Daily Market Update

Household debt increases but previous estimate was too high
Household debt increased in the third quarter but is lower than the previous estimate for quarter two. Figures from Statistics Canada show that the Q3 average household debt rose to 162.6 per cent of income; although the Q2 figure was revised down to 161.5 per cent from 163.6 per cent. The figures include mortgage debt and some experts believe that the home loan portion of household debt should not be considered overly risky. Others are concerned that the eventual interest rate rises will make repayments unaffordable for an increasing percentage of households. Spending on automobiles and other borrowing is also on the increase and there has been speculation that the auto loans market in particular could be vulnerable.
More homebuyers turning to alternative lenders
A higher number of homebuyers are turning to alternative lenders as the big banks have tightened restrictions on mortgages. Analysis from CIBC World Markets using StatsCan data shows a 25 per cent growth in the subprime market compared to 4 per cent in the whole mortgage market. The percentage of loans held by alternative lenders is still small though at 2.2 per cent of all mortgages and is not considered large enough to be a risk to the housing market from defaults.
Consumer sentiment at its lowest for 10 months
The Bloomberg Nanos Canadian Confidence Index has fallen to its lowest figure for 10 months. Last week’s figures show that concern over the economy, job security and house prices all increased while there was optimism on personal finances. The sub-index on house prices shows that those who believe that there will be an increase in prices over the next six months was down to 37.8 per cent last week from 38.9 the week before. Those who think prices will fall accounted for 13.3 per cent; slightly higher than the previous week.
Provinces call for more federal cash for infrastructure
Finance ministers are asking Ottawa to give them more help with costs of roads and transit improvements. Quebec and Ontario led the calls for increased investment in infrastructure as a way to boost the economy and enhance services. Charles Sousa of Ontario said that the province is investing $130 billion in infrastructure over the next decade but the federal government is only committing $75 billion over the same period for the whole country. Ministers say that Ottawa should take advantage of the low cost of borrowing if necessary. 

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