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Canada second quarter household debt-to-income ratio rises to record

OTTAWA (Reuters) – Canada’s household debt-to-income ratio rose to a record level in the second quarter as disposable income increased at a slower pace than household credit market debt, data from Statistics Canada showed on Friday.

The leverage ratio rose to 164.6 percent in the second quarter from 163.0 percent in the first quarter. The ratio is not seasonally adjusted.

The Bank of Canada watches the measure for signs consumers may be overextended after years of low interest rates have boosted consumer and housing market activity.

Two cuts by the central bank this year that have brought the benchmark rate down to 0.5 percent have raised concerns Canadians might be spurred to take on more debt than they can handle.

On a seasonally adjusted basis, households borrowed C$26.3 billion ($19.85 billion) in the second quarter, an increase of C$3.7 billion from the previous quarter. Mortgages accounted for the largest portion of that at C$17.7 billion.

The household debt service ratio, which is the measure of obligated payments of principal and interest as a proportion of disposable income, rose to 14.1 percent, above the historical average of 12.4 percent going back to 1990.

But the interest-only debt service ratio remained at historic lows at 6.3 percent.

(Reporting by Leah Schnurr Editing by W Simon)

Resource By : http://www.mortgagebrokernews.ca/news/canada-second-quarter-household-debttoincome-ratio-rises-to-record-196176.aspx

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