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Statistics Canada Says Canadian Households Added More Debt In Third Quarter Of 2022

National net worth squeezed by declining markets; falls for second consecutive quarter

National net worth, the sum of national wealth and Canada’s net foreign asset position, declined 3.3% at the end of the third quarter to $17,172.4 billion. This represented a drop of over half a trillion dollars and was the largest decline since the fourth quarter of 2008. The value of real estate, natural resources wealth and Canada’s international investment position all fell during the third quarter of 2022. National net worth per capita fell 3.8% to $438,815 in the third quarter.

The total value of non-financial assets in Canada, also referred to as national wealth, declined 3.1% to $16,600.9 billion in the third quarter. The value of residential real estate fell $287.3 billion to $8,398.8 billion, a second consecutive decline in value as the housing market continued to cool amidst rising borrowing costs. The value of natural resources in Canada (excluding land) declined 13.4% to $2,325.7 billion as global commodity prices, particularly energy and metals, declined in the third quarter. This followed an exceptionally strong second quarter in which natural resources jumped by 26.2% and marked the first decline in natural resource wealth since the second quarter of 2020.

On a seasonally adjusted basis, household credit market debt as a proportion of household disposable income increased to 183.3% in the third quarter from 182.6% in the second quarter, still lower than the record high of 184.6% in the third quarter of 2018. In other words, there was $1.83 in credit market debt for every dollar of household disposable income in the third quarter of 2022. Although households’ disposable income was higher (+0.8%) in the third quarter, the rise was outpaced by stronger growth in household credit market debt (+1.2%).

Chart 4 
Household credit market debt to household disposable income, seasonally adjusted

Chart 4: Household credit market debt to household disposable income, seasonally adjusted

The household debt service ratio, measured as total obligated payments of principal and interest on credit market debt as a proportion of household disposable income, increased to 13.97% in the third quarter from 13.46% in the second quarter—the largest increase in the ratio since the third quarter of 2020. The growth in household disposable income before interest payments (+1.8%) in the third quarter of 2022 was outweighed by a record rise in debt payments (+5.6%). While variable rate mortgages are more sensitive to interest rate increases, fixed payment variable rate mortgages have leeway to absorb these higher borrowing costs without a concomitant rise in total payments. However, some fixed-payment variable rate mortgage holders may reach their trigger rate, resulting in higher overall payments. Overall, interest payments expanded 16.2% in the third quarter, the largest increase in total interest payments on record. Meanwhile, obligated payments of principal declined 3.7%. As a result, interest payments as a share of overall debt payments grew to over half (51.3%) in the third quarter, up from 46.7% in the second quarter.

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