Global household debt is falling, but Canada is bucking the trend—and it’s not good news. The Institute of International Finance’s (IIF) latest update shows global household debt-to-GDP fell in Q3 2025, continuing a general trend since the financial crisis. BMO Capital Markets warns Canada is one of the few exceptions, with its households now the second-most indebted among advanced economies.
Global Household Debt Has Been Shrinking Since 2009
Since the Global Financial Crisis, households have generally been deleveraging. According to the IIF, global household debt dropped to 57% of GDP in Q3 2025. While advanced economies were higher at 67.4%, they’ve shed 1.4 points. “Aside from the wild distortions during 2020, the general pattern for household debt has been on the decline since the Great Recession in 2009,” explains BMO Chief Economist Douglas Porter.
Canadian Household Debt Is 2nd Highest Among Advanced Economies
Porter notes progress is being made in most advanced economies, with Canada being a rare exception. He notes the EU has always maintained modest debt hovering around 57% of GDP. The US transitioned from a high-debt economy just 15 years ago to a moderate-debt economy—at least for households, with its public sector debt rising to partially offset the decline. Not the case in Canada.
“Canada has gone the other way, with household debt hovering around 100% of GDP for the past decade, versus around 80% pre-2009, and showing no real sign of backing down,” he explains. “Among a sampling of 25 advanced economies, only Australia has higher household debt/GDP than Canada.”
High private debt is typically offset by lower public debt and vice versa. Canada proves to be an exception here as well, with Porter noting government debt has also steadily increased since 2009. All roads to growth have been debt-fueled.
Long-Term Success Threatened When Debt Reaches These Heights
Debt at this scale doesn’t just impact borrowers, but creates systemic problems we all deal with. Debt is a useful tool, especially when it comes to improving sentiment to kickstart an economy in a rut. However, the benefits are extremely short-lived—so it’s important to not become overly reliant on that path.
IMF research suggests it’s like a sugar high. They found the temporary economic bump in GDP and employment fades within a year. By the third year, that growth turns into a drag—estimating that every 5 points of household debt-to-GDP reduces GDP growth by 1.25 points annually 3 years later.
The Bank for International Settlements (BIS)—known as the central bank for central banks—has studied the topic extensively. One post-Global Financial Crisis study revealed that household debt above 85% turns into a long-term drag on growth. A subsequent paper found that household debt-to-GDP between 60% and 80% stops becoming effective for short-term growth, and starts intensifying a long-run drag on consumption.
Canada may already be demonstrating the impact of such highly leveraged households and government. Aggressive interest rate easing is producing minimal growth, and failing to drive the credit-driven growth expected in industries like housing.
It’s good debt according to condo precon speculators who can’t seem to access credit now. The rest of the world just doesn’t get it.
Canadian debt is mortgage debt. It’s productive because it produces wealth. It’s not Africa and India where the debt is for food and necessities.
Mortgage debt is actually by definition non-productive debt. A house doesn’t make more houses. Any value added is dependent on further financialization. This becomes much more clear once you learn that currency value is relative.
Except that food costs are inflating and a rental home/apartment is no longer cheaper than a mortgage payment, so the necessity of housing and other essentials are still are becoming debt too
Joe, your bias shows. If there’s one certainty in all of this it’s that this mortgage debt we currently see in Canada is BAD NEWS. My experience tells me that anybody spinning this as a positive is working in real estate in some form or another.
I would like to see the breakdown between mortgage debt and consumer debt (new cars and throw-away furniture). My observation is that there is little restraint among Canadian consumers who are used to low interest rates for both mortgage and consumption debt.
Productive debt?!? that’s Like saying I have cancer but it’s a nice cancer. Both will eat away at your world and you can only sit in the stands and watch. Dave is astute in guessing Joe is in real estate. and I find including the word real is comical as it should be surreal .
Debt CAN be productive, it depends on how you use it. If you borrow $100 from me to invest in your business and generate $1M from it, that $100 sure was productive debt. I’m not saying that’s the case in Canada, but just as a one-off example for you to consider.