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Canadians owe more than ever before — but they're worth more than ever, too

Canadians owed almost $1.67 for every dollar they had in disposable income in the third quarter, a slightly higher ratio than seen in the previous three-month period.

National debt-to-income ratio inches up again, to new record of almost 167%

Canada's debt-to-income ratio inched higher in the third quarter, but so did net worth. (Canadian Press)

Canadians owed almost $1.67 for every dollar they had in disposable income in the third quarter, a slightly higher ratio than seen in the previous three-month period.

Statistics Canada reported Wednesday that the ratio increased because while Canadian households had one per cent more disposable income between July and September, they also took on 1.3 per cent more debt.

Canadian households passed the $2 trillion threshold in total debts during the period, and almost two-thirds of that — $1,312 billion — came in the form of mortgages.

There's some seasonality involved in the numbers, as the third quarter has historically shown the largest increased in debt loads. Against that backdrop, it's worth mentioning that the quarterly uptick in debt loads was the smallest seen in a third quarter since 2000, Bank of Montreal economist Benjamin Reitzes noted.

But even as their overall debt loads increased, so too did Canadians' net worth because the value of their assets went up too. On a per capita basis, household net worth was $278,200 during the period. 

That's because Canadians' two biggest investment classes — financial assets and real estate — both increased in value. The former increased by 3.2 per cent, while the latter went up by 1.2 per cent.

Indeed, while debt loads keep inching higher, it looks like, on the whole, Canadians are saving more for a rainy day, too: the household savings rate increased from 4.8 per cent in the second quarter to 5.8 per cent in the third quarter.

Debt loads have increased for several years as record low interest rates in the U.S. and Canada have spurred new borrowing. While a troubling new trend over the long haul, Reitzes says the ratio inching up to a new high is nothing to worry about in and of itself.

"The new mortgage restrictions should restrain housing activity (and in turn borrowing) in 2017," he said in a note early Wednesday, "suggesting the debt ratio could start to flatten out somewhat next year."

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