The surge in Canadian household borrowing over the last five years has been driven by the most indebted families, according to a report by CIBC World Markets released Thursday.

It suggests that about a third of families that have debt now hold 73 per cent of all household debt in Canada.

The Bank of Canada has repeatedly raised concerns about the record high level of household debt — on average at a debt-to-income ratio of 151 per cent — and what will happen when eventually interest rates begin to increase.

"Our new analysis found that all of the rise in debt since 2007 has been driven by borrowing from those with a high debt-to-gross income ratio," said co-author Avery Shenfeld, the chief economist at CIBC.

"The growth in debt-to-income ratios has come from a piling on of debt by those with high debt burdens, rather than from less indebted households getting drawn to the punchbowl by the promise of low rates.”

"It's not only the amount of debt Canadians are carrying, but how many are getting close to the limit of their borrowing capacity," said Shenfeld.

"It would have been nice to have found that the rise in debt was coming from those with a lot of room to borrow, but instead what we see is those with a lot of debt are piling on more."

High house prices a factor

The debt-to-gross income ratio of those most indebted families is 160 per cent. The proportion of the most indebted families is greater in British Columbia, Alberta and Ontario where housing is the most expensive.

The analysis also found the number of people over the age of 45 who hold a high-debt-burden has climbed. The share of heavy borrowers in this age group climbed to 44 per cent in 2011 from 36 per cent in 2007.

"A rising share of the highly indebted are over 45 years old, an age where accumulating net assets ahead of retirement should be paramount,” Shenfeld said.

“Canadians nearing retirement who should be in their prime savings years are, instead, getting themselves deeper into debt. We are already seeing an uptrend in bankruptcies for those 50 and over, but the more material impact will be that this group's ability to spend could be severely squeezed upon retirement."

Shenfeld attributed the growth in debt growth to a combination of ultra-low interest rates and weak growth in household real incomes.

"Borrowing is what fills the gap between what we want to buy and our incomes, particularly for lumpy expenditures like houses, vehicles and other durable goods. Strong growth in real incomes can therefore reduce the reliance on debt by the household sector."

Last week, economists Craig Alexander and Derek Holt of the TD Bank and Scotiabank respectively suggested the problem may be exaggerated.

The household debt-to-income measure was deeply flawed, they argued, and a better gauge would be to assess whether Canadians can afford to make their debt payments. By that calculation, household finances are on firmer ground as long as interest rates stay low.

With files from The Canadian Press