Debt-to-income ratio ticks down to $1.65 for every dollar Canadians earn

The amount that Canadians owe compared to what they earn ticked down in the first three months of 2016, but is still near a record high.

Statistics Canada said Tuesday the debt-to-disposable income ratio was 165.3 per cent for the first three months of 2016, down from 165.4 per cent in the fourth quarter of last year.

"Don't let the improvement fool you though, as the ratio usually falls in the first quarter," BMO economist Benjamin Reitzes said after the numbers came out, adding the decline was the smallest in seven years.

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That means households owe $1.65 in debt for every dollar of disposable income they have — still near an all-time high.

"That's the highest level that we have really ever been at," said Laurie Campbell, the CEO of Credit Canada Debt Solutions in an interview. "I don't think we should take any comfort in the fact it has moved slightly." 

Income and debt increased at the same rate, Statistics Canada said.

Household net worth rose 1.2 per cent in the first quarter to $9.633 trillion, driven by gains in the value of real estate.

Total household debt, which includes consumer credit, and mortgage and non-mortgage loans, totalled $1.933 trillion at the end of the first quarter. Most of that — $1.268 trillion — came in the form of mortgage debt.

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While their assets may also be appreciating, the numbers show that Canadians now owe almost as much as the entire economy is worth. "One final ratio to note: Canadian household debt is inching ever closer to hitting 100 per cent of nominal GDP, with the ratio rising 4.6 [percentage points] over the past year to 98.6 per cent," Reitzes said.

And that figure doesn't include government debt, which is now at a 15-year high of 116 per cent of GDP, he added.

Campbell sees reason for caution in the numbers. "I can tell you from our own experience at Credit Canada that we are seeing people coming in with tens of thousands of dollars of unsecured debt with no means of paying it," she said.

"As this continues to happen, we will see increasing bankruptcy numbers," she added, noting that bankruptcy figures are already starting to increase in Western Canada and Atlantic Canada. "We know this is starting to creep up."

On a per capita basis, the net worth of the typical Canadian came in at $265,200 in the first quarter. That's slightly down from $269,500 in the fourth quarter, largely because of a decrease in the value of Canadians foreign holdings when converted back into Canadian dollars.