Canadian household debt ratio hits highest level on record

Households in Canada had the highest debt level ever when measured as a portion of... 
Shutterstock

Households in Canada had the highest debt level ever when measured as a portion of disposable income in 2015’s second quarter, Statistics Canada announced September 11.

The ratio of household credit market debt to disposable income rose from 163% in Q1 to 164.6% in Q2. This means that for every dollar of disposable income households brought in, they owed almost $1.65.

As interest rates have fallen in the country, more Canadians have gone further into debt. Households borrowed a total of $26.3 billion in the quarter, which was up $3.7 billion compared with Q1. One of the reasons Canadians have gone further into debt is because interest rates have fallen, making borrowing more attractive.

Here in the Lower Mainland specifically, more individuals are becoming concerned about their finances as a result of owing so much more, said Lana Gilbertson, personal bankruptcy trustee at MNP Debt.

Gilbertson said she is seeing an increase in the number of families and individuals looking to file consumer proposals. These proposals are administered by bankruptcy trustees but are not full bankruptcies; they involve offering to pay creditors a percentage of what is owed or extending the time it takes to pay debt.

“[These families] are working, so they haven’t seen job losses or other life events that would cause an interruption in income, but they’ve been carrying high levels of unsecured debt for so long and they simply can’t do it anymore,” she said.

“I see people’s day-to-day living expenses all the time, and what I’m seeing is households that can afford to pay their rent and food and other basic living costs, but there isn’t a lot of room in the budget so credit is looked to for consumer goods or when there’s an emergency.”

Benjamin Reitzes, senior economist and vice-president economic research at BMO Capital Markets, said the StatsCan data isn’t as alarming as it sounds.

“There’s little need to fret about households’ ability to carry all that debt, as the household debt service ratio – interest and principal as a share of disposable income  - rose a modest 0.2 percentage points to 14.1%, not far from the 10-year average, though further increases would start to ramp up our level of concern,” Reitzes said.

“Fortunately, the increase in the total debt service ratio is being driven by higher principal payments, as interest payments as a share of disposable income hit a new record low 6.37% in Q2.”

Household net worth also hit an all-time high, reaching 768% of disposable income. This is up 0.7 percentage points compared with the previous quarter.

ecrawford@biv.com

@EmmaHampelBIV

comments powered by Disqus

More from Economy

Government announces $50,000 threshold for passive income

B.C. Chamber says government has listened to the concerns of B.C. businesses 

Read Article

Seeking CETA’s small-business benefits

Canada-EU deal could generate big business for small B.C. firms

Read Article

Insider Trading: October 17, 2017

The following is a list of stock trades made by corporate executives, directors and other company insiders of B.C.’s public companies filed in the week ...

Read Article

B.C. staffing, revenue up for top national, global firms

69% of companies moved up in ranking on Business in Vancouver’s top-100 list

Read Article

Recommended reading resources for small businesses

Vancouver Public Library offers an array of research tools for entrepreneurs

Read Article

Subscribe to our mailing lists

You may withdraw your consent at any time.

* indicates required

Newsletters

* You can modify your newsletter subscriptions at the bottom of any newsletter you receive.
Business in Vancouver Media Group
303 West 5th Avenue, Vancouver, British Columbia
V5Y 1J6 · Canada
604-688-2398
×