Canada’s Household Debt Problem Is Real, but Concentrated

October 14, 2026 – Canada has the highest household debt in the G7, but the country is not facing a systemic debt crisis, according to a new report from the C.D. Howe Institute. Instead, financial strain is concentrated among particular groups of Canadians.

In “Beyond the Headlines: Where Canada’s Household Debt Problem Lies,” authors Mawakina Bafale and Peter MacKenzie find that Canada’s debt-service ratio (DSR), which measures the share of household income devoted to debt payments, has eased since its 2023 peak. While the financial system has weathered higher interest rates without widespread distress, national averages mask growing financial strain among younger, lower-income, and highly leveraged Canadians.

“In 2025, the highest-income households saved 34 percent of their disposable income, while those in the lowest-income group spent far more than they earned, with a net saving rate of -119 percent,” says Bafale, research officer for the C.D. Howe Institute. “These diverging fortunes show why national averages can mask the financial strain some Canadians are facing.”

The generational divide is particularly stark. In late 2025, Canadians aged 18 to 24 reported nearly a 50 percent probability of missing a debt payment over the next three months, compared with 27 percent among those aged 25 to 54 and just 0.7 percent among those aged 55 and older. Younger Canadians carrying unsecured debt have also missed out on the home-equity gains enjoyed by many older households.

These pressures are compounded by housing costs. Highly leveraged homeowners in Toronto and Vancouver who took out mortgages when interest rates were low are renewing at substantially higher rates, adding pressure to household budgets. Rising consumer insolvency filings add to these concerns, but current statistics cannot distinguish between households struggling to make payments and those whose debts exceed their assets.

The authors recommend three measures to address these vulnerabilities. First, maintain effective mortgage underwriting guardrails and make longer mortgage terms more viable. Second, expand housing supply where jobs are concentrated and help mid-sized cities, for example, Kitchener-Waterloo, London, and Kamloops, compete for workers and businesses. Third, the Office of the Superintendent of Bankruptcy should publish statistics distinguishing cash-flow insolvency from balance-sheet insolvency, enabling policymakers to better identify the source of financial distress and target their responses.

“A homeowner with significant equity may be able to get back on track by refinancing, while someone whose debts exceed their assets faces a much deeper financial challenge,” says MacKenzie, senior policy analyst at the Institute. “Understanding the difference is essential to developing the right policy response and addressing the household debt pressures that are concentrated among younger, lower-income, and highly leveraged Canadians.”

Read the Full Report

For more information, contact: Mawakina Bafale, Research Officer, C.D. Howe Institute; Peter MacKenzie, Senior Policy Analyst, C.D. Howe Institute; and Raquel Schneider, Communications Officer, C.D. Howe Institute, 647-805 3918, rschneider@cdhowe.org.

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

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