said on Thursday.

It was the third quarter in a row that disposable income increased at a slower rate than household credit market debt. The ratio is not seasonally adjusted.

The Bank of Canada watches the measure closely for signs consumers may be overextended.

The central bank said in its January monetary policy report that household imbalances remain elevated and are expected to edge up in the near term as house prices and resale activity continue to see strength in some regions.

The debt-service ratio, or interest paid as a proportion of disposable income, edged up to 6.8 percent, though the ratio has hovered around an all-time low for the past three quarters.

The Bank of Canada cut interest rates to 0.75 percent in January, which means debt burdens will likely get easier, though some economists have argued that cheaper rates could prompt Canadians to stretch themselves too thin.

National net worth rose 2.6 percent from the third quarter to hit C$8.27 trillion ($6.51 trillion).

($1 = $1.27 Canadian) (Reporting by Leah Schnurr Editing by; W Simon)