For every dollar of disposable income, households across the country held $1.67 in debt in 2016’s third quarter, according to Statistics Canada data released December 14.
Canadian household debt ratios increased to 166.9%, which is a record high as previous reports for past quarters have been revised downward.
“We might start to see the ratio flatten out a bit in 2017 as the Vancouver housing market has cooled notably due to the foreign buyers’ tax, and the new mortgage rule should dampen activity modestly in 2017,” Benjamin Reitzes, senior economist at BMO Capital Markets, said in a note to investors.
Reitzes points out, however, that a strong housing market in Toronto will fight against the cooling effect coming from Vancouver.
Total household debt increased 5.1% year-over-year in Q3, reaching $2 trillion. In Q1, the 12-month increase was 5.7%.
“As slowing in residential mortgage accumulation contributed to the decrease, rising by 6.2% compared with 6.6% in the previous quarter,” said RBC economist Laura Cooper.. “Consumer credit growth slowed even more sharply to 3.3%, marking the slowest pace in two years.”
The combined market value of all household net worth in Canada grew 7.7% year-over-year to a record $10.1 trillion. Aggregate net worth increased 7.3% to $12.2 trillion due to strong growth in equity and bond valuations, financial assets and real estate.
The debt-to-asset ratio fell to 16.7%, which Reitzes said is the second-lowest value since the recession.
“This implies that Canadian households have $5.99 of assets for every $1.00 of debt,” he said. “Interestingly, even with strong Q3 GDP growth, Canadian household debt to GDP ratio climbed to 101.2%, after breaching the 100% threshold in Q2.”
@EmmaHampelBIV
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