Canada’s household debt ratio registered a significant decline between April and June, as the government rolled out extensive income-support measures linked to the novel coronavirus pandemic, Statistics Canada said on Friday.
The agency said household credit market debt as a proportion of household disposable income dropped to a seasonally adjusted 158 per cent, down from 175 per cent in the previous quarter.
In other words, the average Canadian now owes $1.58 per dollar of disposable income, a meaningful decrease for a number that’s been hovering above $1.75 since the start of 2016.
Canadians also rushed to build up their savings as the pandemic shut down parts of the economy, the data shows.
The household saving rate shot up to a seasonally adjusted 28 per cent from less than eight per cent in the first three months of 2020 and less than four per cent in the last quarter of 2019.
Government transfers more than offset a reduction in employees’ compensation, boosting household disposable income by nearly 11 per cent. A decline in household spending of nearly 14 per cent also contributed to the savings spike.
Even so, the agency noted that annual trends show that lower-income households tend to have a higher debt to disposable income ratio.
The household debt service ratio, measured as the total obligated payments of principal and interest on credit market debt as a proportion of disposable income, dropped to 12.4 per cent from 14.5 per cent as payment deferrals related to the COVID-19 pandemic reduced the obligated principal paid in the second quarter.
Overall, credit market debt totalled $2.33 trillion at the end of the quarter including $1.55 trillion in mortgage debt and $779.4 billion in consumer credit and non-mortgage loans.
— With files from the Canadian Press