Canadians’ level of debt rising as proportion of household income

Borrowing edged up in the fourth quarter of 2018 to $21.2 billion: StatsCan

The level of debt Canadians carry continues to increase.

A report released on Thursday by Statistics Canada said “household credit market debt as a proportion of household disposable income increased to 178.5 per cent in the fourth quarter (of 2018), with growth in debt slightly outpacing income growth.”

“In other words, there was $1.79 in credit market debt for every dollar of household disposable income,” said the federal agency.

“On a seasonally adjusted basis, total credit market borrowing edged up in the quarter compared with the previous quarter, as households borrowed $21.2 billion. While demand for consumer credit and non-mortgage loans was down, mortgage loan demand rose $2.3 billion to $12.3 billion. Despite the increase in the fourth quarter, on an annual basis, household credit market borrowing was down 19.5 per cent to $84.6 billion in 2018, the lowest level of borrowing since 2014.

“Credit market debt (consumer credit, and mortgage and non-mortgage loans) totalled $2,209.3 billion in the fourth quarter. Mortgage debt reached $1,439.9 billion, while consumer credit and non-mortgage loans combined stood at $769.4 billion.”

debtStatsCan said the household debt service ratio, measured as total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, increased to 14.9 per cent in the fourth quarter, as growth in total debt payments outpaced the growth in disposable income.

“The household sector’s net worth declined 2.8 per cent to $10,735.6 billion in the fourth quarter. This was mainly the result of a lower market value for financial assets (-3.2 per cent), which was led by a 7.5 per cent decrease in the value of equity and investment fund shares. Weaker domestic and foreign stock markets, especially toward the end of the quarter, were a major factor behind the decrease; however, the first two months of 2019 have shown signs of recovery.

“The value of non-financial assets fell 1.0 per cent to $6,187.1 billion in the fourth quarter, led by a 1.4 per cent decline in the value of residential real estate. This was the weakest quarter for residential real estate since the fourth quarter of 2008. The value of residential real estate posted its first annual decrease in 2018 since the start of the time series. Total sales of residential real estate fell 14.7 per cent in 2018.”

Mario Toneguzzi is a Troy Media business reporter based in Calgary. He writes for Calgary’s Business.

household income debt

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