Canada: Household credit as % of Disposable income hits 170.7%!

The household debt service ratio, measured as total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, increased to 13.22% from 12.36%, following the largest decline on record. While payment deferrals in response to the COVID-19 pandemic continued to have an impact on obligated principal paid, deferrals with six-month durations began winding down late in the third quarter. Although interest payments continue to be recorded on an accrual basis, as a result of payment deferrals, the total obligated mortgage payments were nearly 20% lower in the second quarter than without these deferrals. However, by the third quarter this had dropped to under 10%.

Household credit market debt as a proportion of household disposable income rose from 162.8% to 170.7%, as the stock of credit market debt increased 1.6% and household disposable income decreased 3.1%. In other words, there was $1.71 in credit market debt for every dollar of household disposable income, compared with $1.81 in the fourth quarter of 2019. Household debt is aggregated across all income brackets; however, in general, credit market debt to disposable income tends to be higher for lower income quintiles.

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