It’s not looking good. In figures released this week, the personal debt of Canadians reached a new record last year. Statistics Canada, the federal statists gathering agency, reported that for every dollar of disposable income, Canadians owed, $1.67 in the fourth quarter of 2016
In fact the “debt-to-income” ratio was 167.3, which was up from the third quarter record of 166.8.
Total debt owed by Canadians reached $2.028.7 billion in the final quarter of 2016. Most of that, about 65 percent, was mortgage debt,
Over $2-trillion in total debt
In addition to the Statistics Canada report, the consumer credit company Equifax said in its national consumer credit trends report said that while 46 percent of consumers were reducing their debt 37 percent were borrowing more.
Low interest rates have been blamed for rising household debt rates by encouraging people to borrow whether for mortgages or personal items.
The total debt at year’s end including mortgage debt, non-mortgage debt, and consumer credit was over $2-trillion.
There have been strong concerns raised about this debt level should interest rates rise or in the event of some economic shock resulting in substantial job losses.
The US Federal Reserve has just raised its key interest rate from 0.75 percent to 1.0 percent, the second increase since December 2016.
Canada’s rate, for the moment, remains at 0.5 percent, although usually Canadian long term rates follow the US lead.
For the moment this means that interest rates for fixed-rate mortgages in Canada will likely increase. Variable mortgage rates which are pegged to the Bank of Canada policy, are not expected to increase for the moment as the central bank rate is not expected to rise in the near future.