Household Debt Ratio Continues to Soar in Canada

As reported in the December/January 2012 issue of Money Sense, based on stats from OECD collected in 2009, but released in September 2011, Canada now has a higher household debt ratio than any other country in the G7 except the United Kingdom:

Household Debt as a Percentage of Disposable Income

U.K. 170.7%
Canada 148.4%
U.S. 127.2%
Japan 125.6%
France 106.6%
Germany 98.6%
Italy 87.9%

The figures here are only slightly misleading, as, unlike the other countries, Canada’s national balance sheet also includes the balance sheets of individual businesses, which economists say swells the debt-to-personal-disposable-income ratio.

Still, the United Kingdom’s debt ratio peaked two years ago and has since been decreasing, while Canada’s continues to push upward. This debt ratio is made worst, according to many economists, because Canada’s housing market has not undertaken the correction that has been taking place in the United States.

The 90-day mortgage delinquency rate has dropped from 52 per cent in 2008 to 35 per cent in 2010, while Canada’s has doubled from approximately 2 per cent in 2008 to 4 per cent in 2009.

If a similar correction were to occur, escalating debt ratios in Canada could have a significant impact on the Canadian economy.

Source: National Bank of Canada’s Weekly Economic Letter, Sept. 19, 2011

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