Household debt ratio climbs to 170.7%, according to Statistics Canada
Canadian households owed an average of $ 1.71 for every dollar of disposable income in the third quarter, Statistics Canada said on Friday.
In other words, according to Statistics Canada, household debt as a percentage of disposable income reached 170.7% in the third quarter, compared to 162.8% in the second quarter.
The ratio was still below the $ 1.81 seen in the fourth quarter of 2019.
“With more money and less spending, households were able to repay part of their consumer debt. And while there has been a recent recovery, it remains below levels seen earlier this year, ”said a client note from Priscilla Thiagamoorthy, economist at BMO Capital Markets. .
The Statistics Canada report says while credit market debt rose 1.6% in the third quarter, disposable household income fell 3.1% as Canadians recover from job losses for the COVID-19 pandemic. Low-income households tend to have a higher debt-to-disposable income ratio, the agency said.
While employment was below 3.7 percent of its pre-pandemic levels in the quarter, that was not enough to offset the gradual reduction in government supports, as benefits from Employment insurance fell nearly 50 percent in the quarter, according to the report.
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But with COVID-19 restrictions keeping people close to home, household savings remained high in the quarter at $ 56.8 billion, from a record $ 90.1 billion in the second quarter, a indicated the agency.
Households also benefited from the rebound in mutual fund stocks, returning 3.9% on the Toronto Stock Exchange in the three-month period. Overall, Canadian household net worth rose 3% to over $ 12.3 trillion.
“The distribution of wealth tends to be very unequal between income groups. As a result, recent net worth gains have disproportionately benefited Canadians who were already better off, ”Ksenia Bushmeneva, economist at TD Economics, in a note to clients on household wealth. report.
“In general, wealthier people saw larger increases in their savings, as they were more likely to keep their jobs while cutting back on discretionary spending such as travel and dining, which remains largely unavailable. “
Meanwhile, there has been a record increase in mortgage borrowing and investment in housing hit an all-time high as the cost of borrowing hovered at record highs, StatCan reported. Mortgage debt hit nearly $ 1.63 trillion as mortgage demand hit a new high of $ 28.7 billion.
“Obviously, money isn’t always king, and having wealth – (be it) financial or real estate assets – has really paid off this year with the rise in stocks and real estate prices, “wrote Bushmeneva.
Other key changes tracked in the report include the household debt service ratio, which measures income spent on paying interest and principal. The household debt service ratio rose to 13.22% from 12.36%, after falling earlier in the year as part of debt deferral programs linked to the COVID-19 pandemic. Many of those programs ended at the end of the third quarter, Statistics Canada said.
“Canadian household finances are healthier this year thanks mainly to unprecedented government transfers that have increased overall incomes,” Thiagamoorthy wrote.