Money Debt-to-household-income ratio rises in Q3

16:07  15 december  2017
16:07  15 december  2017 Source:   MSN

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OTTAWA — The amount Canadians owe relative to their income hit a new high in the third quarter. Statistics Canada said Thursday that household credit market debt as a proportion of household disposable income increased to 171.1 per cent, up from 170.1 per cent in the second quarter.

Household debt continues to rise . Highlights. • Total household credit increased 6.2% (quarterly annualized) in the third quarter of 2013. • The ratio of credit market debt to disposable income has therefore edged up again from 163.1% to 163.7% in the third quarter. Comments.

OTTAWA - The amount Canadians owe relative to their income hit a new high in the third quarter.

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Debt - to - household - income ratio rises in third quarter, household net worth. Statistics Canada reported that household credit market debt as a proportion of household disposable income increased to 171.1 per cent, up from 170.1 per cent in the second quarter.

Canada’s infamous household - debt - to -disposable income ratio , one of the highest in the world, rose to a breath-taking record of 173.3%. The ratio means that households , on average, owed C3.3 for every dollar of after-tax income earned.

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Statistics Canada said Thursday that household credit market debt as a proportion of household disposable income increased to 171.1 per cent, up from 170.1 per cent in the second quarter.

That means there was $1.71 in credit market debt, which includes consumer credit and mortgage and non-mortgage loans, for every dollar of household disposable income.

Benjamin Reitzes, Canadian rates and macro strategist at the Bank of Montreal, said the upward trend in household debt continues unabated.

"And, with homebuyers rushing to get into the market ahead of the new OSFI rule change that takes effect on Jan. 1, 2018, we could see a further increase in Q4," Reitzes wrote in a report.

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OTTAWA — Sky-high debt loads are one of the central bank governor's top concerns, he said Thursday after data showed the amount Canadians owe relative to their income hit a new high in the third quarter.

(Strengthening household asset values outpaced debt accumulation and the debt - to - income ratio rose to a record high of 163.7% in Q 3 /13). With debt levels remaining historically elevated and continuing to rise

"However, that suggests we could see some flattening out of the ratio in 2018 — though don't bet on it as housing has been persistently resilient."

Household debt is often cited as a key risk to the Canadian economy by the Bank of Canada and others.

In a report last month, the OECD said high house prices and associated debt levels remain a substantial financial vulnerability in Canada.

"A disorderly correction would adversely impact growth and could threaten financial stability," the organization said.

Statistics Canada said the household debt service ratio, measured as total obligated payments of principal and interest as a proportion of household disposable income, was relatively flat at 13.9 per cent, while the interest-only debt service ratio was 6.3 per cent, down from 6.4 per cent in the previous quarter.

The Bank of Canada has raised its key interest rate target twice this year, moves that have led to increases in the prime rates at the country's big banks used to set loans like variable-rate mortgages.

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Household debt - to - income ratio . Credit market debt as a % of personal disposable income . Importantly, the data is not seasonally adjusted and mortgage debt growth typically rises in the second quarter re-flecting a seasonal pickup in housing activity.

While the household debt - to - income ratio provides an indication of household indebtedness and facilitates international comparisons, it provides a Household debt-servicing capacity will become stretched further as interest rates rise to “normal” levels over the next five years. By the end of 2020

Royal Bank economist Josh Nye noted the debt service ratio will increase as the Bank of Canada continues to gradually raise interest rates.

"However, the prevalence of fixed rate mortgage debt means households won't feel the increase all at once," Nye wrote.

"Rather, as today's data showed, the debt service ratio is likely to rise only gradually."

Total household credit market debt grew to $2.11 trillion in the third quarter, up 1.4 per cent from the previous quarter. The increase came as mortgage debt increased 1.5 per cent to $1.38 trillion, while consumer credit rose 1.2 per cent to $620.7 billion.

Meanwhile, the total net worth of the household sector edged down 0.1 per cent to $10.61 trillion in the third quarter.

The move lower was due to a drop in home values as housing resale prices weakened. The value of household financial assets edged up 0.1 per cent.

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Source: http://ca.pressfrom.com/news/money/-57104-debt-to-household-income-ratio-rises-in-q3/

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