Canadians continued to pour money into real estate, pushing prices and debt levels to new heights
The national household debt-to-disposable-income ratio reached a new high in the fourth quarter as mortgage borrowing increased but disposable income decreased, according to the most recent figures available from Statistics Canada.
The data says household credit market debt as a percentage of household disposable income increased to 186.2% in the fourth quarter, up from a modified figure of 180.4% in the third quarter. The figure indicates that for every dollar of family disposable income, there was $1.86 in credit market debt.
Statistics Canada reported that the ratio was 181.1% at the end of 2019 before the pandemic, with a prior high of 184.7% in the third quarter of 2018.
Household credit market debt increased by 1.9% in the fourth quarter, while household disposable income declined by 1.3%.
In the fourth quarter, families increased their debt by $50.0 billion, including $46.3 billion in mortgages and $3.7 billion in non-mortgage loans, on a seasonally adjusted basis.
Additionally, the household debt service ratio, which is calculated as total obligated payments of principal and interest on credit market debt as a percentage of household disposable income, increased to 13.84%, up from 13.55% in the third quarter.
New mortgages have fueled much of the real estate activity, with the ratio of household credit market debt to income reaching a record high of 186% by the end of 2021.
The figures will only add to concerns that record low interest rates are inflating the property market and putting the country’s financial stability at risk through debt, giving the Bank of Canada yet more reason to raise borrowing prices swiftly.
