Canadian Household Debt Nears $3 Trillion, Over 130% of GDP

Higher interest rates may have slowed Canadians from borrowing, but they’re embracing hope. Hope that rates will be cut and the debt they’re once again accumulating will go down in cost. Bank of Canada (BoC) data shows household credit jumped in February, and has shown some mild acceleration. This presents a few concerns for the country, which is already seeing its economy turn sluggish in response to the astronomical debt levels.

Canadian Households Owe Close To $3 Trillion In Debt

Canadian household debt held by regulated financial institutions in trillions of dollars.

Source: Statistics Canada; Better Dwelling.

Canadian households have slowed on borrowing recently, but they still accumulated a whopping amount of debt. Households debt climbed 0.3% (+$10.1 billion) to $2.94 trillion in February. This helped push annual growth to 3.4% (+$96.1 billion), and marks the fourth consecutive month of acceleration.

Canadian Households May Be Ready To Continue The Binge

Annual growth of Canadian household debt, including mortgages and consumer credit.

Source: Statistics Canada; Better Dwelling.

The 2020 Rate Cuts Helped Debt Accumulation Soar

If the nearly $3 trillion in debt sounds astronomical, that’s because it is. From March 2020 to the most recent data, households added a whopping $541 billion to their debt pile. At just under 4 years, accumulation was 50% faster than the years preceding rate cuts.  

Canada Is Trading Long-Term Prosperity For Short-Term Gains

The amount of debt is extremely important in contrast to the size of the economy. Accumulation of debt helps to accelerate economic growth, until it becomes too high. 

US Federal Reserve researchers found the accumulation of household debt to GDP boosts GDP in the short-run for roughly a year. However, once it exceeds 70%, each additional point reduces long-term GDP growth by 0.1 points annually. Considering how rapidly its grown over the past few years, that’s a big slowdown on the horizon. 

The latest numbers put the Canadian household debt to GDP ratio at roughly 132% in February. It’s unclear if the impact remains the same at more than 60 points above the threshold, but if it does that’s 6.2 points of growth trimmed over the long term. That’s… a substantial drag on the economy, providing more context as to why the country’s rapid population boom didn’t produce more growth, and instead was largely inflationary. 

For context, the American household debt to GDP ratio is 75% according to the latest data. They’re world renowned for debt, with a ratio almost half that of Canada. 

It’s not a new problem, but one Canada has been warned about multiple times. Everyone from the OECD to the IMF has expressed concerns about the impact on household debt to long term growth of its economy. The Bank of Canada (BoC) being the latest to call out a “productivity crisis,” as non-productive growth continues to drain any stimulus. 

Canada addressed the concerns with its latest budget by [checks notes] … more cheap household debt. Sweet Baby Jesus, what’s happening here? 

21 Comments

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  • Santa Claus 1 month ago

    Make household rates more expensive. Business debt reduced rates.
    6-8% Real Estate Investment
    3-4% Business Investment
    Tiered Interest rates. Favours job creators.

    • Frank 1 month ago

      Supposed to be how it works with BDC, etc. but when you elect a whole cabinet of real estate speculators, you get policies for real estate speculators.

      We’re just liquidity to them.

      • H2O 1 month ago

        Beautifully put, Frank. I’m not even ashamed that I’ll be plagiarizing that take on our politics in the future.

        Have a good one.

  • Koi 1 month ago

    Canada’s whole plan is based around loading households with debt. I wish someone would explain the housing minister is just distracting people from the infrastructure bank he’s now in charge of.

    A plan considered too predatory by the international community to let Canada execute in Africa, but is debated in Canada.

    • Loonie Canadian 1 month ago

      Love how Conservatives pretended to care about the Infrastructure bank being a scam, now that they’re close to power they dropped the charade.

      It’s going to be their super villain slush fund too.

      • Marco A. Murillo 1 month ago

        Household debt has tripled in the last 15 years to reach the 3 Trillion dollars mark. How does an economy based mainly on resources and housing recovers from such a burden? Most households have seen their income grow thanks to an increase in minimum wage during the time frame but, that has caused added inflationary pressure to the execution of credit-funded purchases. The engine for Canada’s debt fever has been the illusion that the resto of the world will fair above average growth levels, under a peacefully harmonious context, which fell apart thanks to our NATO leaders pushing their limits closer and closer to Russia. The geopolitics in Europe and the Middle East got scrambled due to the invasion to Ukraine, following an interruption of LNG from Russia to Germany, the economic sanctions imposed by the west, and the threats of an escalation (which seems to be already happening in Israel). Who would have though of a geopolitical crisis of this caliber in a decade which saw Tesla, Apple, Microsoft, Google, Amazon, and many other US tech stocks rise to the sky, predicting a booming US economy? Moreover, a decade of world awareness and decisions to contain climate change was not expecting angry polticians and armies to take over the stage? Anyway, I think Canada might not see it’s househokd debt drop in a looooooong time but at least is moving towards controlling inflation by reducing spending. If every household decides to stop spending with credit cards or getting into expensive real estate mortgages the market will respond and push prices down to levels where domestic investment considers prudent. Otherwise let’s just focus on paying back debt. One thing is for sure, debtors already got what they needed right?

  • Ellyn 1 month ago

    Canada needs to forgive debt to come out stronger on the other side
    Use tax income to help people with debt

  • Bob'n the States 1 month ago

    Ah, Stephen, how I enjoy your witty and acerbic commentary! The world may be going to heck in a handbasket, but if one can still laugh about it, there’s hope.

  • Tony Almeida 1 month ago

    The GDP of Canada in the last quarter was $ 2,952,380,000. Ratio of Debt to GDP is more along 100%. Still not very good , in any case.
    https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=3610010301

    • Troy 1 month ago

      Agreed but there’s also the issue that debt doesn’t include anything outside of federally regulated institutional ownership and GDP includes imputed rents, aka the fictional rents you would collect if you were renting the home you own at market prices today.

      It’s a bizarre fricken system in Canada.

  • Chi MING TAM 1 month ago

    This all started with Trudeau higher tax , accepting too any refugees when we are in a housing crunch. Spending too much money on refugees like the Ukraine refugees that gets over 3,000.00 per person per month plus child care, health care now rent support. When does it end when they have never contribute a penny to our system.

    When the senior who worked their whole life and contribute over 48 years into the CPP and EI only gets about $2,000.00 a month living in poverty never get any attention from the stupod Trudeau. Where are the fairest to our system, we senior are being ignore all together. Trudeau treat the canadian like dirt never mentio a word or in his budget to come up with money to them.
    Do you the senior will vote for him? I wont for sure and more and more people from the baby boom years are slowly retiring but you know what. Trudeau tell us we are wrong to work hard and own a home, he and the city and NDP think that we should bare the burden to pay more tax like property tax, gas tax and lead to everything get more expensive and we the senior already in poverty had to pay for his wage increases and his buddy refugees, and the NDP buddy union people. It all come down to squeeze the senior even more.
    It all sound good we get 4.5% increase in CPP only to find out come July the following year I get even less money per month (reduce GIS ) EXAMPLE I get about 55.00 more CPPper month but I end the following years get cut back aboout 120.00 on GIS. So did I get increase or decrease. The whole CRA sytem is to trick senior believing in getting more money only to find out actually getting less money.
    What a retirement scam that Trudeau and the Federal government setup not to help senior but to rip is off.
    Dont vote for Liberal nor the NDP.

  • James 1 month ago

    From the prime minister down to the admin assistant, our public service is a total band of idiocracy at it’s finest. Every move a strategic chess piece to tick a social economic box and line their pockets. More public servants than ever, more debt and problems than ever. They will never solve the housing problem as it only serves to benefit them by going up. We are morons and use a physical asset that should deteriorate as financial vehicles for wealth. Houses are tied to the GDP and the GDP is a stupid metric that only relies on things getting more expensive and completely defeats any human innovation making things more efficient. We need accountability from these monsters. It’s sad to do what you’re told, get an education, get a job paid higher than anyone in your family and you still can’t get a freaking house while people were buying Cadillacs and cottages on single incomes the whole time I grew up… Do you part, fight back and definitely don’t buy an EV vehicle, its fun watching them squirm to meet their targets while no household has disposable income to buy one.

  • Joyce dxusz 1 month ago

    This whole article makes me laugh sarcastically, if you want people to purchase cars, houses, higher education and then the cost of these items increase along with no real increase in wages. Of course debt will increase.

  • Harry Sole 1 month ago

    Thank you liberals. Job well done you get a grade A for destroying Canada.

  • Morsale lelo 1 month ago

    The liberal don’t have a clue about economy. Very poor leadership

  • Stephen 1 month ago

    All of parliament are not paying any attention to their financial advisors, instead continue to support policies that are the exact opposite of what Canada requires. They continue to raise taxes, although the economy and the people cannot handle it. They continue to allow counter investment vehicles such as an exchange mark-up charge when buying Canadian dollars, which has the potential of preventing a massive amount of foreign exchange from entering Canada. They continue to push for a housing economy instead of a manufacturing economy. The level of abject stupidity and self servitude in government is astounding and unbelievable. They need to be stopped before they completely destroy Canada.

  • McTiff 1 month ago

    maybe we just need lower rates. 10 years of low rates never moved inflation higher – while higher rates have moved inflation higher. China has deflation and low rates. Switzerland has the lowest rates and no inflation. Gee i don’t know.

  • Frank 1 month ago

    What more is there to spend when food prices at the discount grocers increase by over 25% in a span of a few weeks?

    When I check for real estate listings, they are measured in increments of half a million ($1 million, 1.5 million, 2.5 million).

    Yet the warehouses and factories want to only hire workers on a student visa for half the wage that the union worker gets.

  • scott 1 month ago

    Like father, like son. This is just another 70’s flashback to the last time a Trudeau bankrupted the country. Sadly english Canada thinks the Trudeaus saved the country. The reality is, they have hastened its demise…

  • Mark Croucher 1 month ago

    Canada’s largest problem is that home ownership is how a lot of people define personal success. The fact is, there is a right time and a wrong time to be in the real estate market. If you are willing to make sacrifices and live frugally, one time the rental market was a safe bet. Since we are trying to import labour, that has evaporated. So now, even the people are who are smart enough to try to get ahead are being smothered by outrageous rents that don’t allow them to save for a future. What you end up creating is a collapse in vitality and outlook of the generations of young people who grew up with hope and now have a diminished morale. This is going to create a non-productive economy where only the smartest and entitled get ahead. My question is: without a vibrant middle class, who is going to pay the taxes for the bulk of our socialist/capitalist programs that let the baby boomers live so large..?

  • [email protected] 4 weeks ago

    SAY GOOD BYE TO THE FINANCIAL IDIOTS IN CANADA SMART MONEY MOVED TO FAR CHEAPER USA HOUSING MARKETS YEARS AGO. SEE ZILLOW, REDFIN AND LANSEARCH

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