As the Bank of Canada continues on the sidelines when it comes to hiking interest rates, Canadian household debt as a percentage of income continues its record upward trajectory.
It’s not that the debt is not manageable at the moment with interest rates this low, but when the inevitable happens and rates start to escalate, the worry is that consumers will not be able to handle the increased load.
The ratio of debt to disposable income rose to 171.1 per cent in the third quarter, which means households owe $1.71 for every dollar of after-tax income earned.
Household debt has surged this century with the extended period of record-low interest rates and Canadians’ debt is among the highest of the OECD.
Bank of Canada data indicates total household borrowing rose 5.5 per cent in October on a one-year basis, with more than 70 per cent of the borrowing linked to mortgages.
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