In a major sign that Canadians are overleveraged, Statistics Canada has reported that debt growth outpaced income growth during the fourth quarter of 2018.
The federal statistical agency reported that seasonally-adjusted household credit market debt, as a proportion of disposable income, rose to 178.5% in the fourth quarter. That compared with a revised reading of 178.3% in the third quarter of last year.
The latest data means that there was $1.79 in credit market debt for every dollar of household disposable income in the fourth quarter of 2018. The household debt service ratio, the total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, increased to 14.9% in the fourth quarter compared with a revised reading of 14.7% in the third quarter.
The rise in debt levels was fueled by an increase in borrowing during the final quarter of last year, said Statistics Canada. On a seasonally-adjusted basis, Statistics Canada said Canadian households borrowed $21.2 billion in the fourth quarter as mortgage loan demand rose $2.3 billion to $12.3 billion. Credit market debt, which includes consumer credit and mortgage and non-mortgage loans, totaled $2.21 trillion in the fourth quarter.
Earlier this month, Equifax Canada reported that consumer delinquencies climbed higher in the fourth quarter of 2018 and the credit monitoring company warned that rising delinquency rates are likely to become the norm. It said the 90-day mortgage delinquency rate rose by 1.5% from the fourth quarter of 2017 to 0.18% at the end of last year. The comparable non-mortgage rate was up 0.4% to 1.07%.
