Canadians’ net worth is up, but so is our debt burden. In fact, a key measure of consumer debt rose to a record level in the second quarter of the year, according to new data from Statistics Canada.
While national net worth reached $7.3 trillion by the end of the first six months of 2013, mortgage debt stood at just over $1.1 trillion and consumer credit debt reached $500 billion, Stats Can said Friday.
Leverage, as measured by household credit market debt to disposable income, rose in the quarter to 163.4 per cent from 162.1 per cent in the first three months of the year.
And while that certainly isn’t the best news, Royal Bank of Canada economist David Onyett-Jeffries explains to the Globe and Mail why it’s important to look at the complete picture.
“While the household debt-to-asset and debt-to-income measures deteriorated slightly in the quarter, this largely reflected the seasonal bounce in mortgage borrowing in the spring that is associated with the higher volumes of housing market activity during the peak home sales season,” Onyett-Jeffries told the Globe.
Obviously the housing market, which has seen a rebound over the past year, is playing a big role in Canada’s debt burden. But as the Globe points out, many economists believe the real estate market, bolstered by homebuyers trying to beat higher mortgage rates, will level off again — and that should help ease Canada’s debt burden to an extent.
“It’s not surprising to see household indebtedness pick up as home sales have been rebounding as of late, but we do not expect this trend to continue going forward,” Toronto-Dominion Bank economist Diana Petramala told the Globe.
“In large part, the increase in household indebtedness also reflects softer income growth over the first half of this year. Looking forward, as housing stabilizes and income growth picks up, the debt-to-income ratio is expected to remain close to its current, still elevated level,” Petramala said.