Canadians' debt-to-disposable income load climbs in Q2

Statistics Canada says the amount Canadians owe compared with their disposable income climbed higher in the second quarter.

The agency says household credit market debt as a proportion of household disposable income increased to 167.8 per cent, up from 166.6 per cent in the first quarter.

That means for every dollar of household disposable income there was $1.68 in credit market debt.

The increase in the debt ratio came as household net worth on a per capita basis fell by $1,300 to $285,900.

"A decline in household net worth, albeit modest, alongside a sharp increase in consumer credit growth are notable as together they suggest that the ability of households to absorb higher interest rates continued to deteriorate," RBC economist Laura Cooper wrote in a commentary.

The increase in the debt-to-income ratio came as household income increased 1.2 per cent while household credit market debt rose 1.9 per cent.

Total household credit market debt, which includes consumer credit, mortgage and non-mortgage loans, totalled nearly $2.08 trillion in the second quarter.

Mortgage debt increased 1.6 per cent to $1.36 trillion, while consumer credit grew 2.4 per cent to $609.6 billion.

TD economist Dina Ignjatovic said household indebtedness remains a key risk to the economic outlook.

"This is especially true in regions that are more sensitive to higher interest rates such as B.C. and Ontario, with the latter even more at risk given the recent turn in the housing market," Ignjatovic said in a commentary.

"Going forward, the spending environment – for consumers, businesses and governments – will become more challenging in light of the recent interest rate hikes by the Bank of Canada," she said. "With additional hikes likely in the pipeline, there will be some further deterioration in the debt service ratio in the coming quarters."