Canada first-quarter household debt-to-income ratio falls to two-year low

FILE PHOTO: The moon rises behind the CN Tower, a Canadian landmark, and the skyline in Toronto, Canada, November 24, 2015. REUTERS/Mark Blinch/File Photo

OTTAWA (Reuters) - Canadian household debt as a share of income, a measure closely watched by policy makers, slipped in the first quarter to a two-year low as disposable income grew, Statistics Canada said on Thursday.

The ratio of debt to disposable income fell to 168.0 percent from 169.7 percent in the fourth quarter, hitting its lowest since 165.4 percent recorded in the first quarter of 2016. Disposable income rose by 1.3 percent while credit market debt edged up by 0.3 percent.

The Bank of Canada - which regularly expresses concerns about Canadians’ debt levels as interest rates rise - last week said slowing credit growth among households and higher incomes have lessened vulnerabilities.

On a seasonally adjusted basis, households borrowed C$22.2 billion ($17.1 billion) in the first quarter, down from C$25.4 billion in the preceding quarter.

Mortgage borrowing fell to C$13.7 billion from C$15.7 billion, the lowest since the second quarter of 2014, pulled down by higher rates and new mortgage regulations.

The debt service ratio, which measures debt principal and interest payments as a proportion of income, remained relatively flat at 13.9 percent.

Reporting by David Ljunggren; Editing by Bernadette Baum