A new Statistics Canada report shows that the average household debt in Canada has hit an all time high and Canadians are taking on more debt than ever before.
On Tuesday, the agency reported that household debt - as a portion of annual disposable income - reached a record 152.98 percent in the third quarter which is up about two and a half percentage points.
In addition, household net worth declined by 2.1 percent to $180,100 from $184,700. It was the sharpest drop in almost three years as the value of pensions and stock investments declined.
The report came a day after Bank of Canada Governor Mark Carney cautioned Canadians about the effects of household debt on the economy.
Canadians are more indebted now than the Americans and British, Carney noted, saying that they need to move to bring debt accumulation in line with income growth, which is modest.
But analysts cautioned against taking too dark a view over the health of household finances in Canada.
"It's not black and white," said Benjamin Tal, a senior economist with CIBC World Markets. Most debt accumulation is from mortgages, and unlike the U.S. before the sub-prime fiasco, the segment of home buyers considered "marginal" in Canada is very small.
Other than mortgage debt, most other forms of credit, such as outstanding balances on credit cards, lines of credit and term loans are slowing down or even falling, Tal added.
The major concern is that debt is growing at a faster pace than incomes.
The latest data shows debt has been on a rising slope for more than a year, climbing from $1.480 trillion in the second quarter of 2010 to $1.595 trillion today.
Meanwhile household net worth per capita has declined two straight quarters and at $180,100, is now only slightly above last year's level at this time. If inflation is taken into account, net worth actually fell in the past 12 months.
Most of the reason for the sharp setback in the past quarter can be traced to the stock market plunge since late July, which has not only reduced the worth of Canadian's equities investments, but devalued their pension holdings, Statistics Canada said.
"This marked the sharpest quarterly reduction in stock prices and per capita household net worth since the fourth quarter of 2008," the agency said.
Staff at Money Mentors in Calgary say they are over loaded with clients who are looking for help to deal with debt they can't handle.
"What will more than likely happen and does tend to happen every year is after Christmas we will also see a huge rise in the phone calls and hits to our website," said Tracy Watson of Money Mentors.
University of Calgary Economist Frank Atkins says this is nothing like the US debt crisis and mortgage debt should be removed from the equation.
"You overbuy a house because you know your income will increase. It's a rational move, so these figures, I don't see anything wrong in these figures at all," said Atkins.
Interest rates are expected to remain at extremely low levels for as much as two years, which means debt servicing payments will not appreciably increase during that time.
One of the few pieces of good news in the report was that national worth, which includes firms, increased by one per cent to $6.5 trillion.
(With files from The Canadian Press and ctv.ca)
