Statistics Canada says households are more in debt than previously thought.
The agency’s revisions on national balance sheets shows that household credit market debt in the second quarter hit 163% of disposable income, well above the previously reported 152%.
That number is also about where households in the United States and the United Kingdom stood before home values crashed.
“The classic solution for slowing credit would be to raise interest rates,” says Benoit P. Durocher, senior economist at Desjardins.
“Yet, given the many obstacles hampering the global and Canadian economies, the Bank of Canada cannot really proceed with firming up the country’s credit conditions.”
He expects the bank will continue to warn about increased rates.
Read: BoC to raise rates?
StatsCan came up with the new number after stripping away non-profit institutions from the category, getting a more accurate reading on the state of household finances.
The good news in the revision is that Canadians have more assets than previously thought, with per capita net worth rising $7,900 to $190,200.
TD bank economist Diana Petramala says the results show Canadian households are more vulnerable to a housing correction than previously thought.
Read: Housing bubble to burst
That’s because although Canadians hold more assets than their counterparts in the U.S. and the U.K. did before the crash, most those assets are locked into the value of their homes, which could take a tumble in a housing correction or if the economy tanks.
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