Far from pulling back amid an economic slump this year, Canadian households continue to amass record amounts of debt.
Statistics Canada said Friday the amount of household credit market debt to disposable income in the second quarter rose to 164.6 per cent from 163.0 per cent in the first quarter as debt grew faster than income.
That means Canadians owed nearly $1.65 in debt on everything from mortgages to consumer loans for every dollar of disposable income — a new record.
A hot housing market in major centres — chiefly Vancouver, Toronto and their surrounding suburbs — fueled the uptick.
Households borrowed $26.3 billion between April and June, up $3.7 billion from the first three months of the year. “Mortgages represented the largest portion of total borrowing,” the federal stats agency said.
“Residential mortgages are growing about twice as fast as consumer loans,” Sal Guatieri, senior economist at Bank of Montreal, said.
Guatieri noted that household debt levels have only shrank on one occasion since 1990.
Rising home values are lifting the net worth of Canadian households, StatsCan said. On a per capita basis, household net worth advanced nearly 1 per cent, to $243,800.
BMO’s Guatieri suggested foreign buyers of real estate are driving up housing values, and by extension the net worth of domestic homeowners.
“Asset values are rising faster than debt, in part, due to an inflow of foreign wealth to the housing market,” the economist said.
The Bank of Canada estimates about 12 per cent of households could be dangerously over-leveraged, holding about 40 per cent of all household debt.
Managing to make debt payments on time hasn’t proved too difficult for most households in the current ultra-low interest rate environment, experts say, while employment levels have yet to be signficant impacted by an economic slowdown that’s gripped oil-producing regions this year.
Statscan said Friday though that the household debt service ratio — the amount of money spent by households on payments as a percentage of take-home income — is edging higher.
That’s an indication that at least some households have seen the financial strain of making monthly payments increase since the start of the year.
“If they’re struggling to manage their increasing debt obligations now, a sudden change in external factors — like a rise in interest rates or the loss of a job — will leave many Canadians in greater financial difficulty,” Scott Hannah, president of Vancouver-based Credit Counselling Society, said.