The federal agency said Wednesday that seasonally adjusted household credit market debt as a proportion of household disposable income fell for the third quarter in a row.
The figure dipped to 178.7 per cent in the fourth quarter from 179.2 per cent in the third quarter, a change the agency attributed to disposable income outpacing growth in credit market debt because of relatively slow mortgage borrowing in the fourth quarter. However, the household debt service ratio, which measures interest and principal as a share of disposable income, was little changed in the fourth quarter as payments rose in line with disposable incomes, noted Shelly Kaushik, an economist with BMO Capital Markets. It remains historically elevated and is poised to rise in the coming quarters, she said.
"Household debt ratios improved in the fourth quarter as elevated rates kept a damper on demand for mortgage loans," she said in a note to investors.Before then, Kaushik expects elevated debt service ratios to continue to be a headwind for household spending and broader economic activity. "Keep an eye on government debt levels in the coming quarters, which look to rise further as larger borrowing plans are unveiled across the country this budget season," she said.The agency said total household net worth increased almost two per cent to $16.4 trillion, driven largely by strength in financial markets as both bonds and equities rallied.
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