Canada Household Debt Ratio Climbs to Record High in 2nd Qtr

 Canadian household debt climbed to a record relative to disposable income in the second quarter, underlining what the central bank has called a key vulnerability in the economy.

Credit-market debt such as mortgages rose to 164.6 percent of after-tax income from 163 percent in the prior three months, Statistics Canada said Friday in Ottawa. Credit-market debt rose 1.8 percent in the second quarter, outstripping growth in disposable income of 0.8 percent.

The Bank of Canada said Sept. 9 that risks to financial stability are evolving as expected, language that in the past has referred to the dangers linked to a housing and consumer debt boom. Governor Stephen Poloz has said there’s no housing bubble in Canada.

The central bank has cut its trend-setting interest rate twice this year to 0.5 percent, and mortgage rates, which rise and fall with the bank rate, are at the lowest in decades, making it easier for consumers to buy homes.

Low borrowing costs have also made it easier for consumers to service their debts. Interest payments made up 6.3 percent of disposable income, keeping it at “historic lows,” Statistics Canada said.

Credit-market debt rose to C$1.87 trillion from C$1.84 trillion in the second quarter. Those obligations were equal to 21.4 percent of Canadians’ net worth, up from 21.2 percent between January and March.

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