Canadians took on slightly less new debt last quarter compared to what they earned, but they still owe $1.77 for every $1 they make, according to Statistics Canada’s latest national balance sheet.

The debt-to-income ratio lowered by around half a percentage point from the first quarter of 2019, from 177.54% to 177.1%. It was the third consecutive quarterly decline, as income grew slightly faster than debt.   

Household disposable income increased 3.4% since the third quarter of 2018, while household credit market debt grew 2.8%. Despite the improvement in earnings, the total debt owed by Canadians is still growing.  

On a seasonally adjusted basis, total credit market borrowing increased to $23.5 billion from $18.9 billion in the previous quarter. Credit market debt totalled $2.25 trillion in the second quarter including nearly $1.47 trillion in mortgage debt and $782.9 billion in consumer credit and non-mortgage loans.  

“Canadians continue to rely on their credit cards or lines of credit to supplement costs of living,” Scott Hannah, president of the non-profit Credit Counselling Society, said in a written statement about the report.  

He also noted that people need to prepare now for a potential recession in the future. “It’s not too late for Canadians to turn their financial situations around — track your spending, create a budget/spending plan, put aside money for savings and start to chip away at your debts.” 

Source: CBC