* Ratio slips from record high after back-to-back increases
* Ratio closely watched amid fears of debt, housing crisis
* Bank of Canada expects soft landing for housing market
By David Ljunggren
OTTAWA, March 14 The ratio of Canadian household
debt to income in the fourth quarter of 2013 slipped from a
record high while net worth rose, bolstering the Bank of
Canada's belief that the housing market is in for a soft
The central bank and the Conservative government have long
fretted that near record low interest rates might prompt people
to take on too much debt, especially big mortgages that could
increase the chances of a housing crash.
Statistics Canada said the ratio of household debt to income
in the fourth quarter of 2013 slipped to 164.0 percent from a
record 164.2 percent in the third quarter.
Last week, the Bank of Canada said recent data supported its
view that there would be a soft landing in the nation's housing
market and the household debt-to-income ratio would stabilize.
"Today's results should be mildly encouraging for
policymakers, and suggest that the Bank of Canada's view that
imbalances are evolving 'constructively' is reasonable," said
Doug Porter, chief economist at BMO Capital Markets.
Mortgage borrowing grew by C$13.0 billion ($11.7 billion) in
the fourth quarter, considerably less than the C$21.0 billion
recorded in the third quarter.
The increase in mortgage debt was just 1.1 percent over the
previous quarter compared to the average quarterly growth of 1.8
percent seen over the past six years.
The figures though are not seasonally adjusted and could
well reflect the fact that the fourth quarter is traditionally a
quieter time for house purchases.
At the end of the fourth quarter, mortgage debt stood at
just over C$1.1 trillion.
The ratio in the fourth quarter fell after two consecutive
increases. Bank of Canada Governor Stephen Poloz said last
December that consumers had pushed up their plans to buy houses
as mortgage rates started to rise.
"Today's data confirm that the risks associated with
household balance sheets did not increase in the latter part of
2013," said Laura Cooper, an economist at RBC Economics.
Statscan also reported that national net worth grew by 2.7
percent to a new record high of C$7.73 trillion after advancing
by 2.5 percent in the third quarter.
Household net worth advanced by 3.0 percent in the fourth
quarter, led by a 5.9 percent gain in the value of shares and
other equities. Household real estate gained 1.6 percent in
The Bank of Canada, which referred to the "risks associated
with elevated household imbalances" last week, has kept its key
interest rate at 1.0 percent since September 2010.
The bank has said it will not move on rates until the
economy picks up and the current period of low inflation ends.
Recent data show the economy grew faster than expected in
2013 and also that inflation in January picked up notably,
although it is still below the bank's 2 percent target.
Most analysts polled by Reuters expect rates to go up in the
third quarter of 2015 and market chatter about a possible rate
cut has all but vanished.
"Today's report is consistent with our longstanding view the
Bank of Canada will not provide additional monetary stimulus to
help pull inflation back towards target," said TD Securities
strategist Mazen Issa.