Canadian households devote an astronomical amount of income just to carry their debt payments. Data from the Bank of International Settlements (BIS) shows Canadian households have a very high debt service ratio (DSR). The ratio dropped in Q4 2020 slightly, but it’s still much higher than any other G7 country. Not even the US housing bubble reached this level in 2008.
Canadians Spend 12.4% Of Their Income On Debt Payments
Canadians spend an astronomical share of their income on debt payments. The household DSR reached 12.4% in Q4 2020, down from 13.5% in 2019. It dropped, but this was entirely due to the fact interest costs have fallen. Household credit growth is still booming, and at a much faster rate than income.
Canadian Debt Payments Dwarf The US… Even In 2008
Contrasting with our neighbors to the South, we can see their DSR isn’t even close to Canada. US households had a DSR of 7.6% in Q4 2020, down from 7.9% in the same quarter a year before. They spend a third less of their income on servicing debt…read more.