07:06 AM EDT, 09/13/2024 (MT Newswires) -- Canadian household finances remain acutely vulnerable to

elevated rates, said Bank of Montreal (BMO).

While debt levels have trended downward as a share of income over the past couple of years, the debt service ratio -- which measures interest and principal as a share of disposable income -- has risen to near all-time highs, noted the bank. Most recently, it ticked up to 14.97% in Q2, just a

hair off the record of 15.03%.

The ratio is expected to face further upward pressure as mortgages continue to renew at higher rates and as a

looser labor market dampens income growth, stated BMO.

While the ongoing Bank of Canada rate cuts should provide some offset, it will take time for the mortgage rate renewal

shock to dissipate, it pointed out.

In the meantime, BMO wouldn't be surprised if the debt service ratio hit fresh record highs.

Until debt service costs return to more manageable levels,

the bank expects consumer spending patterns to remain sluggish, keeping economic growth "subdued."