Total Canadian net worth increased 1.3% (Q/Q) in the second quarter of 2015. National wealth in Canada rose 1.2%, reflecting healthy gains in the value of residential real estate (+1.6%) and durable goods (+3.1%). Canada's net international investment standing moved higher by $10.4 billion, marking the fourth consecutive quarterly increase.

Household net worth advanced 0.9% in 2015Q2, the weakest pace of growth in two years with household debt growing faster than assets. As a result, the household debt to total assets ratio increased slightly to 17.9%. The ratio had been on a general downward trend since 2009. Non-financial assets grew 1.8% - driven by real estate - but a decline in the value of domestic equity markets weighed on financial assets in the quarter. Growth in financial liabilities increased a strong 1.8%, on the back of rising mortgages.

Rising mortgage debt drove total household debt 1.8% higher in the second quarter, accelerating from the 0.7% increase in Q1. After moderating at 163.0% in 2015 Q1, the household credit market debt-to-income ratio moved higher to 164.6%. The household debt service ratio (defined as the total obligated payments of principal and interest paid as a portion of disposable income) was up slightly to 14.1% - above the historical average. Statistics Canada noted that the interest-only debt service ratio remained at 6.3%, near historical lows.

Net worth in the non-financial sector declined for a second consecutive quarter. Financial assets were down 1.2%, while non-financial assets increased 0.5%. The credit market debt-to-equity ratio remained virtually unchanged at 61.9% after rising steadily since the third quarter of 2012.

In the government sector, the net debt burden as a share of GDP continued to climb at a sub-national level, reaching 32.2% in 2015Q2. The ratio for the federal government declined to 31%, coming below the sub-national reading for the second consecutive quarter.

The increase in household debt and the debt-to-income ratio in the second quarter of 2015 came as no surprise. The drop in Canadian borrowing rates through the first half of this year has spurred an increase in household credit growth with the trend rate now at 5.3% Y/Y. Mortgage accumulation (+5.7% Y/Y) has been the main factor contributing to this acceleration, consistent with the surge in housing demand through the first half of this year.

"Our forecast for decent economic growth over the second half of this year will boost incomes, it will still likely be outstripped by debt growth. As such, we expect the household debt-to-income ratio to trend up over the second half of 2015 before stabilizing in 2016 along with a moderation in housing activity", says TD Economics.