* Debt-to-income ratio hits record high of 165 pct
* Pace of household credit growth slowing
* New home prices rise 0.2 pct in October
* Q3 industrial capacity use unchanged at 80.9 pct
By Louise Egan
OTTAWA, Dec 13 Canadians continued to pile on
personal debt in the third quarter, pushing the debt-to-income
ratio to a record high in what has become the biggest headache
for central bank chief Mark Carney as he keeps interest rates
low to spur growth.
There was evidence, however, that Canadians are curbing
their appetite for mortgage credit as the country's housing
The ratio of credit market debt to disposable income rose to
164.6 from the previous record high of 163.3 in the second
quarter as borrowing grew faster than incomes, Statistics Canada
said on Thursday.
The trend is similar to that seen in the United States and
Britain before the global financial meltdown, and that
similarity prompted the government to tighten mortgages rules in
July for the fourth time since 2008.
The Bank of Canada said last week that household financial
excesses remained the biggest domestic threat to the country's
But the debt-to-income ratio rose by a smaller amount than
it did in the second quarter, Statscan said.
"The further deterioration in household leverage ratios in
the third quarter is sure to raise concerns," said David
Onyett-Jeffries, economist at Royal Bank of Canada.
"With that said, the annual rate of increase in household
debt has shown considerable moderation during 2012, and credit
growth is around decade lows at 5.8 percent in the third
quarter," he said.
Carney said on Tuesday the pace of household debt
accumulation had slowed to about 4 percent from 10 percent, but
he said it was too early to call the decrease a sustainable
The central bank sees the debt-to-income ratio continuing to
rise before stabilizing over the next couple of years.
Growth in mortgage debt - which accounts for almost
two-thirds of all household debt - also slowed somewhat in third
quarter but was still up by C$18.4 billion ($18.8 billion) to
C$1.1 trillion. Consumer credit rose to C$474 billion from C$467
billion in the second quarter.
NEW HOME PRICES RISE
In another piece of the housing market puzzle, Statscan
reported that new home prices rose 0.2 percent in October for
the 19th consecutive monthly gain.
The data contrasts with most other reports showing the
property market is cooling. Analysts had expected a 0.1 percent
rise in the new housing price index.
Prices for new homes in the combined Toronto-Oshawa
metropolitan region, which includes Canada's biggest city, rose
by 0.3 percent in the month and were up 4.9 percent on the year.
The figures do not include condos, the main area of concern
for authorities because of fears of overbuilding.
Canadians have taken advantage of ultra-low borrowing rates
to invest in homes and other big-ticket items, helped by the
Bank of Canada's benchmark rate holding steady at 1 percent
since September 2010.
But the bank has been signaling that its next move will be a
rate hike, not a cut, and that the household debt situation will
play into its monetary policy decisions.
Economic growth has not been strong enough to warrant
monetary tightening and inflation is well below the bank's 2
A third Statscan report on Thursday showed Canadian
industries operated at 80.9 percent of their production capacity
in the third quarter, unchanged from the second quarter, after
four consecutive monthly increases.
The central bank watches the data for signs the economy is
getting closer to the point where it is generating inflationary
pressures. In October, it judged the economy as a whole to be
operating at roughly two-thirds of a percent below its capacity
and forecast it would return to full capacity at the end of