Household debt in Canada is historically high, and is now comparable to the sort of debt levels recorded in countries prior to a real estate crash. According to Statistics Canada, the ratio of household debt to disposable income has continued to rise over the past two decades, accelerating from 137% in 2007 to just less than 160% at the end of September 2013. This mirrors the 163% ratio recorded in the US at the time of the financial crisis in 2008. Although not directly comparable, these numbers have been sounding some alarm bells.
While acknowledging that the situation may be worrisome, Scotiabank’s chief executive Brian Porter notes the strengths of the Canadian market – where the real estate sector has traditionally been well regulated and mortgage rules have reduced loan durations over the past years.