Household debt ratio climbs to 176.9%, according to Statistics Canada


A key measure of household debt rose in the first quarter as the COVID-19 pandemic began to take hold of the economy, Statistics Canada said on Friday.

The agency reported that household debt in the credit market as a proportion of household disposable income increased from 175.6 percent to 176.9 percent.

In other words, there was $ 1.77 of debt in the credit market for every dollar of household disposable income.

Statistics Canada added that annual trends show that low-income households tend to have a higher debt-to-disposable income ratio.

BMO economist Priscilla Thiagamoorthy said long before the pandemic that household debt was a key vulnerability for the economy.

“We could see a crash in the next quarter as the ratio declines amid slowing borrowing and government action bolsters income,” Thiagamoorthy wrote in a report.

“But with the economic downturn deeply affecting income growth and low rates encouraging borrowing, debt ratios are likely to hit new highs in the coming quarters, leaving households even more indebted.”

On a seasonally adjusted basis, total borrowing in the credit market increased $ 1.9 billion to $ 27.6 billion in the first quarter. Mortgages increased $ 3.8 billion to $ 23.1 billion, while demand for consumer credit and non-mortgage loans declined $ 1.9 billion to 4 , 5 billion dollars.

Canadians now owe $ 2.3 trillion in total

Overall, Statistics Canada said credit market debt totaled $ 2.33 trillion at the end of the quarter, including $ 1.53 trillion in mortgage debt and $ 802.1 billion in home credit. consumption and non-mortgage loans.

Meanwhile, the household debt service ratio – measured by the total obligatory payments of principal and interest on credit market debt as a proportion of disposable household income – fell to 14.67 percent from 14.81 percent.

“One of the positive aspects of today’s report is the decline in debt service costs, with the DSR falling for the first time in more than two years as interest rates have fallen over a wide range of loans, ”TD Bank economist Ksenia Bushmeneva wrote.

“In addition to lower interest rates, deferrals and other changes to mortgages and other credit products have also helped reduce debt service expenses. “

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John A. Bogar

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