canada mortgage debt Photo: 401(K) 2012/Flickr

According to a new report from Statistics Canada, mortgage debt at the end of the first quarter of the year rose just 0.6 per cent from the previous quarter to about $1.1 trillion — the slowest pace of growth since 2009.

The federal agency also said that the level of household credit market debt to disposable income dropped from 163.9 per cent in the fourth quarter of 2013 to 163.2 per cent in the first quarter of 2014. This means that Canadians owe just over $1.63 for every $1 in disposable income they earn in a year.

The report also found that national net worth climbed 1.5 per cent in the first quarter to $7.8 trillion, or $221,300 on a per-capita basis. Household net worth, meanwhile, increased 2.5 per cent to a record high $7.9 trillion.

Big banks react


The Bank of Montreal called the StatsCan report “encouraging,” but noted the figures are not seasonally adjusted and that the debt-to-income ratio has dropped in each of the past five Q1s before jumping again in the spring and summer during prime home buying, and thus mortgage borrowing season.

“Still, today’s broad results are a tantalizing hint that the corner is turning for household debt, and lend support to the Bank of Canada’s view that imbalances are evolving ‘constructively’,” said BMO chief economist Douglas Porter.


Like BMO, the Royal Bank said the Stats Can report supports the Bank of Canada’s observation that, while elevated levels of household debt continue to leave Canadians vulnerable to adverse macroeconomic shocks, a “constructive evolution of imbalances” is gradually underway.

“With housing market activity set to cool after a likely short-lived weather-related bounce in the spring, a further slowing in mortgage credit growth along with firmer income gains are expected to keep a lid on the debt-to-income ratio in the quarters ahead,” RBC said.


TD Economics predicts that Canada’s household balance sheet will continue to improve in the second quarter of the year as better growth in personal incomes, equity markets and home prices continue to support asset growth in the range of seven to eight per cent.

“However, given a recent turnaround in the housing market, the debt-to-income ratio is likely to temporarily resume an upward trend over the rest of 2014,” the bank said.

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