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Money Canada debt-to-income ratio hits two-year low as rates set to rise

18:24  14 june  2018
18:24  14 june  2018 Source:   reuters.com

Mortgage borrowing slides to lowest point since 2014

  Mortgage borrowing slides to lowest point since 2014 Canadian mortgage borrowing over the first three months of 2018 fell by $2 billion to $13.7 billion — the lowest level since 2014 — following the introduction of new lending rules and a rise in interest rates.Canadians' mortgage borrowing over the first three months of 2018 fell by $2 billion to $13.7 billion — the lowest level since the second quarter of 2014 —  following the introduction of new lending rules and a rise in interest rates, Statistics Canada reported Thursday.

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 C.73 for every dollar of after-tax income earned.

Despite all this, household debt is expected to rise in 2016. “ Set against a backdrop of rising unemployment, the debt - to - income ratio is still likely to continue to trek higher through 2016,” said TD Bank economist Diana Petramala.

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Canadian household debt as a share of income slipped in the first quarter to a two-year low, a development sure to please policymakers worried about the pain that rising interest rates will cause.

The ratio of debt to disposable income - which hit a record 170.0 percent last year - fell to 168.0 percent from 169.7 percent in the fourth quarter, Statistics Canada said on Thursday. This was its lowest since the 165.4 percent recorded in the first quarter of 2016.

Higher rates, tighter mortgage rules cool Canadian home prices: Reuters poll

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Personal Finance News. Canada ’s Debt - to - Income Ratio Hits 164.4%. A number of reports show Canadian debt levels are rising and the major culprit continues to be low rates and rising real estate costs.

OTTAWA—The amount Canadians owe relative to their income hit a new high in the third quarter. Royal Bank economist Josh Nye noted the debt service ratio will increase as the Bank of Canada continues to gradually raise interest rates .

The Bank of Canada, which regularly expresses concerns about Canadians' debt levels as interest rates rise, last week said slowing credit growth among households and higher incomes have reduced vulnerabilities.

The central bank has raised rates three times over the last year and is widely expected to lift them again next month.

Royce Mendes, senior economist at CIBC Capital Markets, said the implications of the lower debt ratio were pretty positive.

"What we've been worried over this recovery in Canada has been the vulnerability posed by these high household debt levels and policymakers have been working to find ways to reduce those risks," he said in a interview.

"A more gradual pace to rate hikes, one that creates an environment that the economy can still (thrive), is the best way to contain the risks from high household debt ratios."

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OTTAWA (Reuters) - Canada ’s household debt - to - income ratio hit a record high in the third quarter of 2014, climbing to 162.6 percent from 161.5 percent in the second quarter, Statistics Canada said on Monday.

The ratio of debt to disposable income edged down to 166.9 percent from an adjusted 167. 2 percent in the fourth quarter. Low rates allow consumers to pay down more of their mortgage principal.

Disposable income rose by 1.3 percent while credit market debt edged up by 0.3 percent.

On a seasonally adjusted basis, households borrowed C$22.2 billion ($17.1 billion) in the first quarter, down from C$25.4 billion in the preceding quarter.

Mortgage borrowing fell to C$13.7 billion from C$15.7 billion, the lowest since the second quarter of 2014, pulled down by higher rates and new mortgage regulations.

People go shopping in the Eaton Centre shopping mall as they walk by a giant Christmas Tree in Toronto. © REUTERS/Mark Blinch/File Photo People go shopping in the Eaton Centre shopping mall as they walk by a giant Christmas Tree in Toronto.

The debt service ratio, which measures debt principal and interest payments as a proportion of income, remained relatively flat at 13.9 percent.

Separately, Statscan said new home prices were flat for the second month in a row in April as higher interest rates and tougher mortgage regulations dampened buyer enthusiasm.

Analysts in a Reuters poll predicted no change from March.

Prices in Toronto fell 0.5 percent, the fourth monthly decrease in a row, after the provincial government had instituted measures last year to rein in the city's hot market.

(Reporting by David Ljunggren and Fergal Smith; Editing by Dan Grebler)

In Bill Morneau's riding, 40% of children live in poverty, report says .
Campaign 2000 hopes the data will prod the government to approve a soon-to-be-finalized poverty-reduction strategy before next year's federal election, and enshrine commitments in legislation so it cannot be undone by a future government. The Liberals have promised to create a poverty reduction strategy before the end of this four-year mandate.Morneau will have a say in how much new federal spending may be made available for the strategy, which would have an effect on his riding of Toronto Centre, where two-fifths of children live in low-income enclaves near the wealthy Bay Street corridor.

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