More than 9% of income just to pay interest

Canadian consumers, hit hard by eight interest rate hikes in 18 months, are spending more than 9% of their disposable income just on paying interest costs – an all-time record.

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Growth in debt payments continues to outpace growth in the country’s disposable income. Overall, Canadians now spend 9.26% of their disposable income on interest payments alone, a share not seen since 1995, according to the latest data released by Statistics Canada.

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The debt service ratio, i.e. total debt payments in relation to households’ disposable income, reached a new record of 15.22% in the third quarter. An increase from the 15.08% rate in the second quarter. This is the highest rate since Statistics Canada began collecting this data in 1990.

Rising interest rates hurt

Since the Bank of Canada began raising rates in the first quarter of 2022, the total amount of mortgage interest payments has increased by 89.6%, according to Statistics Canada.

During the same period, the amount of payments used to reduce the principal portion of a mortgage decreased by 16.8%.

Canadian household debt today stands at $2,889.4 billion, and mortgage debt ($2,147.2 billion) accounts for almost three-quarters of that debt.

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