The debt to income ratio is an important one. It is a good indicator on how strong the economy is and gives lenders a look at how financial secure you are as an individual. On average, this ratio for Canadians rose to an all time high in the second quarter.
In the wake of low oil prices, the Bank of Canada announced at the start of the year that the largest domestic risk are the loss of jobs forcing income to decline enough to limit Canadian’s ability to pay their debt. This will ultimately lead to a housing correction.
Since then, the Bank has cut interest rates for the second time this year to help alleviate the load that some Canadians are taking on.
The leverage ratio rose to 164.6% from 163.0% in the first quarter, this is not seasonally adjusted.
The concern comes when the Bank of Canada decides to raise the interest rates although economists speculate that this will be a long way away.
On a seasonally adjusted basis, households borrowed $26.3 billion in the second quarter which is an increase from $3.7 billion from the previous quarter. Mortgages accounted for $17.7 billion, the largest portion.
Canadians need to be careful and not overextend themselves financially as a whole. That is where we will see problems occur and start to see housing prices decrease.
Saskatoon real estate agent
Century 21 Fusion