Overall household debt also rose by 1.2 per cent to $1.923 trillion in the final quarter of 2015. Mortgage debt comprised $1.262 trillion of the total, while consumer credit debt accounted for $573.6 billion. Meanwhile, the household debt service ratio (i.e., payments of principal and interest vs. disposable income) sat at 13.8 per cent.
Experts said that this upward trend in debt would stimulate a vicious cycle of more loans to pay off existing debts, which in turn would only serve to “encourage a further acceleration in borrowing”.
“While the increase in spending and borrowing will help support economic growth, households are increasingly becoming more vulnerable to a potential interest rate shock or slowdown in the housing market,” Diana Petramala of TD Bank said, as quoted by Global News
Other economists are more optimistic of reduced debt this year, however. Royal Bank
economist Laura Cooper pointed at a recent regulatory change—which required prospective home buyers to commit larger down payments for homes valued above $500,000—as a possible factor that might “curb the appetite for mortgage loans to some extent.”
Unchecked mortgage growth has spurred the Canadian household-to-debt ratio to a record high of 165.4 per cent by the end of last year, according to a Statistics Canada report released on Friday (March 11).