Canadian household debt is rising and is set to keep rising despite expected increases in interest rates; and that worries the Parliamentary Budget Officer.
In a report published this week, the PBO says that the levels of household debt are less of a risk to financial vulnerability as households’ ability to service their debts.
Currently average disposable income required to service debts is 14.2 per cent, already high by historical standards (12.9 per cent on average). By 2021, the PBO says debt service ratio (DSR) could be up to 16.3 per cent, which it has never seen before in the 27 years it has been keeping records.
The current level of household indebtedness is 174 per cent of disposable income but that is expected to rise to 180 per cent by the end of 2018 due largely to continued rises in home prices.