Household debt can be a major challenge for many Canadians and the amount of debt has grown with rising living costs. Many people have large mortgages and also hefty student loans they had to take out while attending higher education all adding to their household debt.

Large amounts of debt can take years or decades to pay off and make it difficult to save, for example, for a home, a car, or retirement.

So what are the household debt statistics like in Canada? Read on to find out.

Household Debts Statistics for Canadians

  • Household debt is the combined amount owed by all members of a household.
  • The average Canadian household debt, not including a mortgage, is almost $41,500.
  • In April 2022, Canadian household debt was $2,116 billion.
  • Half of all Canadians earned less than the median yearly income of $37,899 in 2019.
  • Mortgage borrowing increased by 41% in 2021.
  • In 2021, the average ratio of debt-to-income was 173.08%, compared to 88.77% in 1990.
  • Canadians aged 46-55 owe the most money and have an average household debt of $72,482 excluding mortgage.
  • Almost six out of ten Canadian households are in debt.
  • Average Canadian credit score is between 600 and 650 with anything above 650 considered a good credit score.
  • Only 34% of Canadians live in mortgage free homes.
  • Canadian household debt remained under $200 billion in the 1960s and 1970s, but then began to rise exponentially, reaching over $1,000 billion at the turn of the millennium.
  • Anyone concerned about their household debts or not being able to cover their loan and credit card payments can speak to an advisor regarding debt consolidation loans and ways to save on outgoings.

What is household debt?

Before we focus on the household statistics for Canadians, it is important to understand what is meant by debt and how it differs from personal debt. It is often defined as the combined liabilities that require payments of interest or principal of all members in a household.

In other words, household debt is the combined amount owed by all members of a household.

Types of debt

There are different types of debt that contribute to household debt, which include:

  • Secured debt, which is any type of debt that is backed by collateral. This collateral will be forfeited to the lender if the debt is not paid. The amount you are able to borrow is determined by the value of the asset used as a collateral. An example of secure debt would be a car loan where the lender will repossess the car if the loan isn’t paid.
  • Unsecured debt is not backed by collateral and includes debt from credit cards and unsecured loans. How much you can borrow is based on your credit score. The better your score, the more you can borrow.
  • Mortgage debt is a subset of secured debt where the property is the collateral. Most people will pay back their mortgage over several decades.
  • Student loans can be government issued or private loans. They are a type of unsecured loans as there is no collateral used.

The average household debt in Canada

Mortgage not included, the average amount owed per person is around $20,739, which would mean that the average two-person household would have a combined debt of almost $41,500.

If a mortgage is included in the calculation, then the average per person debt in Canada rises to almost $75,000.

In April 2022, Canadian household debt was $2,116 billion, which is lower than the $2,330 billion owed in 2020. The figures from 2020 show that mortgages formed the biggest part of household debt at $1,550 billion and $802 billion was owed in non-mortgage loans and consumer credit.

The average earnings and net worth of Canadian households

According to Statistics Canada, the average Canadian earned $49,000 in 2019. However, this does not give us the real picture, as half of all Canadians earned less than the median yearly income, which was $37,899.

High incomes can give a skewed picture of the average income, which is why median statistics are often more relevant when looking at statistics such as personal income.

Data from Statistics Canada also shows that the Canadians’ net worth rose by 3.5% per year between 2012 and 2016. The most recent net worth statistics show Canadian families had a median net worth of $329,000 in 2019.

With around one million millionaires in Canada, looking at the median net worth gives a more truthful picture as households with high net worth drag the average up. The households living in Toronto and Vancouver have the highest median net worth and Montreal the lowest. Cities such as Calgary, Edmonton, and Ottawa are in the middle.

What is the biggest driver behind increased household debt?

The main reason behind the increased household debt in Canada is mortgage debt. In 2021, new mortgage borrowing increased by 41%.

However, non-mortgage household debt decreased during the pandemic as emergency income support from the government helped many Canadians to lower their credit card bills. Household spending was also down during the lockdowns.

What type of household is most likely to owe the most money?

Statistics show Canadians aged 46-55 owe the most money. The consumer debt in this age group, not including mortgages, is $36,241, making the total average household debt before a mortgage $72,482.

Canadians aged 18 to 25, owed on average $8,847 per person at the beginning of 2020. The average consumer debt for 26 to 35-year-olds was $18,398, $28,863 for the 36-45 years old, $30,000 for people aged between 56-65, and people over 65 had an average debt of $16,491.

How many Canadian households are debt free?

Data from Statistics Canada shows that only 30.2% of Canadians are debt-free. The percentage is bigger among households led by people aged 65 or older at 56.7%. However, the number of senior households that have debt has increased in the last few decades mostly because of bigger mortgages and increased use of credit cards.

Mortgage statistics

As mentioned earlier, new mortgages were up 41% in 2021, but what are the other mortgage statistics in Canada? In 2020, the total Canadian mortgage debt was $1.7 trillion, and the growth was the biggest since 2010, when in one year the total mortgage debt increased by $118 billion.

The main driver behind the increased spending in the mortgage sector were low interest rates combined with rises in property prices. This could be a worry as the main cause behind the 2008/2009 financial crisis was lucrative mortgage interest rates that allowed many people to buy properties they couldn’t afford once the rates rose again.

Majority of Canadian households live in mortgaged homes. According to the statistics, only 34% of Canadian homeowners have mortgage free properties. These households are also more likely to have no other household debts, either.

What is the average Canadian credit score?

According to Equifax Canada, the average Canadian credit score is between 600 and 650.

A credit score considers different parameters such as history of payments, level of debt, and length of credit. In Canada, people with a score of 650 or higher are considered financially stable and more likely to receive loans. Anything above 760 is considered an excellent credit score.

History of household debt in Canada

In Canada, the total household debt has increased almost every year since the records began in 1961. During the 1960s and 1970s, while there was year on year growth, it was slow and uniform and the total debt remained below $263 billion. By the end of the 19080s, the debt had risen to over $500 billion and surpassed 1,000 billion in the early 2000s.

Changes to household debts over the years

There have been many changes to household debt over the years. One of the key changes has been the ratio of debt-to-household income, which has climbed exponentially in Canada.

In the 1980s, the average ratio of debt to income was 66% and in the first quarter of 1990, it was around 88.77%. In the second quarter of 2021, the ratio was 173.08%. This data shows that the average Canadian household has much more debt now compared to three decades ago. One of the main reasons for the higher ratio is that most Canadians cannot purchase their homes without getting a mortgage.

The debt to income ratio means that for every dollar, Canadians owe $1.73. This ratio shows that the money Canadians earn and have at their disposal is less than what they owe.

Prior to 1961, the total amount of Canadian household debt was only $16 billion compared to over 2,000 billion now.

However, there is good news, too. The ratio of debt from credit cards has dropped in Canada and has now reached a six-year low. This is closely linked to the reduced spending during the COVID-19 pandemic. The overall debt to income ratio was also higher before the pandemic. In the last quarter of 2019, it was approximately 180%.

Why has household debt in Canada increased so much since the mid-1900s?

The increase in debt coincided with the economic boom that followed the Second World War. There was also a change in Canadians’ attitudes towards debt. In the past, people would try to avoid getting into debt because it was seen as something negative.

After the Second World War, buying on credit and larger loans became more widely available and spending on credit slowly became more acceptable. However, it wasn’t until the 1990s when there was a prominent surge in household debt in Canada.

Changes to the credit score system since it was introduced in 1971 have also made it easier for people earning a median income to get loans.

What can you do if you are worried about debt?

If you are struggling to keep up with your loan or credit card payments, what can you do?

One of the first steps you can take is to use a debt calculator tool. These tools will allow you to get an idea of how long it will take you to pay off your debt. It will also calculate how much you will pay in interest.

Using a debt calculator tool can give you an idea of whether you can manage the debt on your own by setting aside extra money each month to clear them quicker. If you can only pay the minimum, or worse, can’t cover all the bills, you may want to speak to a financial advisor about ways to reduce your payments, for example, by getting a debt consolidation loan or ways to reduce your outgoings.

Conclusion

Even though there is a high level of household debt in Canada, it does not mean that it will lead to a financial crisis. While there are similarities to previous recessions such as a booming property market and low interest rates, banks have not been giving large loans to risky households with a poor credit score.

Following the pandemic, the ratio of debt to income slightly improved in Canada as people were spending less during the lockdowns. Statistics are yet to show what has happened since the return to a more normal life.

Frequently Asked Questions

In Canada, anything above 650 is considered a good credit score and anything above 760, an excellent credit score.

Most Canadian households have debt, with only 30% of them being debt free. Senior households are the most likely to have no household debt.

There is no simple answer to this. The ratio between your disposable income and your debt gives you a better indication of whether the debt you have is manageable. You can use the Canada Debt Calculator from Credit Canada to get a better idea.

Mortgage not included, the average household debt in Canada is just under $75,000.

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