Canadian household debt is up 3.5 per cent this year, according to new Bank of Canada data.
But surprisingly, Bank of Montreal chief economist Doug Porter says the increase is actually the slowest household debt growth Canadians have experienced in past 35 years.
Porter credited the slowdown to the housing market cooldown in Toronto and Vancouver in a report.
“It’s important to note that mortgages account for more than 70 per cent of all household debt, so they really drive the bus in terms of growth rates,” Porter wrote. “The counter trend in consumer credit bears watching, but it’s less important for policymakers—at least so far.”
Canadians experienced a similar slowdown in 1983 due to high interest rates, HuffPost reports. While the Bank of Canada warns interest rates will continue to rise, the rates in the early 80s were drastically higher than today’s rates.
Earlier this week, the central bank announced the decision to maintain their overnight rate at 1.75 per cent.
Still, Canadians are carrying a lot of debt. Just last month, the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) predicted an increase in bankruptcy rates in the next year.
And the OECD says Canadians have the highest household debt in the world with $1.68 of debt for every dollar of disposable income.
The good news is that thanks to stricter mortgage rules, highly indebted Canadians aren’t burying themselves in mortgage debt.
In November, The Bank of Canada claimed policy changes like the mortgage stress test and high interest rates resulted in higher quality mortgages being issued.