This statistic just hit a record 150.8% and has made headlines recently. The Governor of the Bank of Canada has commented on it as well.
It might be a better idea to focus less on that figure and more on debt payments vs. income or TDS (Total Debt Servicing). TDS is the debt ratio that compares your housing costs + any other monthly payments and obligations to your income. It's also a better indicator of your ability to keep your head above the water, financially speaking.
When applying for a mortgage the maximum TDS (Total Debt Servicing ) can usually be no higher than 40%. Meaning no more than 40% of your income should go to debt payments. Sometimes this ratio can be pushed to 42%. It might be a good idea however to have this ratio closer to 30 or 35%. Especially considering 30 or 40% today won't be 30 or 40% tomorrow. We are still in a time with historically low rates but interest rates will rise at some point. According to the latest forecasts by RBC they may go up by 1/4 percent in the last quarter of this year and by a full 1% by the end of the next (2013).
When interest rates go up your debt payments go up but your income doesn’t always follow.
If interest rates are now 2 or 3%, and 40% of your income is going to servicing debts today, then you could be in trouble when the rates go up.
Fortunately research finds that only 6.5% of mortgages currently have a TDS ratio over 40%, reports the Vancouver Sun.
Source: Tony Marchigiano & "Canadian Mortgage Trends" website.