Canadians are more indebted than ever but have borrowed wisely to build their net worth to record levels, according to a new report.

The $10.3-trillion in net worth of Canadian households is the result of debt accumulated to finance assets such as real estate and investments, according to a Fraser Institute report released Tuesday. Warnings about household debt often ignore assets, which skew the picture, says the report from the right-leaning think-tank.

“Despite alarmist headlines, concerns about Canadian household debt levels can be overblown,” said study author Livio Di Matteo, a professor of economics at Lakehead University. “When looking at debt levels it’s important to consider the degree to which Canadians are also using it to increase their net worth.”

Based on the traditional metrics of total household debt or comparing household debt to income, Canadian debt is near historic highs. By the end of 2016, it topped $2 trillion, up from $357 billion in 1990. (All figures from Statistics Canada.)

Two-thirds of that total is in mortgages, while consumer credit comprises 29 per cent and other loans 5 per cent. That composition has remained stable since 1990. That $2 trillion of debt is approximately 170 per cent of household disposable income, up from 90 per cent in 1990. That puts Canada middle-of-the-pack among OECD countries.

“Yet, this does not mean that Canadians are being irresponsible with household debt. To start, the above data ignore the fact that household debt growth can be a rational response to falling interest rates.”

Household assets, such as real estate, pensions, financial investments and businesses, have grown from $2.2 trillion in 1990 to $12.3 trillion in 2016. Along with that, net worth – assets minus liabilities – has soared from $1.8 trillion to $10.3 trillion.

“We may be borrowing, but we’re doing it in a pretty savvy way,” said Pattie Lovett-Reid, CTV News chief financial correspondent.

There is good debt that pays off in the long run (student loans, mortgages) and consumption-oriented bad debt that drags down balance sheets, she told BNN.

Interest rates were nearly 13 per cent in 1990, dramatically falling to 0.75 per cent at the end of 2016. So, while Canadians have more debt, the cost to service it is about half – 6 per cent of disposable income in 2016, compared to close to 11 per cent in 1990.

“The greatest risks to the management of household debt are economic shocks that lead to job losses that make debt servicing problematic, or increases in the interest rate that raise debt servicing costs,” reads the Fraser report.

It chastises governments for cautioning about household debt when their own finances are less favourable.

“Governments across Canada have been racking up debt, particularly since 2007, but the net worth of governments in Canada has actually decreased,” said Di Matteo. “It’s somewhat hypocritical for governments to warn Canadians about rising household debt levels given the state of their own finances.”

But the Canada Mortgage and Housing Corporation warned Tuesday that record high levels of household debt is cause for “vigilance.”

Canadians signed more than a million new mortgages (including refinancing or renewals with new lenders) in 2016, representing $269 billion and a 9 per cent increase year-over-year.

While new mortgage rules should help insulate households from rising interest rates and there was overall improvement in loan delinquency rates at the end of 2016, CMHC says there are some red flags.

First, those without mortgages are seeing a declining trend in their average credit scores that began in 2015, along with an increasing likelihood of bankruptcy. As well, mortgage delinquencies for consumers over 65 are the highest of all age groups and rising, and higher delinquency rates for auto loans persisted throughout 2016.

Also Tuesday, BMO Wealth Management reported that millennials say their top financial priority is paying down debt. It beat out finding meaningful and better-paying work, purchasing or upgrading a home and upgrading education.