Let’s start with some good news – after years of high interest rates, Canadians can celebrate two rate reductions from the Bank of Canada early in 2025. While rates are lower, many Canadians are still struggling and money remains a top source of stress. A high cost of living as well as a persistent threat of a trade war and recession are adding to feelings of financial uncertainty and concern among individual Canadians and businesses.
The State of Canadian Debt
For Canadians, money is top of mind. Forty-two percent stated money was their greatest stressor when responding to the 2025 Financial Stress Index from FP Canada. Forty-nine percent of Canadians admitted to losing sleep due to financial worries. The majority of these respondents were younger Canadians and lower earners (less than $55 in annual household income).
Top concerns among Canadians include having the ability to pay their bills on time, saving enough for retirement, and having enough money set aside to pay for a major purchase. Grocery prices, inflation, and housing prices are some of the main factors influencing Canadians’ financial stress.
Average debt
Consumer debt reached $2.54 trillion at the end of 2024, according to a recent report by Equifax Canada. This is a 4.6% increase over 2023. At an individual consumer level, the average non-mortgage debt is $21,931.
In Q4 2024, those in the 46 to 55-year age group had the highest average debt levels at $34,564, up 3.71% from the previous year. Canadians in the 56 to 65 age group have the largest average debt increase year-over-year at 5.53%, and those aged 36 to 45 have the largest increase in delinquency rates, year-over-year at 23.20%.
Average debt is also varied based on geography. The province of Newfoundland has the highest average debt at $24,843, followed by Alberta ($24,537), and Prince Edward Island (PEI) ($23,664).
The city of Fort McMurray has the highest average debt at $37,861, followed by Calgary ($24,078), and St.John’s ($23,968).
Credit cards
As of Q3 2024, credit card debt was up 9.4% year-over-year. This increase is partly attributed to population growth and an increase in the average credit card balance for those who are unable to pay their credit card in full.
While delinquency rates are starting to flatten for many Canadians, consumers who are new to credit and newcomers to Canada saw the largest rise in missed payments in Q3 2024, compared to Q3 2023. For these groups, 1 in 22 have missed a credit payment in Q3 2024, versus 1 in 28 last year. This is likely a result of rising unemployment and high inflation over the last few years.
Insolvencies
Consumer insolvencies rose by 6.1% in Q4 of 2024 compared to the previous year. Ontario, Quebec, and PEI saw the largest increase in percent change year-over-year.
Business insolvencies decreased by 12.4 % from Q4 2023 to Q4 2024. Nova Scotia, Manitoba, and British Columbia saw the largest increases in business insolvencies.
Mortgages
Overall, some Canadians are doing better thanks to lower interest rates, while others continue to feel the pressure. This is the case for many mortgage holders in Ontario and British Columbia who are feeling squeezed due to high living costs and mortgage renewals with higher payments.
In Q4 2024, 11,000 mortgages missed a payment in Ontario. This is nearly three times higher than the number in 2022. The 90+ day mortgage balance delinquency rates rose to 90.2% year-over-year to 0.22%. Higher than in other provinces. Non-mortgage delinquency rates in Ontario also increased by 46.1% from Q4 2023.
While a drop in rates has led to signs of recovery in the mortgage market and the return of first-time homebuyers, those renewing mortgages in 2024 and 2025 continue to pay higher prices. Homebuyers that took on a mortgage in 2020 and 2021, in a low-interest environment, are renewing at higher rates and seeing monthly payments rise.
What’s Contributing to Household Debt?
There are a variety of factors contributing to Canadian household debt, including:
Cost to borrow
As of Q4 2024, nearly half (48%) of Canadians who responded to a recent survey by TransUnion expressed worry over interest rate increases and how this would affect their ability to pay off debt. While the Bank of Canada continues to cut interest rates, Canadians are still concerned about the cost of borrowing.
According to data from Equifax Canada, one of the largest drivers of consumer debt in Q3 2024 was auto loans. As the price of used cars fell and consumers could find better rates on new cars, there was an increase in demand for auto loans. Non-bank auto loan debt increased by 12% year-over-year, and bank loans by 2.7%.
Cost of living
Canadians continue to try to cope with the rising cost of living. In a Q4 2024 report from TransUnion, 44% of respondents said their household finances are worse than expected. Eighty-two percent of respondents reported the inflation of household goods, such as gas and groceries, as one of their top three financial concerns. Twenty-six percent said they expected to be unable to pay at least one of their bills or loans in full and would have to make a partial payment.
Mortgage debt
As interest rates continue to fall, the pace of missed mortgage payments has started to slow. However, delinquency rates are still higher than in 2019, pre-pandemic. Homeowners in Ontario and British Columbia are the provinces driving the delinquency rates as affordability remains a challenge for many.
Approximately 1.2 fixed-rate mortgages are up for renewal in 2025, with 85% of these originally contracted with the Bank of Canada interest rate of 1% or below. Canadians who already renewed their mortgage in Q4 2023 saw their monthly payments increase by an average of $457. In Ontario and British Columbia, average monthly payment increases exceeded $680.
Wage stagnation
The majority of Canadians (59%) expect their wages to stay the same over the next year, according to data from TransUnion. Many Gen X respondents revealed that their finances were worse than expected in 2024.
How Are Canadians Coping With Rising Costs?
As the cost of living continues to rise, Canadians are finding creative ways to cope. According to TransUnion’s Consumer Pulse Study, consumers intend to focus on:
- Cutting back. Canadians of all ages are choosing to cut their discretionary spending, limiting travel, and entertainment, cancelling subscriptions, and eating out.
- Repaying debt. Many Canadians are focused on paying their debt off faster and building an emergency fund.
- Reducing retirement savings. Unfortunately, some Canadians are cutting back their retirement savings or even dipping into their retirement savings to cope with expenses.
How to Deal With Rising Debt
If you’re feeling the financial pinch and you’re struggling to keep your head above water, speak to a Licensed Insolvency Trustee. A LIT is a debt professional who can assess your financial situation and recommend a path forward. Trustees can offer the largest range of debt solutions, including a Consumer Proposal or Bankruptcy. Don’t deal with your debt alone, get the help you need to move forward. For a free, no-obligation debt consultation call us at 1-888-371-8900 or fill in our online contact form.
