Canadians seem to be heeding warnings from various quarters to throttle back on their seemingly endless appetite for household borrowing, new figures suggest.
While the total amount of mortgage and consumer credit debt both grew in the final quarter of 2013, Statistics Canada, reported Friday that they did so at the slowest annual pace since 2001.
That was enough to allow the closely watched ratio of household credit market debt to disposable income to drop slightly to 164.0 per cent, down from 164.2 per cent in the previous quarter.
That means Canadians, on average, owe $1.64 for every $1 they take home in a year.
The slight tick down suggests that the most important measure of household leverage may finally have ended its steady march higher.
RBC economist Laura Cooper said the StatsCan figures confirm earlier data from the Bank of Canada that "moderation in credit growth is firmly underway."
"We expect credit growth will continue to moderate accompanied by a strengthening in the pace of hiring and firmer income gains that will support a further improvement in the oft-cited debt-to-income ratio in the quarters ahead," she said.
That, in turn, will allow the Bank of Canada to leave its key interest rate at 1.00 per cent until early 2015, "when the combination of stronger growth and higher inflation will likely prompt a gradual increase in rates," she writes.
'Stretched household balance sheets continue to be an important domestic economic risk that needs monitoring, particularly as interest rates return to more equilibrium levels' - TD economist Sonya Gulati
But even as economists applauded signs that households appear to have pared back their eagerness for new debt, they also warned that many indebted Canadians remain hard-pressed to make ends meet. The debt-to-income ratio is still higher than it was a year ago, they point out..
"Stretched household balance sheets continue to be an important domestic economic risk that needs monitoring, particularly as interest rates return to more equilibrium levels," said TD economist Sonya Gulati in a research note.
Other measures of financial health also improved. Statistics Canada said. Net worth hit an all-time high, thanks to rising home values and healthy stock markets.
Household net worth grew by 3.0 per cent in the fourth quarter, driven by a 5.9 per cent gain in the value of shares and other equities held by households, as well as a 1.6 per cent gain in the value of household real estate.
Household net worth rose to $217,700 on a per capita basis, the agency said.
The Bank of Canada has long warned Canadians not to accumulate too much debt in a time of historically low borrowing costs, but has not raised interest rates out of fear that higher borrowing costs would hobble any economic recovery.
Finance Minister Jim Flaherty has intervened four times to restrain borrowing in the housing sector with measures that made mortgages more costly for high-leverage borrowers.