Canadians go deeper into debt to afford mortgages
But net worth also rises as the value of homes increases
Canadian mortgage borrowing jumped in the second quarter, pushing household indebtedness to a new high, according to Statistics Canada.
At the same time, Canadian household net worth climbed in the quarter, boosted by rising home prices.
Statistics Canada said Friday the ratio of household credit market debt to disposable income increased to a new high of 163.4 per cent in the second quarter compared with 162.1 per cent in the first three months of the year.
That means Canadians owe just over $1.63 for every $1 in disposable income they earn in a year.
During the second quarter, Canadians borrowed $25.9 billion including $18 billion in mortgage borrowing. Housing sales picked up in the period from April to June, as prospective buyers raced to beat expected rate hikes.
In the previous quarter, Canadians had borrowed $3.8 billion for mortgages — the lowest level in four years — and reduced other loans and consumer credit. Tighter mortgage rules implemented a year ago by Ottawa in an attempt to cool the market led to a downturn in number of house sales, yet house prices continued to rise.
The higher value of homes helped push up household net worth — it rose 0.7 per cent in the second quarter, led by a 1.6 per cent gain in the value of houses.
Total mortgage debt stood at just over $1.1 trillion and consumer credit debt reached $500 billion at the end of the quarter. Financial experts say the levels of consumer debt in Canada are troubling, with some people carrying debt into retirement.
The increase in household net worth was held back by a weak quarter on the Toronto Stock Exchange, which saw its benchmark composite index fall 4.9 per cent in the quarter.
Statistics Canada said household net worth was $205,900 in the second quarter on a per capita basis.
With files from CBC News