Canadian households had a higher debt-to-income ratio than their U.S. counterparts for the first time in 12 years, and the government may consider tightening mortgage rules to make it harder for households to become overextended.
The ratio of household credit market debt-to-personal disposable income rose to 148.1 per cent from 143.4 per cent as income fell 1.5 per cent, according to Statistics Canada. In the U.S., debts represent 147.2 per cent of households’ disposable income, as reported by the U.S. Federal Reserve.
The Bank of Canada expects consumer spending to account for more than half of the country’s growth this year and next. The central bank said last week Canadian households have become more vulnerable in the past six months as debts have risen faster than income.
“Authorities are co-operating closely and will continue to monitor the financial situation of the household sector,” the central bank said in its twice-yearly Financial System Review.
Canadians now owe $44,000 per capita. The last time the debt-to-income ratio was higher than in the U.S. was in the third quarter of 1998.