Falling real estate prices helped boost the wealth of Canadian households at a record pace during the first quarter of the year, even as huge sectors of the economy were halted due to the COVID-19 quarantine.
Statistics Canada says national net worth has risen by more than $ 1 trillion to almost 15 trillion dollars, which is 7.7% more than in the previous quarter.
Residential property values rose $ 595 billion, up 9.4 percent, for the third straight quarter. Statistics Canada notes that in 2020 the value of residential property has grown by just over $ 750 billion.
The agency says that in the long term, the average selling price of a home has increased by 87% over the past 10 years.
Canadians continue to enjoy low interest rates, accumulating mortgage debt. It fell to $ 29 billion, but after a record high of $ 32.1 billion in the previous quarter, it is the second-highest record high.
In the meantime, debt with higher interest rates is being paid off. Statistics Canada reports that non-mortgages, including consumer loans, fell $ 13.5 billion from 2019 to $ 786.5 billion.
Swap high interest debt for low interest debt
With fewer places to spend money, savings rates went up. The seasonally adjusted household savings rate rose from 11.9 percent in the fourth quarter to 13.1 percent in the first quarter. Statistics Canada says it is at double digits since the second quarter of 2020.
All of this helped bring the household debt-to-income ratio down to 172.3 percent in the first quarter from 174 percent in the fourth quarter. In other words, for every dollar of household disposable income, there is $ 1.72 of debt in the credit market.
But BMO economist Priscilla Tiagamurti says the data doesn’t necessarily mean everyone is in order.
“Canadian household finances improved in the first quarter of this year as the ratio of household principal debt to disposable income took another step away from pre-pandemic record highs,” Tiagamurti said.
“Although the growth in mortgage debt may slow further in the coming quarters, the flow remains high. Thus, housing imbalances and still high household debt remain a key vulnerability for the Canadian economy. ”
The findings echo the Equifax report released earlier this week, which found new mortgages rose 41.2% in the first quarter compared to the first quarter of 2020. It also revealed that credit card debt fell to its lowest level in six years.
“The number of cards per consumer has been decreasing since 2016. Consumers are moving away from using multiple cards and are becoming more careful with their loans. Younger consumers, who are more likely to miss credit card payments, have also seen a reduction in their spending-to-payments ratio, ”said Rebecca Oakes, Advanced Analytics AVP at Equifax Canada.
“Similarly, Gen Z was able to change that ratio and pay off credit card debt.”
Jesse Baines is a senior reporter for Yahoo Finance Canada. Follow him on Twitter @jessysbains…