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Canadian debt at pre-recession levels

By some measures, Canadian households show higher debt levels than the US peak which preceded the Great Recession.

Debt to income ratio, or the ratio of household debt to household disposable income (income after paying taxes and other necessaries), is one indicator of consumer vulnerability to credit crises. The higher the ratio, the more easily consumers will fall into default and insolvency.

According to Statistics Canada, Canada had a household debt to income ratio of 166.8% in the third quarter of 2018, up from the previous quarter and also up from the same quarter last year. It looks like Canadian's debt is continuing to grow faster than our income.

This has implications not just for consumers but for others, such as small businesses and secondary lenders, who deal with individuals and their assets on a regular basis. Secondary mortgage lending in particular may be becoming increasingly risky as debt rises and real estate values stagnate or even drop in several locations in Canada.

Businesses exposed to consumer borrower and customers need to consider these factors when making their risk assessments.

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