| OTTAWA, Sept 13
OTTAWA, Sept 13 The ratio of household debt to
income in Canada hit a record high in the second quarter,
although the pace of growth slowed from the same period in 2012,
Statistics Canada said on Friday.
The federal government and the Bank of Canada have expressed
concern that Canadians are taking on too much debt - in
particular cheap mortgages - at a time when interest rates are
at near record lows. Officials fret that when rates go up
eventually, some consumers could find themselves in trouble.
The ratio of household debt to income rose to 163.4 percent
in the second quarter from 162.1 percent in the first quarter.
The rise in the ratio followed two consecutive decreases.
Analysts said it was too early to draw conclusions from the
latest data, noting the second quarter is traditionally a busy
one for home-buyers. One suggested Canadians could be rushing to
buy property as mortgage rates show signs of rising.
In May, Bank of Canada Governor Stephen Poloz said he saw
signs of a constructive evolution in household debt. The bank,
which has held rates steady since September 2010, said last week
it would withdraw stimulus measures at an unspecified time in
"What the Bank of Canada has described as a 'constructive
evolution' of household balance sheets still appears to be
unfolding, but the modest deterioration in the second quarter
and the recent pop in home sales raise some doubts," said Doug
Porter, chief economist at Bank of Montreal.
"The lingering question mark on this front is one reason the
Bank of Canada has doggedly maintained its mild tightening
bias," he said in a note to clients.
The head of Bank of Nova Scotia said last week
policymakers should raise interest rates if they fear a bubble
is forming in Canada's housing market rather than imposing more
regulations on the country's big banks and mortgage lenders.
Canadian authorities have tightened mortgage rules four
times since 2008 to cool the housing market, and on Monday,
Finance Minister Jim Flaherty said he was comfortable with the
way the market had evolved. Flaherty's office did not respond to
a request for comment on Friday.
Housing prices climbed to a record high in August, although
the annual price increase remained subdued, according to data
released on Thursday.
The previous record Canadian household debt to income ratio
was 162.8 percent, recorded in the third quarter of 2012.
The ratio in the second quarter increased by 1.3 percentage
points from the first quarter, or 0.8 percent. In 2012, the
equivalent second quarter increase was 1.5 percentage points, or
RBC Economics economist David Onyett-Jeffries said the
increase in the second-quarter ratio "largely reflected the
seasonal bounce in mortgage borrowing in the spring that is
associated with the higher volumes of housing market activity
during the peak home sales season".
Jimmy Jean, strategist at Desjardins Capital Markets, said
that to some extent the increase in the debt ratio represented
"some households rushing home-buying decisions as rates began to
He added in a note: "The idea of a gradual realignment going
forward thus remains valid and we do not expect the Bank of
Canada to show more concern than in the past."
Mortgage borrowing led the demand for credit in the second
quarter, rising by C$18 billion ($17.4 billion) to a total of
just over C$1.1 trillion.
National net worth in the second quarter rose 3.1 percent to
C$7.31 trillion from the first, as the value of residential real
estate helped boost national wealth and net foreign indebtedness
Separately, Statscan said Canada's industries operated at
80.6 percent of capacity in the second quarter, down slightly
from the 80.8 percent recorded in the first quarter.