Debt to income ratio edges lower – but servicing costs at record highs

Statistics Canada says the amount Canadians owe relative to their income edged lower in the third quarter, but the cost of servicing that debt relative to income climbed higher.

The agency says household credit market debt as a proportion of household disposable income in the third quarter fell to 181.6 per cent, on a seasonally adjusted basis, down from 181.9 per cent in the second quarter.

In other words, it says Canadians owed $1.82 in credit market debt for every dollar of household disposable income in the third quarter.

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The result came as household disposable income rose 1.0 per cent, while credit market debt gained 0.8 per cent.

Meanwhile, the household debt service ratio, measured as total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, was 15.22 per cent in the third quarter, up from 15.08 per cent in the second quarter, as debt payments grew faster than income.

The cost of borrowing has risen since the Bank of Canada started raising interest rates in 2022 in an effort to bring inflation back to its target of two per cent.