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Canada's household debt levels higher than any other country, report says

Household debt levels in Canada are higher than in any other country, according to a report by the OECD.

Andrew Francis Wallace | Toronto Star | Getty Images

Real Estate signs in the west-end of Toronto, Canada.

Household debt levels in Canada are higher than in any other country, according to a report by the Organization for Economic Cooperation and Development (OECD).

In a preliminary version of the report, set to be released fully next month, the OECD found Canada's household debt ranked as the highest among the 35 developed and developing countries the group monitors.

The rapid accumulation of household debt for Canadians could also leave its economy particularly vulnerable to shocks, the organization said.

"Although in part this reflects strong population growth, these developments may entail significant risk to financial stability given the direct exposure of the financial system to the housing market," the OECD said.

Risk of 'severe recessions'

The group found Canada's household debt-to-GDP (gross domestic product) ratio had ballooned to 101 percent — significantly higher than any other nation studied.

In comparison, the ratio for South Korea was the next highest at slightly under 93 percent, with the U.K. third at over 88 percent. In the U.S., the household debt-to-GDP ratio was around 80 percent, while Germany and France had a ratio below 60 percent.

"Research points to a number of links between high indebtedness and the risks of severe recessions," the group said.

While virtually all countries witnessed soaring debt loads ahead of the credit crisis a decade ago, most have seen their indebtedness reduce over time.

However, for Canada — and some countries in Scandinavia — this has not been the case, with OECD pinning the blame on inflated house prices.

"OECD countries that have experienced the strongest increases in household debt since the crisis have also the steepest rise in house prices," the group said.