Canadian Households Reversed Progress On Debt, Hits A New Record High

Canadian households briefly saw their debt issue shrink, but those days are long gone. According to Statistics Canada (Stat Can), the household debt to income ratio hit 186.23% in Q4 2021. The ratio had improved briefly as stores were closed and households paid down a little debt. The most recent update was massive though, reversing any progress made as it pushed to a record high.

Canadian Households Are Carrying A Record Share of Debt

The debt to income ratio reached a new all-time high and did so with a monster move. The ratio came in at 186.3% in Q4 2021, meaning households owed $1.86 for every $1 of disposable income earned. It’s an increase of 6 points from the previous quarter and it’s up 9 points from last year. More than half of the deterioration was over a single quarter. 

Canadian Household Debt To Income

The ratio of Canadian household market credit to disposable income.

Source: Stat Can; Better Dwelling.

Canada Has Seen Household Debt Rise and Incomes Fall

Stat Can attributed the ratio to rising debt and falling household incomes. Household debt rose 1.9% in Q4 2021, while disposable income dropped 1.3% over the same period. Initial public health measures left households with a little extra cash. Some households had reduced their credit while they were locked at home. It only lasted a few months before low rates enticed people to binge on the cheapest cash in history.

Canada’s Debt Problems Are Bigger Than They Appear

If it’s one of the first times you’ve ever seen the ratio, it might not seem that high. It’s important to remember this is an average used at the national level. Every household with little to no debt weighs the index lower for those with more debt. There are other indicators, like 1 in 5 new mortgages are to highly indebted households, that reveal the situation is worse.

Stat Can suggested it might not be as bad as it sounds due to the large amounts of home equity gained. That’s somewhat problematic when home prices are moving so fast. One bank recently suggested the market has “exaggerated” the value of housing. Consequently, they don’t consider the value of homes to be a reliable indicator at this point. The reduction of economic activity due to rising rates and high debt loads, or low rates and high inflation? Now that’s real.



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  • C.Rose 2 years ago

    Rising interest rates with high debt is an evil combination. If you can’t handle a extra 2 or 3 percentage point increase over the next year and half… you’re in trouble!

  • John 2 years ago

    If the government and the BOC are so concerned about Canadian debt levels, they should take a hard look at themselves .. the government is spending us into oblivion. What a great example. If Canadians see their government doing it, why shouldn’t they? The Liberal government was handed a balanced budget when they took office from the Conservatives. And they ballooned yearly deficit spending from to over $70 billion a year. And this was while the economy was strong and not in need of stimulus or excess program spending. Then Covid came. Lets hope the Liberals don’t try to pass their massive debt creation on Covid .. it started long before!

  • Scott 2 years ago

    “You’ll forgive me if I don’t think of monetary policy,…”. S there nothing this government won’t ruin? English Canada won’t be around much longer if this keeps up…

  • Itchy Bear 2 years ago

    I’m sorry, if you don’t remember that Harper didn’t like surpluses and killed the policy of maintaining them, you don’t have anything to add to this conversation.
    Trudeau is terrible, but the conservatives are and will forever be at least as bad.

    • Terry 2 years ago

      If you can’t tell the difference between household and government debt, maybe STFU.

  • John 2 years ago

    Debt is debt. Creditors are creditors .. the only difference between government debt and household debt is that the homeowner can’t print money when they run out .. the government can and does! Its really that simple. When I can’t pay my mortgage because I am too far in debt, the bank comes and takes my home away. When the government debt rises to the point that their source of revenue (i.e. taxes) won’t cover the interest payments on their debt (actually it is our debt), they can 1) raise taxes further, 2) borrow money by issuing bonds, 3) print money or 4) a combination of items 1-3. Canada’s tax system is so progressive, the government as very little room to increase taxes. If the government has to issue bonds to raise money simply to pay interest on existing debt, it is desperate and in dire straights .. lenders will know this, demanding higher and higher interest in return for money lent (this is what happened to Greece). So, the last resort is to print money / expand the money supply and debauch the currency, leading to rising inflation. Oh, I forgot. There is a 5th option. The government could actually reduce the size of the public sector and freeze their wages until they come down to the same level as private sector wages doing the same type work. They could also change public sector pensions from defined benefit to money purchase which would result in a huge savings. And after all, the average person in the private sector DOESN’T EVEN HAVE A PENSION! But they all pay taxes that fund the public sector who ALL HAVE DEFINED BENEFIT PENSIONS INDEXED TO INFLATION EACH YEAR.

    • Castreau - the illigitimate 2 years ago

      “We – all pay taxes that fund the public sector who ALL HAVE DEFINED BENEFIT PENSIONS INDEXED TO INFLATION EACH YEAR. ”

      One of the issues with these imbalances stems from the fact that the very unions who on average get a much lower rate of increases every contract and complain to the media for public support – never do they point out that the managerial levels of public sector employees give themselves on average 12-15% salary increases every 3 years. This is a huge cost to the rest of the tax base who are subjected to the economic fluctuations like the massive economic lockdowns we have just witnessed. No wonder the rest of the population are now trying to rally together and force the hand of our disconnected politicians. I agree with their frustrations!

      I asked local MPs and MLAs why they did not at least take a 30% hit on their wages during this pandemic, never mind freezing their indexations? Blank stares!! The disconnect between government and private sector is becoming more alarming by the day. If nothing is done to bring this liberal government to their knees, I fear we will be seeing a political class behaving like the old monarchs and their government employees (minions) subjugating the remaining working class that will be forced into serfdom.

  • John 2 years ago

    Harper balanced the budget period. He handed a balanced budget to Trudeau. The comment about his not liking surpluses is simply gobbledy gook and it has no relation to the topic at hand anyways.

    During the 2015 federal election that brought him to power, Trudeau promised three years of “modest deficits” — $9.9 billion in 2016, $9.5 billion in 2017, $5.7 billion in 2018 — and a balanced budget with a $1 billion surplus in 2019.

    Instead, he delivered annual deficits of $19 billion in both 2016 and 2017, $14 billion in 2018 and $39.4 billion in 2019 — all BEFORE the pandemic hit in early 2020.

    Today, the Trudeau government no longer gives any date for eliminating the federal deficit the prime minister originally said would be gone by 2019-20, with a $1 billion surplus in that year.

    Harper formed a government that was fiscally responsible. They did what they said they would do. Mr. Harper was, and still is. highly respected and regarded around the world.

    Mr. Trudeau has had so many abjectly corrupt incidents and gaffes (that have even hit the world press) they have become laughable. Oh yes, “the budget will balance itself.” Lol.

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