Canadian households will close out 2015 carrying thicker layers of debt after worrisome gains over the past 12 months — extra padding that's expected to get even fatter in the new year.
But even with greater borrowing, many experts still believe the finances of most Canadians remain in decent shape.
This assessment comes as the country shows worrisome signs linked to consumer spending. It has a record-high debt-to-income ratio and the central bank has called rising household debt as a growing weak spot in Canada's entire financial system.
One big bank economist, who has closely studied household debt, said any negative fallout from the debt situation would likely depend on whether Canada sustains an unlikely economic shock.
But trouble could also hinge on how quickly interest rates eventually rise, said CIBC deputy chief economist Benjamin Tal.
Economic shocks remain difficult to predict and, for at least the next year, Tal doesn't expect rates to climb at a hazardous speed for those who may have overindulged on debt.
Persistently low interest rates have been a major contributor to rising household debt. Borrowing became even cheaper in 2015 after the Bank of Canada twice dropped its benchmark rate to help cushion the blow of the oil slump.
Households, meanwhile, have managed on debt since the financial crisis and provided spending that has helped the economy recover.
If interest rates rise slowly over the next two to three years, Tal predicts the impact is more likely to curb consumer spending rather than harm their ability to pay down their debt. He doesn't foresee a wave of defaults if rates make an expected, gradual climb.
Many of the debt numbers, however, have painted a disquieting picture.
Earlier this month, Statistics Canada released data that showed the amount of Canadians' household debt compared with disposable income rose to 163.7% in the third quarter. It means the average household had nearly $1.64 in debt for every dollar of disposable income.
That was a record high.
The Bank of Canada has described the country's mounting household debt level the most-important vulnerability in the financial system — a susceptibility that continues to grow.
Governor Stephen Poloz recently said most of that exposure is concentrated among 720,000 households that could struggle to make debt payments in a significant economic downturn.
The proportion of households holding debt higher than 350% of their gross income — a high-risk category — has doubled to about 8% since the 2008 financial crisis, the bank found.
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