Debt-to-disposable income rates continue to climb in second quarter

September 18th, 2017  |  Personal Finance

Statistics Canada has reported that debt-to-disposable income rates among Canadians rose in the second quarter.

According to StatsCan, household credit market debt, as a proportion of household disposable income, rose from last quarter’s 166.6% to 167.8%. Meaning, that for every $1.00 of household disposable income in quarter two, there was also $1.68 in credit market debt.

The debt ratio increase came about as the household net worth, on a per capita basis, fell to $285,900, a $1,300 decrease from last quarter. And while household income increased by 1.2%, household credit market debt climbed to 1.9%.

"A decline in household net worth, albeit modest, alongside a sharp increase in consumer credit growth are notable as together they suggest that the ability of households to absorb higher interest rates continued to deteriorate," wrote RBC economist Laura Cooper in a commentary.

In the second quarter, total household credit market debt totaled almost $2.08 trillion across the country. This manor of credit includes consumer credit, mortgage, and non-mortgage loans. Mortgage debt saw an increase of 1.6% percent, and consumer credit saw 2.4% growth, totaling $1.36 trillion and $609.6 billion respectively.

"Going forward, the spending environment – for consumers, businesses and governments – will become more challenging in light of the recent interest rate hikes by the Bank of Canada," said TD economist Dina Ignjatovic. "With additional hikes likely in the pipeline, there will be some further deterioration in the debt service ratio in the coming quarters."