A key measure of family debt rose within the first quarter because the COVID-19 pandemic started to seize the economic system, Statistics Canada stated Friday.
The company reported family credit score market debt as a proportion of family disposable earnings rose to 176.9 per cent from 175.6 per cent.
In different phrases, there was $1.77 in credit score market debt for each greenback of family disposable earnings.
Statistics Canada added that annual developments present that decrease earnings households tended to have a better debt to disposable earnings ratio.
BMO economist Priscilla Thiagamoorthy stated properly earlier than the pandemic that family debt was a key vulnerability for the economic system.
“We may see a blip within the subsequent quarter because the ratio declines amid a slowdown in borrowing and authorities measures shore up incomes,” Thiagamoorthy wrote in report.
“However with the financial downturn deeply impacting earnings progress and low charges attractive borrowing, the debt ratios will seemingly hit contemporary document highs within the coming quarters leaving households much more indebted.”
On a seasonally adjusted foundation, complete credit score market borrowing elevated $1.9 billion to $27.6 billion within the first quarter. Mortgage loans rose $3.eight billion to $23.1 billion, whereas demand for client credit score and non-mortgage loans fell $1.9 billion to $4.5 billion.
Canadians now owe $2.Three trillion total
Total, Statistics Canada stated credit score market debt totalled $2.33 trillion on the finish of the quarter together with $1.53 trillion in mortgage debt and $802.1 billion in client credit score and non-mortgage loans.
In the meantime, the family debt service ratio — measured as complete obligated funds of principal and curiosity on credit score market debt as a proportion of family disposable earnings — fell to 14.67 per cent from 14.81 per cent.
“One silver lining in immediately’s report was the decline in debt servicing prices, with the DSR falling for the primary time in additional than two years as rates of interest fell throughout a broad vary of loans,” TD Financial institution economist Ksenia Bushmeneva wrote.
“Along with decrease rates of interest, deferrals and different modifications of mortgages and different credit score merchandise additionally helped decrease bills associated to debt servicing.”