Debt to income ratio inches up to almost 178% in third quarter

The amount Canadians owe relative to their income ticked higher in third quarter.

Statistics Canada says household credit market debt as a proportion of disposable income was 177.5 per cent in the third quarter on a seasonally-adjusted basis. That compared with 177.4 per cent in the second quarter.

In other words, Canadians owed nearly $1.78 in credit market debt, which includes consumer credit and mortgage and non-mortgage loans, for every dollar of household disposable income in the third quarter.

Total credit market borrowing slowed for the third consecutive quarter as households borrowed $18.3 billion, down from $20.0 billion in the previous quarter.

Mortgages posted a third consecutive quarterly decline as they decreased by $1.2 billion. Demand for consumer credit also fell by $500 million, while non-mortgage loans decreased by $100 million.

The household debt service ratio, measured as total obligated payments of principal and interest as a proportion of disposable income, was 14.5 per cent in the third quarter, relatively unchanged from the previous quarter.

Canadian debt loads are becoming more expensive to finance in part because the Bank of Canada has raised its benchmark interest rate five times since the summer of 2017. The central bank's next decision on interest rates is scheduled to come out on January 9th. Markets currently think there's about a 10 per cent chance of a rate hike on that day.