Canada’s Household Debt Servicing Costs Hit New Record

Canadian household debt rises again.

Canada’s already-serious household debt problem has worsened.

According to Statistics Canada, total household debt increased to $1.759 owed for every dollar made by Canadians.

That’s an increase from $1.754 in the Quarter 2 of 2019.

While the household debt level compared to income is slightly below the record of $1.785 that was hit in 2017, there’s some very bad news.

The cost of serving the debt, the percentage of income that goes to debt payments, has now hit 14.96%.

That’s the highest it’s ever been in Canadian history.

As reported by BNN Bloomberg, “RBC senior economist Robert Hogue notes the service ratio is at an all-time high, and that with mortgage debt also re-accelerating, he sees little scope to remove household debt from the list of top vulnerabilities for the economy.”

Total borrowing also surged in Quarter 3 of 2019, rising from $21.7 billion to $28.5 billion.

What makes this such a big concern is that the debt service ratio is rising at the same time the economy is weakening. If Canada falls into a recession, many people who are just barely keeping their heads above water will be drowning in debt, and that will cause a decline in household consumption that will slow the economy even further.

That could be mitigated by the government, with the combination of a huge investment in infrastructure, a large tax cut for working class and middle class Canadians, and a re-investment in our armed forces, which would create many jobs across the country.

Unfortunately, the Trudeau Liberal government instead appears to be focused on continuing their high-tax agenda, meaning the already-high cost of living will rise further, and make the burden of debt even worse.

Spencer Fernando