Canadian household debt has shot past the sky-high levels that foreshadowed the U.S. housing bust.
But it?s taken a statistical revisions by Statistics Canada to get there.
Canadians? debt-to-income ratio reached 163.4 per cent in the second quarter, up from 161.7 per cent at the end of last year.
The revisions ? part of an effort by Statscan to bring its estimates of key economic data in line with international norms ? added roughly 11 percentage-points to the 2011 debt ratio, which was previously estimated at 150.6 per cent.
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?Debt growth dynamics over the last decade look eerily similar to the U.S. experience, just before their dramatic housing bust,? economist David Madani of Capital economics said in research note.
?The new data shows a much steeper ascent in the growth of household debt.?
A ratio of 160 per cent was the mark that began the unwinding of earlier housing bubbles in both the U.S. and Britain, Royal Bank of Canada economist David Onyett-Jeffries pointed out.
While the Canadian number is ?alarming,? it doesn't necessarily mean Canada is headed for a U.S.-style housing bust, Mr. Onyett-Jeffries said.
The debt-to-income ratio, now higher in Canada than the U.S., has been the focus of intense debate, prompting stern and repeated warnings from Bank of Canada Governor Mark Carney and Finance Minister Jim Flaherty.
Ottawa has also tightened mortgage lending rules several times in the past couple of years in bid to cool excessive borrowing.
Yes, Canadian debt levels are excessive, experts agree. But several factors play in Canada?s favour. Canadians have more equity in their homes (near 70 per cent) than Americans ever did. And high-risk subprime mortgage are rare in Canada, where fixed rate, five-year mortgages are the norm.
?Household debt is alarming. It?s high,? Mr. Onyett-Jeffries acknowledged. ?Just because the level changes doesn?t mean the story has changed that much. We?ve been concerned about it for the past four or five years, and that?s still very present.?
Lenders are more focused on other debt measures, including debt-to-total assets and debt-to-net worth ? both of which have been declining since 2011, he added.
That?s because Statscan has also revised its estimates for household net worth to $6.6-trillion in 2011 from $6.3-trillion. Net worth has continued to rise this year, reaching $6. 9-trillion in the second quarter.
Mr. Onyett-Jeffries said the rate of growth in non-mortgage debt, including credits cards and lines of credit, is already slowing a lot, and if the same is starting to happen with mortgage debt.
But economist Diana Petramala of Toronto-Dominion Bank said only rate hikes can put Canadian households on a sounder footing.
?A gradual increase in interest rates by the Bank of Canada over the medium term will ultimately be required to ensure a more sustainable picture for household balance sheets,? she said. ?With the cost of borrowing at record low levels, there is still a large incentive for borrowing to reaccelerate.?
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