Canada’s household-debt-to-income ratio down slightly in second quarter
The household-debt-to-income ratio edged down to 177.1 per cent in the second quarter of the year, from 177.5 per cent between January and March. The numbers mean Canadian owe $1.77 in debt — including mortgages and consumer debt like credit cards — for every dollar of disposable income. The ratio has been edging down since October 2018, StatsCan data shows, thanks to both a slowdown in borrowing and healthy income growth.
The data makes for “a mildly encouraging picture,” RBC economist Robert Hogue wrote in a note to clients shortly after the release.
But there’s a caveat, he added: debt-servicing costs continued to eat up a large share of Canadians’ disposable incomes. Households were using a record 14.9 per cent of their spending money to meet debt obligations, a growing burden that reflects the rising cost of interest payments.
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The Bank of Canada has raised its trend-setting interest rate five times since July 2017, though it has been holding it steady since October of 2018.
The trend toward more expensive debt, though, reversed in the past few months, as concerns about the U.S.-China trade standoff and the health of the global economy put downward pressure some interest rates, including those on mortgages.
Still, he added, “we’re still a long distance from writing off household debt from the list of top vulnerabilities for Canada’s economy.”