Young, low-income Canadians bear brunt of household debt

A C.D. Howe Institute report reveals that Canada’s household debt burden disproportionately affects younger and lower-income Canadians. While the country’s overall debt-service ratio has eased, the report highlights a growing divide in financial strain. Canada holds the highest household debt load in the G7, and the report shows that national averages mask the deepening strain on vulnerable groups.

Released on October 14, 2026, the report titled Beyond the Headlines: Where Canada’s Household Debt Problem Lies exposes the uneven distribution of debt-related challenges. Mawakina Bafale, a research officer, and Peter MacKenzie, a senior policy analyst, identify vulnerable groups facing financial distress, including younger Canadians, lower-income households, and highly leveraged homeowners.

The debt divide in Canada

In 2025, the highest-income households saved 34% of their disposable income, while lower-income households spent 119% more than they earned. Bafale notes, “These diverging fortunes show why national averages can mask the financial strain some Canadians are facing.”

Canada‘s household net worth reached $18.6 trillion in Q1 2026, driven by real estate and equity market gains. The debt-to-disposable-income ratio reached 179.6%, equivalent to roughly $1.80 in debt for every dollar of disposable income. This ratio shows the structural imbalance in Canada’s household finances, as highlighted by the C.D. Howe report.

Generational debt challenges

The report shows the generational aspect of Canada’s debt problem. In late 2025, 18-24-year-olds faced a 50% chance of missing a debt payment within three months, compared to 27% for those aged 25-54 and just 0.7% for individuals 55 and older. This generational pressure is exacerbated by the inability of younger Canadians to benefit from home-equity gains, unlike older households.

The housing market further exacerbates the issue, particularly in cities like Toronto and Vancouver. Homeowners who secured mortgages at low-interest rates now face significantly higher renewal rates, increasing financial pressure. Rising consumer insolvency filings add to these concerns, though current statistics fail to differentiate between cash-flow and balance-sheet insolvency, a gap the report aims to address.

Recommendations for advisors and policymakers

The C.D. Howe Institute report offers three key recommendations. First, it suggests maintaining mortgage underwriting standards and promoting longer mortgage terms for greater financial predictability, a measure that would benefit financially stretched homeowners.

Second, the report advocates for expanding housing supply in job-concentrated markets and supporting mid-sized cities like Kitchener-Waterloo, London, and Kamloops to reduce housing risk concentration in major urban centers. This approach would help distribute housing demand more evenly across the country.

Lastly, the authors recommend that the Office of the Superintendent of Bankruptcy publish statistics differentiating between cash-flow and balance-sheet insolvency. MacKenzie explains, “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.” This distinction is key for understanding and addressing the depth of financial challenges faced by households.