September 15, 2017 / 12:53 PM / a year ago

UPDATE 1-Canada's household debt-to-income ratio hits record in Q2

(Adds data)

OTTAWA, Sept 15 (Reuters) - Canadian household debt as a share of income hit a record high in the second quarter as borrowing outpaced wage growth, Statistics Canada said on Friday in a report that underscored the challenges consumers could face as interest rates rise.

The ratio of debt to disposable income rose to 167.8 percent from a downwardly revised 166.6 percent in the first quarter.

On a seasonally adjusted basis, households borrowed C$28.9 billion ($23.8 billion) in the second quarter, up from C$25.4 billion in the preceding quarter.

Mortgage borrowing decreased to C$16.5 billion from C$19.2 billion, the first decline since the third quarter of 2016, while borrowing of other consumer loans jumped to C$12.3 billion from C$6.2 billion.

Home sales in Toronto, Canada’s largest city, have declined since the provincial government implemented a number of measures in April to cool the market, including a foreign buyers’ tax.

Friday’s data did not capture the effects of interest rate increases by the Bank of Canada in July and September.

Indeed, the debt service ratio, which measures debt principal and interest payments as a proportion of income, was flat at 14.2 percent.

After years of low interest rates that have propelled consumer borrowing, policymakers have said they will be closely watching the economy’s sensitivity to higher borrowing costs.

Reporting by Leah Schnurr; Editing by W Simon

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