credit and debt
RECORD-BREAKING MORTGAGE BURDENS The proportion of incomes that Canadians are using to service their mortgage debt reached an all-time high in Q2 2024 (the data go back to 1990) at 8.18%. That is undoubtedly a concern going forward: prior to 2023, the mortgage debt-service ratio (DSR) had not reached 8.00%, a level it has been above ever since. There is a silver lining when it comes to the debt obligations of Canadians—non-mortgage DSR has been declining. At 6.79% in Q2, the non-mortgage DSR reached its lowest level since Q4 2022, and compared to pre-2020 rates, is at its lowest point since Q3 2002. The diverging paths of the mortgage and non-mortgage DSRs has kept the overall debt-service ratio in check and in line with 2019 levels. It rose to 14.97% in Q2 2024,
which is still elevated from a historical perspective. That said, it was less than the same quarter in 2023 (15.00%) and below the all-time high of 15.03% set in Q1 2019. With two-thirds of Canadian mortgages held in fixed-rate mortgages, there is still a wave of renewals to come that will be at higher interest rates, with the potential to push the mortgage payments higher. The other side of the DSR equation is incomes: as wages rise they can reduce the debt-service ratios for individual borrowers. But as we explored earlier, unemployment is growing and slower income growth is likely to follow. All of this suggests that Canadian debt-service ratios may increase going forward, which is another consideration for the Bank of Canada as it continues cutting its policy rate.
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