High levels of household debt continue to concern Canada’s financial system, even as the credit situation of Canadians has generally improved.

Total household credit market debt reached $2trn during the last quarter of 2016, according to a recent report by the Canada Mortgage and Housing Corp. But data also showed that Canadians seem to be managing debt well –especially their mortgages. Canada added 1.03 million new mortgage loans in 2016 representing about $269bn, a 9% increase from 2015.

The average credit scores of mortgage holders improved in the fourth quarter, in addition to a decrease in their likelihood of bankruptcy. “Consumers rated ‘very good’ and ‘excellent’ accounted for 80% of all mortgage holders and accounted for 85% of the outstanding mortgage balance,” the report said.

The mortgage delinquency rate remained below 1% of active mortgages, suggesting that the market is “not under stress.” CMHC observed a drop in the overall delinquency spread across all loan value ranges. In particular, loans below $200,000, which have a “significantly higher” rate than average, recorded their lowest delinquency rate in a year.

Households can expect to be “insulated” from higher mortgage service costs wrought by rising interest rates. “New financing rules to tighten access to insured mortgage credit and ensure new homebuyers have a sufficient buffer in order to continue servicing their debts in a higher interest rate environment were introduced this quarter.”

Related storage:
More Canadians have ‘healthy’ finances in 2017
Mortgage rates could start rising as soon as July

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