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OTTAWA, June 14 (Reuters) - Canadian household debt as a share of income dipped in the first quarter but remained near record highs, Statistics Canada said on Wednesday in a report likely to reinforce concerns that consumers are becoming overextended.
The ratio of debt to disposable income edged down to 166.9 percent from an adjusted 167.2 percent in the fourth quarter. That meant Canadians owed C$1.67 for every dollar of disposable income.
The Bank of Canada - which warns borrowers that interest rates will one day move up from near record lows - last week said rising consumer debt levels and an unbalanced housing market had raised household vulnerabilities.
Separately, data showed Canadian home prices rose in May as Toronto remained robust despite recent government efforts to cool the market, while prices in Vancouver picked back up to hit a fresh peak.
Policy makers are worried about a possible bubble in both cities. Years of low rates since the global financial crisis, as well as rising home prices, have prompted Canadians to steadily increase their debt.
RBC Economics economist Laura Cooper said the slight dip in the household debt ratio reflected a "seasonal slowing in debt accumulation in the quarter rather than an improvement in household balances".
The Teranet-National Bank Composite House Price Index, which measures changes for repeat sales of single-family homes, showed prices rose 2.2 percent last month.
While other recent data suggested activity in the Toronto market cooled in May, Wednesday's report pointed to accelerating price growth in the resale market.
Low rates allow consumers to pay down more of their mortgage principal. At the end of the first quarter, households spent more on principal payments than on interest payments for the first time since Statscan began compiling the data in 1990.
On a seasonally adjusted basis, households borrowed C$27.5 billion ($20.8 billion) in the first quarter, down from C$27.6 billion in the previous quarter.
Mortgages made up C$20.9 billion of this, an increase of C$2.7 billion, while consumer credit and non-mortgage loans fell C$2.8 billion to C$6.5 billion.
Consumers' ability to pay their debt also remained relatively easy. The interest-only debt service ratio held at a record low of 6.1 percent, while the household savings rate fell to 4.3 percent from 5.3 percent.
The household debt service ratio, with is obligated payments of both principal and interest as a proportion of disposable income, edged up to 14.2 percent from 14.1 percent in the fourth quarter.
$1=$1.32 Canadian Reporting by David Ljunggren; Editing by Bernard Orr