credit and debt
SPENDING MORE AT HOME MEANS SPENDING LESS OUT The proportion of disposable income required to service debt continues to march upward, reaching its highest level in 4 years.
Since we just detailed how much interest costs for Canadian households have ballooned of late, it’s important to measure not just the total amount, but also Canadians’ ability to afford what they owe via the debt service ratio (DSR), which is the proportion of disposable income that is spent paying back loans. After falling dramatically in 2020 when interest rates were cut, DSR’s have been steadily increasing over the past three years, as Canadians took on more debt, followed by interest rate increases.
The current total DSR of 14.79% is up substantially from 13.76% a year earlier and while down marginally from Q1 is at its second- highest level since Q4 2019. What’s kept the overall DSR level relatively in check, however, is the non-mortgage DSR, which, at 6.66%, is up marginally over the past two years, but still quite low from a historical perspective. The mortgage DSR, on the other hand, at 8.14% is at its highest level ever (going back to 1990) and means that Canadians will be spending more of their incomes on their mortgages and less elsewhere (like the retail sales we looked at earlier).
STARTING TO SWEAT ABOUT SERVICING OUR DEBT
16%
14.79%
14%
12%
10%
8.14%
8%
6.66%
6%
4.75%
4%
2%
0%
2017
2018
2019
2020
2021
2022
2023
NON MORTGAGE DSR MORTGAGE DSR
TOTAL DSR
BOC POLICY INTEREST RATE
SOURCE: STATISTICS CANADA. TABLE 11-10-0065-01 DATA: PROPORTION OF DISPOSABLE INCOME GOING TO DEBT SERVICE, QUARTERLY, CANADA
rennie.com
27
Made with FlippingBook - professional solution for displaying marketing and sales documents online