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Key household debt ratio edges lower, Report
Key household debt ratio edges lower, Report

Key household debt ratio edges lower, Report

Canadian households kept debt at almost record levels in the first quarter, even as they benefit from rising asset values that saw their net worth rise to new highs.

The ratio of household credit market debt to disposable income dipped to 163.3 per cent in the first quarter, down from 163.6 per cent in the fourth quarter in 2014, Statistics Canada said Friday in a new report.

This means that for every dollar of disposable income households earned, they owed about $1.63 in consumer credit, mortgage, and non-mortgage loans.

Disposable income increased at a faster pace than household credit market debt, 0.9 per cent compared to 0.7 per cent, StatsCan said in its national balance sheet Friday.

CTV’s Chief Financial Commentator Pattie Lovett-Reid said that while the slight decrease in the debt-to-income ratio is a step in the right direction, it’s too early to call it a trend.

“We always pay attention to how much money are we spending for every dollar that we have coming in, and for three consecutive quarters we’ve seen it increase,” she said. “Some might think that the fact it showed a small decrease (this quarter) is reason to cheer, but it isn’t really.”

Lovett-Reid said it’s normal to see a bit of a pullback in spending in the first quarter, “and this isn’t as big a pullback in spending as many would have thought,” she said.

“At least it’s moving in the right direction, but it’s not moving fast enough.”

On a seasonally adjusted basis, households borrowed $23 billion in the first quarter of the year, up 0.4 per cent from the fourth quarter in 2014. Mortgages made up the bulk of the borrowing at $15.9 billion, down 0.8 per cent from the previous quarter, the agency said.

Consumer credit borrowing represented $4.8 billion in the first quarter.

Total household credit market debt, comprising consumer credit, mortgage and non-mortgage loans, reached $1,841 billion at the end of the first quarter, up 0.7 per cent from the previous quarter.

The agency said that since the 2008 financial crisis, asset prices have “rebounded significantly,” but the ratio of household debt to total assets has not returned to pre-recession levels.

StatsCan reported that household net worth increased 3.2 per cent to $214,800 on a per capita basis in the first quarter of 2015.

Non-financial assets, mainly real estate, rose 1.2 per cent, the agency said. Net financial assets were up 6.2 per cent, with the gain largely stemming from the growth in the value of mutual funds and pension assets.

Financial assets represented 55.7 per cent of total household assets at the end of the quarter, StatsCan said.


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