For Victoria, the increased DTI ratios increased as a result of strong growth in mortgage debt and installment loans. (Photo CP)

Victoria in Canada’s top three cities for highest household debt

Rising interest rates could cause required payments to exceed budgets of highly indebted households

Victoria households could be in trouble if interest rates continue to rise.

Victoria is in Canada’s top three cities for highest household debt, according to a debt-to-income (DTI) ratio report released this week by Canada Mortgage Housing Corp.

With interest rates on the rise, highly indebted households could see their increased required payments exceed their budgets.

“In the declining interest rate environment, debt-to-income ratio has been climbing,” said report author Brent Weimer, senior specialist in socio-economic analysis for CHMC. “We are now seeing rates push higher. Currently it is not problematic, but it could be if there are significant interest rate jumps.”

Though for most of Canada the increasing trend in the DTI ratio has now paused, Victoria’s strong growth in mortgage debt and installment loans has its household debt to disposable income on the rise and near record levels.

RELATED: Bankruptcies in British Columbia on the rise

The DTI ratio is a measure of the relative vulnerability of indebted households. While households may be able to service their debt during periods of low interest rates, some may face challenges when rates rise.

“You will see people now renewing at a higher rate, with a larger portion of income servicing their debt,” Weimer said.

While Victoria has one of the highest DTI ratios overall due to real estate, it has the lowest DTI ratio in the country – 30 per cent compared to the national average of 39 per cent – for debt not secured by real estate, such as credit card debt and car payments.

The Bank of Canada has been warning that high household debt could be a potential vulnerability to the Canadian economy.

If an increasing number of borrowers begin to default on their loans, financial institutions may decrease lending activities in response. These negative effects could then impact other areas of the economy.

RELATED: Household debt, housing remain key risks for financial system: Bank of Canada

Research has shown that recessions in highly indebted countries tend to exhibit a greater loss in output, higher unemployment, and last longer compared to countries with lower debt levels, according to the CMHC report.


 

keri.coles@blackpress.ca

Follow us on Instagram
Like us on Facebook and follow us on Twitter.

Just Posted

Residents say Monday’s fatal crash in Saanich wasn’t unexpected

Speed has long been a concern for neighbours in the Cumberland and Union roads area

Defense says burden of proof not met in double murder case against Oak Bay father

Closing statements begin in trial for man accused of killing daughters Christmas 2017

UPDATED: Hundreds gather to reflect and remember UVic students killed in bus crash

Campus community invited to reflect, support one another

Sealand was much more than killer whales, says ex-employee

Former Sealasd trainer revisits Sealand of the Pacific in talk

Province overrules View Royal; plans to build handyDART facility

View Royal Mayor calls province’s actions “heavy handed” and “unusual”

WATCH: United Way #Drive4Five event launches campaign to raise $5 million

More than 80,000 lives changed last year by the United Way

Crime Stoppers most wanted for Greater Victoria for the week of September 17

Greater Victoria Crime Stoppers is seeking the public’s help in locating the… Continue reading

Man who crushed Nanaimo RCMP cars with stolen truck gets more jail time

Majore Jackson, 34, sentenced to two more years in jail in provincial court in Nanaimo

B.C. dog breeder banned again after 46 dogs seized

The SPCA seized the animals from Terry Baker, 66, in February 2018

Surrey mom allegedly paid $400,000 for son in U.S. college bribery scam

Xiaoning Sui, 48, was arrested in Spain on Monday night

Three dogs found shot dead in Prince George ditch

The three adult dogs appeared to be well cared for before being found with gunshot wounds, BC SPCA says

B.C. party bus company to be monitored after 40 intoxicated teens found onboard

Police received tip teens and young adults were drinking on party buses and limousines in Surrey

Rick Mercer calls out Conservative candidate in B.C. for fake meme

‘Not true. All fake. Please Stop,’ tweeted Rick Mercer in response

Bear killed in Kimberley after chasing girl, wreaking havoc on town

This particular brown-coloured bear has been the subject of many calls this summer; very food habituated, CO says

Most Read