OTTAWA (Reuters) - Canadian household debt is far higher than previously thought relative to income, Statistics Canada’s historical revisions showed on Monday, heightening pressure on policy makers to address what they have called the biggest domestic danger to the economy.
And the rate was still rising to a new record in the second quarter -- before the tightening of mortgage insurance rules. The household debt-to-income ratio jumped to 163.4 percent in the second quarter from 161.8 percent in the first quarter, according to revisions made to bring the agency’s methodology in line with updated international standards.
Under the old method, Statscan had reported the first quarter household debt-to-income ratio of 152.0 percent. The revisions show the ratio in 2011 was 161.7 percent instead of 150.6 percent as previously estimated.
The figure is a key measure of the vulnerability of indebted Canadians to a sudden loss of income or sudden downturn in the housing market. A Statistics Canada analyst said the Canadian ratio was well above that of the United States.
The main reasons for the revisions were that the new methodology resulted in a higher calculation of household credit market debt and lower disposable income. Statscan also removed non-profit institutions serving households from the household sector when making its estimates.
The soaring debt levels, fueled in part by a hot housing market, have led Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty to warn Canadians repeatedly against getting too deep into debt at a time of ultra-low rates.
The International Monetary Fund last week singled out the country’s housing boom and household debt levels as factors to watch.
Reporting by Louise Egan; Editing by Chizu Nomiyama