Canadian key household debt ratio hits record high

Canadian household debt ratios hit a record high over the spring, according to new figures released Thursday by Statistics Canada.

The ratio of household credit market debt to disposable income rose from 165.2 per cent in the first quarter of the year to 167.6 per cent in the second quarter.

That means households held $1.68 in credit market debt for every dollar of disposable income, Statistics Canada said.

The figures show that in the April-June quarter, Canadians' total household credit market debt which includes consumer credit, and mortgage and non-mortgage loans rose by two per cent, while disposable income increased by a weaker-than-normal 0.5 per cent.

BMO Capital Markets said the increase in the household debt ratio is consistent with the seasonal trend, as the second quarter is the strongest period for housing markets and mortgage debt growth.

BMO also said the upward trend in household debt goes back for the 26 years for which it has records and is showing no signs of slowing down.

"While it looks as though the Vancouver housing market is cooling after the foreign buyers' tax was implemented, the Toronto market remains very strong, and others are showing signs of improving as well," said BMO senior economist Benjamin Reitzes

• Canadian house prices still rising, but pace slows
• Luxury home sales tumble in Vancouver, grow in Toronto

In a series of tweets, another economist took a different perspective andcalled debt-to-income misleading, as it ignores accumulated wealth. Trevor Tombe, an assistantprofessor of economics at the University of Calgary, said household debt is about 17 per cent of total assets, and that Canadian households have about $3 in financial assets per $1 of debt.

Statistics Canada said household net worth at market value was up1.9 per cent in the second quarter to about $9.84 trillion.On a per capita basis, household net worth was $271,300.

The rise in net worth was chiefly dueto gain of2.2 per cent gain in the value of non-financial assets, mainly real estate, which increased on higher prices.Financial assets grew1.7 per cent on stronger domestic and foreign securitiesmarkets.

Meanwhile, totalcredit market debt climbed above$1.97 trillion atthe end of the second quarter. Consumer credit was $585.8billion, while mortgage debt stood at $1.29 trillion.