Household debt-to-disposable-income ratio hits another record

Credit and bank cards are seen in this undated file image.

OTTAWA -- Canadian household debt rose to a new record high in the fourth quarter of last year, fuelled in large part by mortgage growth.

Statistics Canada said Friday that total household credit market debt, which includes consumer credit and mortgage and non-mortgage loans, increased 1.2 per cent to $1.923 trillion at the end of last year.

The total included $573.6 billion in consumer credit debt and $1.262 trillion in mortgage debt.

The growth helped drive the ratio of household debt to disposable income to a new peak of 165.4 per cent in the fourth quarter, up from 164.5 per cent in the third quarter.

That means Canadian households on average held $1.65 in debt for every dollar they earned after taxes and other fees paid to government.

TD Bank economist Diana Petramala said low interest rates have allowed households to take on more debt, mostly backed by mortgages, and predicted the growth in debt will outpace income growth in the first half of this year.

"Canadian consumer borrowing interest rates fell once again through the start of the year, which may only encourage a further acceleration in borrowing," she said.

"While the increase in spending and borrowing will help support economic growth, households are increasingly becoming more vulnerable to a potential interest rate shock or slowdown in the housing market."

However, Royal Bank economist Laura Cooper said the implementation of new mortgage regulations last month "may curb the appetite for mortgage loans to some extent."

The changes mean homebuyers must make larger down payments for properties over $500,000.

The household debt service ratio, the obligated payments of principal and interest as a proportion of disposable income, was 13.8 per cent in the fourth quarter, compared with 13.5 per cent in the third quarter.

While household debt increased, a rebound in financial assets helped drive household net worth in the quarter by 1.6 per cent to $9.479 trillion.

Financial assets increased 2.2 per cent after dropping for two quarters, buttressed by a 0.7 per cent increase in non-financial assets, which includes real estate.

Statistics Canada said household net worth amounted to $263,200 on a per capita basis, up 1.5 per cent from the previous quarter.