Nearly 27% of Canada’s Mortgage Borrowers Are Highly Indebted, But Risk Is Overstated

Canada borrowed debt so households didn’t have to, but they went ahead and borrowed anyway. Bank of Canada (BoC) data shows the share of highly indebted mortgage borrowers pushed to a new high in Q1 2022. These borrowers, with at least a 450% debt-to-income (DTI) ratio, now represent 1 in 4 mortgages. It sounds bad, but most of Canada’s debt is held by higher income households with substantial capital cushions. 

Nearly 27% of Canadian Mortgage Borrowers Are Highly Indebted

Canadian mortgage borrowers are swimming in debt to buy real estate. Highly indebted households represent 26.7% of conventional mortgage originations in Q1 2022. This is down 1 point from the previous quarter and down 3.4 points from a year before. A conventional mortgage borrower has substantial equity, since they’re capped at 80% of the property’s value. As interest rates fell, these households levered up. 

Canada’s Highly Indebted Borrowers Crushed The 2017 Record

The previous record for mortgage originations to highly indebted households looks tiny in hindsight. The share for conventional mortgage originations last peaked in Q3 2017, which is 6.9 points lower than the most recent record-smashing quarter. Record low rates and ripping inflation produced negative real borrowing costs. It’s a mystery why so many households binged on effectively “free” money.

More Canadian Households Are Highly Indebted, But It’s Not As Bad As It Sounds

Most household debt in Canada is mortgage related, pushing the BoC forecast higher. They estimate 18.7% of households are now highly indebted, including those without mortgages. It’s almost a 2 point climb from 2020 and nearly the same size as the previous 8 years combined.

However, the most interesting takeaway is the big jump after the Great Recession. The era of low rates was sold as a way for households to save. In reality, it sparked a huge borrowing binge almost immediately.

The tone feels ominous and was even presented that way as a systemic risk by the BoC, but it may not be that bad. People tend to picture low income households when they think of the highly indebted. In Canada, the top 40% of households held 71% of outstanding debt in 2019, the most recent data point. The reason is simple — lower income households don’t have access to as much credit. 

Wealthier households can access and carry much more leverage, and have bigger cushions. It’s one of the reasons banks have programs to circumvent the stress test. It’s also one of the reasons investors became such a large share of home sales when rates fell



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  • GTA Landlord 2 years ago

    Tiff and the gang mean they’re worried they’ll lose money when they say they’re worried about low income households. They know better than anyone that low income households aren’t highly indebted but they went with the narrative anyway.

    • Vincent Fornelli 2 years ago

      Imagine Better Dwelling being the ones to calm people down? There’s a first.

  • Trader Jim 2 years ago

    the heck. So household debt is always presented as per household so which is $125k/household on average. If it’s 70% it’s more like $62k/avg for the bottom 60%, which is less than 1 year of income for these quintiles.

    Would appreciate a debt dive on this if possible because it’s game changing if you think about it. In passing you may have just explained this isn’t risk of default, it’s risk of output since upper middle and high income households won’t borrow for anything but more house.

    • Ethan Wu 2 years ago

      You might be too young to remember but during the 90s crash realized losses were quite low, it was speculators buying condos that held on to too much and couldn’t sell without a loss. Most were fine, and don’t remember how stressed they were.

  • Joe 2 years ago

    Not surprising at all. It’s going to get way worst this is economics and finance 101. Just remember before inflation was not that high, interest rate has been at its lowest, no covid pandemic, no supply chain issues, no recent war that truly affected the whole world directly, sky rocket prices everywhere. Now they are all here! I know you might say, I don’t have mortgages, I am debt-free etc. Good for you but not the majority of the people. And yes, we can blame on the government, immigration, war, covid, greed blah blahh but it doesn’t matter anymore, The Wolf is already here huffing and puffing.

  • dan 2 years ago

    Good let the interest rates crush em. their illusion of home ownership on debt is about to collapse like a house of cards. they will be eating bugs and paying interest through the nose soon enough. why borrow or buy when you dont got the means/cash. i always buy with cash and why im not in debt.

  • Mark Bayly 2 years ago

    This housing and stock market crash is just beginning It’s going to get far worse Why do all these editorials ignore the elephant in the room Government debt In Canada governments just plan on printing and borrowing money like no tomorrow to buy votes forevermore Economy can only spiral downwards

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