Debt-to-income ratio climbs to 166.9 per cent in Q3: Statistics Canada

“Even with the more modest increase, the upward trend in household debt . . . continues unabated,” Reitzes wrote in a report.

“However, 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.”

Statistics Canada said the higher debt ratio came as adjusted disposable income increased 1.0 per cent, while household credit market debt grew 1.3 per cent.

Total household credit market debt totalled $2.004 trillion at the end of the third quarter. Mortgage debt accounted for 65.5 per cent of the total in the third quarter, up from 65.1 per cent in the second quarter, Statistics Canada said.

The household debt service ratio — payment obligations as proportion of disposable income — edged down to 14.0 per cent in the third quarter from 14.1 per cent in the second quarter.

Despite the increase in household debt, household net worth rose 2.5 per cent in the third quarter to $10.133 trillion.

The increase came from a 3.2 per cent increase in financial assets as the value of investment fund shares, particularly mutual fund units, life insurance and pension assets rose.

Non-financial assets, mainly real estate, grew 1.2 per cent.

Royal Bank economist Laura Cooper noted that the household saving rate increased to 5.8 per cent in the quarter, up a full percentage point from the second quarter and its highest level since the first quarter of 2001.

“That said, the further deterioration in the oft-cited debt metric will serve to strengthen the Bank of Canada’s appraisal that elevated household indebtedness remains a key vulnerability to financial stability,” Cooper wrote.

“Such is expected to be flagged in the release of the bank’s semi-annual Financial System Review (on Thursday).”

Household debt has been identified as a key risk for the Canadian economy.

The federal government has moved several times in recent years in an effort to limit risks in mortgage lending.

In its latest move, Ottawa announced changes in October that stiffened eligibility rules on prospective borrowers, including expanded stress tests on mortgages.

Craig Wong, The Canadian Press

by Canadian Press

Debt-to-income ratio climbs to 166.9 per cent in Q3: Statistics Canada

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