Canadian household debt hits record high: StatsCan

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Canadian households had, on average $1.71 in debt for every dollar of disposable income, in the third quarter of 2017, Statistics Canada announced December 14.

The debt ratio hit 171.1% in the quarter; this is a full percentage point higher than Q2’s ratio of 170.1% in Q2, which was revised upward from 167.8%.

Benjamin Reitzes, BMO Capital Markets’ senior economist, said the increase was in line with seasonal norms, and this trend is expected to continue.

“With Homebuyers rushing to get into the market ahead of the new OSFI rule change that takes effect on January 1, 2018, we could see a further increase in Q4,” he said in a note to investors.

“However, that suggests we could see some flattening out of the ratio in 2018 – though don’t bet on it as housing has been persistently resilient.”

Total houshold debt inched up 1.4% in the quarter, reaching more than $2.1 billion. The biggest contributor was mortgage debt, which grew1.5% to almost $1.4 billion.

RBC economist Josh Nye said even though debt has been on the rise for the last decade, the share of income needed to service that debt has remained flat. This is expected to change as the Bank of Canada raises interest rates, he said, but because mortgage debt is often set at a fixed rate, households won’t feel the increase all at once.

“Rather, as today’s data showed, the debt service ratio is likely to rise only gradually,” Nye said.

ecrawford@biv.com

@EmmaHampelBIV