MNI DATA REACT:Canada Household Debt Service Ratio Hits Record

--Debt-To-Income Ratio Tracked By BOC Declines

By Greg Quinn

     OTTAWA (MNI) - Canadian households devoted a record share of their income

to debt repayment in the fourth quarter, another sign of the side effects of

low-for-long interest rates.

     The debt-service ratio of 15% was up 0.1pp from the third quarter and the

highest in Statistics Canada figures published Friday going back to 1990. The

figure has climbed from 14% in mid-2017.

     Household debts have climbed to CAD2.31 trillion or 102% of GDP. That debt

burden along with Bank of Canada rate increases to 1.75% in 2018 have helped

boost the debt service ratio, though the BOC is now expected to keep cutting the

benchmark to 1% or less in coming months with the global economy strained by

COVID-19.

     Governor Stephen Poloz said after a 50bps rate cut on March 4 that the

focus now is on boosting consumer spending and confidence amid the global health

crisis and related economic disruptions. The BOC resisted cutting rates last

year while citing the long-term risks in consumer finances. 

     The closely-watched ratio of debt to disposable income declined in the

fourth quarter, to 176.3% from 176.6%. That's still close to a record of 178.5%

from the first quarter of 2017.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

[TOPICS: MACDS$,M$C$$$]