Ontario’s fiscal watchdog says household debt in the province has increased since 2010, and is projected to continue to grow, which could spell trouble for the economy as interest rates also climb.

Ontario’s Financial Accountability Office says low interest rates have fuelled spending in the province, and the household debt has grown by 5.6% on average each year between 2010 and 2016.

Read: Housing affordability at worst level since 1990: RBC

The FAO says that during that same period, growth in household disposable income grew by only 3.4% on average, per year.

It says the average Ontario household owed nearly $154,000 in 2016, up from $119,000 in 2010.

The budget watchdog says that a sharper than expected interest rate hike could force households to cut back on spending and have negative implications for the broader economy.

Read: Expect dovish rate hike, say economists

The report attributes the growth in household debt primarily to residential mortgages.

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