Question Period Note: Household Balance Sheets First Quarter of 2024

• The net worth of Canadian households rose 3.3% in the first quarter of 2024, following a 1.5% increase in the previous quarter.

• The household debt-to-disposable income ratio fell further to 176.4% (-1.6 p.p.), along with the household debt service ratio which ticked down to 14.9% (previously 15.0%).

• Canadian household wealth improved further in the first quarter of 2024 and now sits 37% higher than prior to the pandemic.
• Household indebtedness has now declined to pre-pandemic levels but remains elevated.

• Bottom line: Household balance sheets improved in the first quarter, supported by the continued upward trajectory in equity markets and a rebound in house prices, as well as a continued slowdown in debt accumulation. Households also continued to benefit from solid income growth, with the debt-to-disposable income ratio edging down for a fourth quarter and the debt service ratio now back at its pre-pandemic level.

• The net worth of households surged by 3.3%, again reflecting a strong gain in asset values and subdued growth in debt. Higher asset values were driven by a bounce back in household residential real estate (+2.6%) and strength in financial assets (+3.6%) as stock market indices continued their rallies from the prior quarter. Overall, household wealth remains 37% higher than before the pandemic. Similarly, the household net worth-to-disposable income ratio rose to 1,013% from 997.5% in the previous quarter, sitting well above its pre-pandemic level (931%).

• Household debt growth (+0.9%) ticked up slightly in the first quarter but remains historically weak, as still-elevated consumer credit growth offset the continued moderation in mortgage borrowing. Household deleveraging in the face of higher interest rates, combined with solid income growth (+1.9%), reduced the household debt-to-disposable income ratio to 176.4% (-1.6 p.p.)— its lowest level since the first quarter of 2021 and further below its pre-pandemic level (181.2%).

• The household debt service-to-disposable income ratio—a measure of households’ capacity to make regular debt payments (interest and principal)—edged down in the first quarter and is now back at its pre-pandemic level (14.9%) but still near record highs. The debt service ratio has now seen a modest decline over the past year, reflecting solid income growth and a slowdown in debt accumulation.

• Outlook: redacted. In the second quarter, equities continued their solid momentum redacted. redacted, with inflation declining, interest rates beginning to ease, and consumer sentiment improving, redacted.

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