Household debt and the Bank of Canada’s anxiety levels—in a graph

Canadians’ debt-to-income ratios, with Mark Carney commentary


It’s been years since Bank of Canada governor Mark Carney first started warning about Canadians piling on too much personal debt. Rising household debt, after all, has been the most dangerous byproduct of his low interest rate policy, which was initially designed to help Canada sprint out of the Great Recession––and, later on, partly dictated by the need to help sputtering Canuck exports. Right from the get-go, though, Canadians haven’t been listening. As the situation became more dire, so did the Bank’s warnings. Today Canada’s ratio of household debt compared to disposable income is inching toward 160 per cent, the peak seen in the U.S. and the U.K. just before their respective housing busts. (In the last three months of 2011, the debt-to-income ratio declined somewhat–not because Canadians stopped taking on debt, but because income levels also rose during the same period.) Carney is still at it. Last week, he finally raised the prospect of raising interest rates, cutting people off from all that cheap money, even as the Fed down south sticks to near-zero rates.

In the graph below, we’ve charted debt-to-income ratios, alongside some increasingly alarmed quotes from BOC governor Mark Carney or other Bank officials.

Click on the chart to open a full-size version of the graph in a new window.

Source: Statistics Canada. Photograph: Sean Kilpatrick/CP.


Household debt and the Bank of Canada’s anxiety levels—in a graph

  1. “Rising household debt, after all, has been the most dangerous byproduct of his low interest rate policy …. Right from the get-go, though, Canadians haven’t been listening. ”

    Oscar Wilde ~ I can resist everything except temptation

  2. I find it shocking that the governor of the Bank of Canada does not understand that the point of lowering interest rates is so that people will borrow more money.

    He could raise interest rates and then people would borrow less. Or he could keep rates low and people will continue borrowing money at record levels….


    •  Yes because you know more than him… Did you even read the article? It offers insight on his decision.

  3. Funny how people respond to cheap credit by using more of it. 

  4. Awe come on people! Honestly! How can you seriously think that low interests on lending money only contributes to increased household debt. Where are you people living anyway? Everything keeps escalating up. The average wage earner is making less money per year. Sure the federal government likes to believe that the average Canadian wage is over 83.000 per year! Which translates to 39 dollars an hour. When the postal workers want 28.00 dolars an hour was it given to them! No way! The fact of the matter the middle class wage earner in this country is losing ground. And losing fast. Some people are going into debt just to keep what they have. Their homes. Thats it. In two years I have gone twenty two thousand in debt just trying to maintain the status quo! Im making considerly less money then ten years ago! While everything else esculates up.

    •  The low interest rates are certainly a major contributor to the higher levels of debt, but Jay is right in that inflation has a big part to play as well.  Wages are stagnant.  I’m a civil servant and will have had a 1.5% raise, total, over the last 4 years ending in Dec, 2012.  My wife has not had any raise at all in her private sector job that she started five years ago in August. 

      Meanwhile, the price of gas has increased by 20-30%, the price of many food staples has basically doubled.  The price of housing has also continued to rise (largely a function of low interest rates – the price of lumber has actually come down).

      If you want to talk real cost of living, and not some fantasy rate
      dreamed up by a government statistician, the inflation rate has probably
      been running at 5-8% for the last five years.  That means that unless you are getting an annual raise of 5-8%, you are in fact getting a pay cut.  I wish more people could realize this.

  5. Bank of Canadas’ low intrest rate policy is what is causing this increase in household debt. When you offer people almost “free” money they will take it,with out considering future consequences, such as rate increases. The sbb-prime debacle in the US was not a one off, or uniquely American. If banks pay near zero intrest on savings, why save? Borrow the near “free” ( low intrest) money and speculate, is really a rational response to Bank of Canada intrest rate policy.