According to new figures from Statistics Canada (StatCan), income rose faster than debt for Canadians in the first quarter of the year.
There was a decline from the record debt-to-income ratio set in the fourth quarter of 2021, as incomes grew faster than debt. This decrease came as household credit market debt grew 2%, while household disposable income gained 3.3% in the first three months of the year.
According to StatCan, on a seasonally adjusted basis, household market debt as a proportion of household disposable income fell to 182.5% compared with the record 185% in the quarter before. In basic terms, this means there was $1.83 in credit market debt for every dollar of household income in the first quarter (you're welcome).
Mortgage debt totalled nearly $2T, while non-mortgage loans stood at $706.2B, says StatCan. Meanwhile, net worth rose 2.6% to C$17.6T ($13.7T), with much of the new worth increases due to Canada’s red-hot housing market, which has only recently showed signs of cooling. Real estate as a percentage of household disposable income reached a sky-high 583.7% in the first quarter compared to 509.4% a year earlier, says StatCan. On a seasonally adjusted basis, mortgage borrowing by households was the third highest on record, as home resale prices increased amidst the start of the Bank of Canada's rate-hiking cycle, which began in March.
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 -- was 13.48% in the first quarter, down from 13.72% in the fourth quarter of 2021.
On a nominal basis, compensation of employees recorded strong gains in the first quarter of 2022, mainly due to increases in average wages, which were almost double the rate of growth for employment. Wage growth was broad-based in terms of industry and region, and was the main contributor to the rise in nominal household disposable income and subsequent rise in the savings rate in the first quarter, says StatCan.
Meanwhile, other StatCan data released last week shows that Canadians are struggling to keep up with basic living thanks to rising inflation. The release of all of this telling StatCan data comes in advance of looming interest rate hikes -- something that could test the financial health of countless Canadians.