Canada’s household-debt-to-income ratio down slightly in second quarter

The ratio of Canadians' household debt to disposable income declined slightly between April and June of 2019, Statistics Canada said on Friday, Sept. 13, 2019. THE CANADIAN PRESS/Ryan Remiorz

The size of Canadians’ debt compared to their income declined slightly between April and June of 2019, as incomes grew a bit faster than debt, Statistics Canada said Friday.

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.

READ MORE: Canadian households now using 14.9% of income for debt payments

The data makes for “a mildly encouraging picture,” RBC economist Robert Hogue wrote in a note to clients shortly after the release.

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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.

That, among other factors, should bring “some relief” to household budgets in the period ahead, Hogue wrote.

Still, he added, “we’re still a long distance from writing off household debt from the list of top vulnerabilities for Canada’s economy.”


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