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Consumer credit cards are displayed in North Andover, Mass., March 5, 2012. The Bank of Canada is using a speech today to emphasize its concerns over rising household debt and its potential impact on the country's financial system. THE CANADIAN PRESS/AP/Elise Amendola

The Associated Press

Canadians ended 2015 with a record-high debt burden, as low interest rates and still-soaring regional housing markets fuelled the fastest year of household debt growth since 2011.

Statistics Canada reported Friday that the ratio of household credit-market debt to disposable income, the key measure of the debt load, rose to 165.4 per cent in the final quarter of the year, eclipsing the upwardly revised previous record of 164.5 per cent in the third quarter. That means that at the end of the year, households held more than $1.65 in debt for every dollar of annual disposable income.

For all of 2015, household debt rose 4.9 per cent, the fastest pace in four years, to a record $1.92-trillion. That included a 6.3-per-cent surge in mortgage debt, also the fastest since 2011, reflecting low borrowing costs and surging real estate prices in key regions, especially in Toronto and Vancouver. Disposable income, meanwhile, grew by a more modest 3 per cent.

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Canada's household debt-to-income ratio had eased from record levels in the first half of last year, but picked up again in the second half, after the Bank of Canada cut interest rates in July for the second time in the year.

Debt rose 1.2 per cent in the fourth quarter, amid persistent low interest rates, while disposable income crept up 0.6 per cent, the slowest since the first quarter, reflecting renewed sluggishness of the economy. Fourth-quarter gross domestic product grew at an annualized rate of just 0.8 per cent.

"Interest rates have been hovering at a low level for a long time, which has played a significant role in spurring Canadians' appetite for taking on more debt," said Scott Hannah, chief executive officer of the Credit Counselling Society, a non-profit consumer debt-counselling group, in a news release.

Statscan said total household credit-market debt (mortgages plus consumer credit) rose 1.2 per cent in the fourth quarter. Mortgage debt rose 1.6 per cent, while consumer credit (which includes credit cards, car loans, personal lines of credit and other personal loans) rose a more modest 0.3 per cent. Mortgage debt accounts for about two-thirds of total household debt.

But measured against total assets and total net worth, Canadians' household debt ratio actually edged down slightly in the fourth quarter, to 17.1 per cent and 20.6 per cent, respectively. The country's total household net worth rose 1.6 per cent in the quarter, to a record $9.48-trillion, helped by healthier financial markets, a weak Canadian dollar that lifted the value of foreign holdings and continued strength in home values. But Statscan noted that for the full year, households' financial assets grew a modest 5.4 per cent, down from about 8 per cent in each of the previous three years, "as the domestic market weakened considerably in 2015."

"While only improving modestly, these metrics indicate that, in aggregate, households have a sizable cushion to absorb the impact of an unforeseen macroeconomic shock," said Royal Bank of Canada economist Laura Cooper in a research note.

The Bank of Canada has long expressed concern about the elevated levels of household debt, which pose a potential risk to Canada's financial stability in the event of a sharp economic downturn that would strain consumers' capacity to meet their debt payments. Earlier this week, the central bank noted that "financial vulnerabilities continue to edge higher."

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"The emerging slowdown in consumer credit accumulation suggests households may be heeding the perpetual warnings about the vulnerabilities created by elevated debt levels, although the sustained uptrend in mortgage balances tempers this enthusiasm," Ms. Cooper said.

She noted that new federal government regulations that took effect last month, raising down-payment requirements on homes between $500,000 and $1-million, "may curb the appetite for mortgage loans to some extent, which would help to pour some cold water on the sustained uptrend in outstanding mortgage balances."

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