Household debt in Canada continued its downward trend on Thursday to reach 163.2 per cent of disposable income in the first quarter of 2014, according to a report released by Statistics Canada on Thursday.

The household debt-to-disposable income ratio has been on a downward trend since peaking at 164.1 per cent in the third quarter of 2013 and settling into 163.9 per cent in the fourth quarter, results that are encouraging to financial industry experts. Consumer credit debt also edged down by 0.3% in the first quarter, another positive sign.

“Canadians are learning how to make smarter financial choices and how to ease themselves away from relying on credit, and these new numbers reflects that,” said Scott Hannah, president and CEO of the Credit Counselling Society, a non-profit charitable organization that offers free advice for people dealing with debt problems.

“We receive hundreds of phone calls every day from people looking for help to pay down their debts, and as Canadians start to become more aware of their personal finances, we are encouraged to see the general reliance on debt decrease.”

The new household debt ratio means that the average Canadian owes nearly $1.63 for every $1 in disposable income they earn. Industry experts fear that maintaining such elevated levels of household debt may leave many Canadian households vulnerable to financial shocks, such as a loss of income or employment, or a sharp rise in interest rates.

The elevated Canadian household debt levels have been attributed to the surge in mortgage lending spurred by near record-low interest rates, according to the Statistics Canada report. The Bank of Canada and the federal government have long cautioned that low interest rates may prompt Canadians to take on too much debt in the form of expensive mortgages. Although managing this debt may seem easy enough today, it is just as easy for debt to get out of control.

“The challenge of taking on too much debt has to do with changing interest rates,” Hannah warns. “Canadians need to be prepared to handle increased payments if interest rates rise. That’s why it is so important for Canadians to look at how much debt they’re carrying, and whether it will still be manageable in the future if and when interest rates go up.”