Canadian household net worth fell by $330 billion
Credit: Unsplash
Canada's household net worth – the value of all assets minus liabilities – fell by around $330bn during the third quarter of this year. This follows a record quarterly decline of more than $930bn between April and June. Despite this decline, the country's household wealth remains around $2.7tn higher than it was at the end of 2019.
Statistics Canada also reported that households made about $57.4bn in debt payments during the third quarter, a record quarterly increase of 6.1%. The interest portion of these debt payments rose by 17.8%, also a record. This increase in debt payments is largely due to the Bank of Canada rapidly raising interest rates in an effort to bring inflation under control. The bank has continued to raise interest rates in the current quarter, and earlier this month suggested that its hiking cycle is nearing an end.
The rising interest rates have had a tangible impact on the real estate market, leading to fewer home sales and generally lower prices. The value of residential real estate owned by households fell by 3.4% in the third quarter. However, despite this decrease, the total value of residential real estate is still 35% higher than it was at the end of 2019.
Overall, it appears that the increase in interest rates is having a negative impact on Canadian households, with debt payments increasing and the value of household assets decreasing. The Bank of Canada will continue to monitor the situation closely as it evaluates the impact of its aggressive rate hikes.
Source: Statistics Canada
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