The ratio was still below the $1.81 seen in the fourth quarter of 2019.
“With more money and less spending, households were able to pay off some of their consumer debt. And while there has been a recent recovery, it remains below levels seen earlier this year,” said a client note from Priscilla Thiagamoorthy, economist at BMO Capital Markets.
The Statistics Canada report indicates that while credit market debt rose 1.6% in the third quarter, household disposable income fell 3.1% as Canadians recovered from job losses during the COVID-19 pandemic. Low-income households tend to have a higher debt-to-disposable income ratio, the agency said.
While employment was less than 3.7% of its pre-pandemic levels during the quarter, this was not enough to offset the reduction in government aid, as health insurance benefits Jobs fell nearly 50% in the quarter, according to the report.
But with COVID-19 restrictions keeping people close to home, household savings remained elevated in the quarter at $56.8 billion, from a record $90.1 billion in the second. quarter, the agency said.
Households also benefited from the rebound in mutual fund shares, as part of the Toronto Stock Exchange’s return of 3.9% over the three-month period. Overall, the net worth of Canadian households rose 3% to over $12.3 trillion.
“The distribution of wealth tends to be very unequal across income groups, so recent gains in net worth have disproportionately benefited Canadians who were already better off,” Ksenia Bushmeneva, an economist at TD Economics, in a note to clients on the Household Wealth Report.
“Generally, wealthier people saw a greater increase in their savings as they were more likely to keep their jobs while cutting back on discretionary spending such as travel and restaurants that remain largely unavailable.”
Meanwhile, there was a record surge in mortgage borrowing and housing investment hit an all-time high as the cost of borrowing hovered at historic lows, StatCan reported. Mortgage debt reached nearly $1.63 trillion as mortgage demand hit a new high of $28.7 billion.
“Obviously, cash isn’t always king, and having wealth – (whether it’s) financial assets or real estate – has really paid off this year with rising stock prices. and real estate,” Bushmeneva wrote.
Other key changes tracked in the report include the household debt-service ratio, which measures the amount of income spent on interest and principal payments. The household debt service ratio fell to 13.22% from 12.36%, after declining earlier in the year under debt deferral programs related to the COVID-19 pandemic. Many of those programs ended at the end of the third quarter, Statistics Canada said.
“Canadian household finances are in better shape this year thanks mainly to unprecedented government transfers that have boosted overall incomes,” Thiagamoorthy wrote.
