Falling equity markets and softening house prices have put pressure on household balance sheets at a time when the ratio of debt to income is already at a record high of 140 per cent. The household debt-toasset ratio has risen as the credit crisis intensified, reaching 19 per cent at the end of the third quarter – the highest level since 1990.
At the same time, the debt-service ratio of households actually declined modestly to 7.5 per cent, well below the historical average of 9.2 per cent seen since 1992, owing to lower effective borrowing costs. This gives a measure of assurance that most households can comfortably manage their debts. The health of Canadian households is obviously important to our banking sector.