Red flag raised as data shows Canadians keep borrowing
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High levels of debt held by Canadian households is causing concern for the organization of central banks; and borrowing has increased further.
The Bank for International Settlements, dubbed ‘the central bank’s bank’ says that Canada, China and Hong Kong remained “well above trend levels” in data up to the end of the first quarter of 2017.
It says that credit-to-GDP ratios are critical, meaning they are elevated compared to historic trends and therefore continue to pose a risk to the domestic banking system.
There is some good news; Canada’s credit-to-GDP ratio was 11.3 according to the latest figures, down from the previous reading of 14.1; and it is also far lower than the 22.1 for China and 35.0 for Hong Kong.
However, other developed economies have far lower credit-to-GDP ratios; minus 7.6 for the US, minus 19 for the UK and minus 4.6 for Australia.
The BIS says that in most cases, the rise in credit-to-GDP ratios is due to rising property prices. As prices have begun to ease in Canada’s hottest markets, this should help bring the risk down.
Debts keep growing
Figures released Friday by Statistics Canada show that Canadians further increased debt in the second quarter of 2017.
While mortgage debt gained 1.6% to $1,361 billion, there was a sharper rise in consumer debt driven by spending on consumer durables. This type of debt was up 2.4% to $606.9 billion.
Canadian households owed $1.68 for every dollar of disposable income in the second quarter, up from $1.67 in the first quarter.
Meanwhile, net household wealth was relatively flat, with non-financial assets gaining 0.3% compared to 0.1% for financial assets and financial liabilities growing 1.9%.
That means that household net worth decreased (on a per capital basis) to $285,900, down $1,300 from the first quarter.
The Bank for International Settlements, dubbed ‘the central bank’s bank’ says that Canada, China and Hong Kong remained “well above trend levels” in data up to the end of the first quarter of 2017.
It says that credit-to-GDP ratios are critical, meaning they are elevated compared to historic trends and therefore continue to pose a risk to the domestic banking system.
There is some good news; Canada’s credit-to-GDP ratio was 11.3 according to the latest figures, down from the previous reading of 14.1; and it is also far lower than the 22.1 for China and 35.0 for Hong Kong.
However, other developed economies have far lower credit-to-GDP ratios; minus 7.6 for the US, minus 19 for the UK and minus 4.6 for Australia.
The BIS says that in most cases, the rise in credit-to-GDP ratios is due to rising property prices. As prices have begun to ease in Canada’s hottest markets, this should help bring the risk down.
Debts keep growing
Figures released Friday by Statistics Canada show that Canadians further increased debt in the second quarter of 2017.
While mortgage debt gained 1.6% to $1,361 billion, there was a sharper rise in consumer debt driven by spending on consumer durables. This type of debt was up 2.4% to $606.9 billion.
Canadian households owed $1.68 for every dollar of disposable income in the second quarter, up from $1.67 in the first quarter.
Meanwhile, net household wealth was relatively flat, with non-financial assets gaining 0.3% compared to 0.1% for financial assets and financial liabilities growing 1.9%.
That means that household net worth decreased (on a per capital basis) to $285,900, down $1,300 from the first quarter.
