Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

Canadian household debt hits new high

Ryan Remiorz/THE CANADIAN PRESS

Canadian households are still hungry for debt, sending levels to another record in the third quarter even as the pace of accumulation is cooling.

Debt levels, as tracked by the level of household credit market debt to disposable income, hit a record 164.6 per cent in the third quarter of the year, up from 160.9 per cent a year ago, Statistics Canada said Thursday.

That means Canadian families now owe nearly $1.65, on average, for every dollar of after-tax income they earn.

Story continues below advertisement

Canadian household debt levels have surpassed those of the United States in recent years, fuelled by low interest rates and hot house prices. The streak is such that elevated household indebtedness, along with "stretched" valuations in some parts of the housing market, are the biggest domestic risks in the Canadian economy, the Bank of Canada warned last week.

And while Canadians are slowing the pace at which they're piling on debt, the unprecedented levels are leaving many households vulnerable to economic shocks such as a job losses, interest rates hikes or a sudden slide in house prices.

The latest climb in debt levels "should fuel the Bank of Canada's concerns," said Benoît Durocher, Montreal-based senior economist at Desjardins Securities.

"Under these conditions, monetary authorities will surely continue to repeat their warning about eventual interest rate hikes for some time."

The pace at which Canadians are racking up debt, however, is slowing.

The annual rate of increase in household debt has subsided through this year, and credit growth eased to its lowest pace in about a decade of 5.8 per cent in the quarter, notes David Onyett-Jeffries, an economist at Royal Bank of Canada.

That's about half the pace of growth seen during the 2004-to-2008 period, said Diana Petramala, an economist at Toronto-Dominion Bank. Nonetheless, "household debt remains excessive and is a notable risk to future Canadian economic growth."

Story continues below advertisement

Indeed, the pace of debt accumulation has eased before, only to rev up again, the central bank's Governor, Mark Carney, said this week.

"I would just caution that we have seen in the past, when there have been policy measures taken, movement in these variables that are then followed by a reacceleration," he said at a press conference Tuesday, adding that there's a need to be "vigilant" about monitoring debt levels – and adjusting policy if there are clear signs of overaccelerating.

The bank's financial stability report last week highlighted the risk of higher debt loads. It noted that, while the growth of household credit has moderated in the past six months, credit still grew at a faster pace than disposable income.

An apples-to-apples comparison of Canadian and U.S. household debt levels shows the ratio of debt-to-disposable income was 154 per cent in Canada in the quarter, a much higher level than the 144 per cent recorded in the U.S. in the same period, according to Desjardins.

Still, by that measure, the Canadian ratio remains well below the peak seen in the United States.

And while debt keeps rising, assets are rising even more quickly, noted Bank of Montreal economists.

Story continues below advertisement

Net household worth has returned to near record levels recorded in 2007, it said.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies