Canadian Households Dedicate A Record Share of Income To Debt Payments
Canadians went on a record debt binge, and are now left with one of the worst hangovers in history. Statistics Canada (Stat Can) data shows the household debt service ratio (DSR) surged to a new record high in Q1 2023. Households now dedicate a record share of income to repayment, and it’s not just due to higher interest rates. The leverage was just astronomical.
Debt Service Ratio (DSR)
The household debt service ratio (DSR) is the share of disposable (post-tax) income spent on debt repayment. It’s measured in aggregate, providing the average level. This sometimes throws people a curveball when they see a 10% DSR, and think “oh, that’s not that bad.”
In reality, it’s important to remember that many people don’t have any debt. This can be because they’re older households, which Canada slants towards, or low income and can’t access much credit. Whatever the reason, these households bring the average down. …[Continue Reading]