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Canadians ended 2015 with a record-high debt burden, as low interest rates and still-soaring regional housing markets fuelled the fastest year of household debt growth since 2011.
Household sector net worth at market value rose 1.6% in the fourth quarter to $9,479 billion. On a per capita basis, household net worth was $263,200, up 1.5% from the previous quarter. Financial assets increased 2.2% following two consecutive quarterly declines, whereas the stock of financial liabilities increased 1.2% in the fourth quarter as a result of rising mortgage liabilities. Non-financial assets grew 0.7%, driven primarily by increases in the value of real estate and consumer durables. The ratio of financial assets to non-financial assets rose to 111.5% in the fourth quarter from 109.8% in the third quarter.
The value of life insurance and pension assets grew 2.8% in the fourth quarter along with equities, notably mutual fund shares (+3.5%) and foreign equity investment (+10.6%), as foreign stock markets strengthened and the value of foreign-denominated assets grew as a result of the depreciating Canadian dollar. On an annual basis, financial assets increased 5.4% in 2015, a slowdown from the roughly 8% annual growth in each of the previous three years, as the domestic market weakened considerably in 2015.
Total household credit market debt (consumer credit, and mortgage and non-mortgage loans) reached $1,923 billion at the end of the fourth quarter, up 1.2% from the previous quarter. Consumer credit debt was $573.6 billion, while mortgage debt stood at $1,262 billion. Over the year, households increased their mortgage liabilities by $74.4 billion, a rise of 6.3% from the previous year, and the strongest growth since 2011.
The ratio of total household debt to total assets was largely unchanged in the fourth quarter, edging down to 17.1%. This ratio sits between the peak of 19.3% recorded in the first quarter of 2009 and the low of 13.8% in the second quarter of 1997.
The ratio of household credit market debt to disposable income (excluding pension entitlements) rose to 165.4% in the fourth quarter from 164.5% (revised from 163.7%) in the third quarter. In other words, households held $1.65 in credit market debt for every dollar of disposable income. Disposable income increased 0.6%, a slower pace than that of household credit market debt (+1.2%).
The household debt service ratio (total obligated payments of principal and interest as a proportion of disposable income adjusted to include actual interest paid) was 13.8% in the fourth quarter, compared with 13.5% in the third quarter. The interest-only debt service ratio (household mortgage and non-mortgage interest paid as a proportion of disposable income) continued to hover around a record low of 6.2%.
On a seasonally adjusted basis, households borrowed $25.1 billion in the fourth quarter, down slightly from the third quarter. Mortgages represented the largest portion of total borrowing in the quarter ($21.9 billion), up $1.2 billion from the previous quarter, while consumer credit accounted for $2.2 billion of borrowing.
Agencies/Canadajournal
We’ve been saying this for the last four years about consumer debt load.
Cheap money will be around for at least another two years. So, what’s
being done to put a brake on credit? Nothing..and the consumer keeps on
loading the credit card.