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Household Debt in Canada is on the Rise

The numbers are in from Statistics Canada for the 2022 year end household debts of Canadians – and they are not good. Canadians are feeling a triple whammy of increasing housing costs, price increases to everyday goods like gas and groceries, and interest rate hikes on their debt. 

The numbers are showing that not only has the total debts of Canadians ballooned since the pandemic, many of us are now relying on record high levels of credit card debt to make ends meet from day to day.

Overall household debt has steadily increased since 2018. It was common to hear that Canadians paid down their debts during the pandemic, and many did. However, the Statistics Canada data shows overall our debts have continued to increase from 2018 to present. 

Total Household Credit  Usage


Increasing Mortgage Costs

Why is our mortgage increasing? The first reason is that the majority of debt held by Canadians is for their mortgages. With housing getting more and more expensive over the last few years, not just the price paid for properties went up but increases in interest rates as well.

The most current Statistics Canada data for how much Canadians are paying to service their debts are for Q3 2022, but it shows a serious increase in mortgage debt servicing costs.

Mortgage Debt PaymentsSource: Statistics Canada. Table 11-10-0065-01  Debt service indicators of households, national balance sheet accounts

Aside from a dip in mortgage debt payments during the pandemic, when many Canadians were unemployed or took advantage of lender flexibility in waiving payments, the increased costs of borrowing have hit Canadians hard. The 2019 Statistics Canada showed Canadians made mortgage debt payments of $25.2 billion. By Q3 2022 this had risen to $30.6 billion. 

Many of us thought in 2019, before the pandemic hit, that Canadians were reaching breaking points in terms of housing affordability. The Bank of Canada was consistently issuing warnings to Canadians to reduce debt, especially mortgage debt, as it was clear that the costs of housing were growing faster than Canadians’ ability to pay their mortgages.

There was nowhere for interest rates to go but up. And now they have. The impact has been to more than just homeowners. Commercial property owners are now paying more to service their debt as well, putting pressure on the rental market.

Since the end of September, 2022 the Bank of Canada has raised interest rates from 3.25%  a further 1.25% to 4.5%, a 38% increase. It is highly likely that the trend of mortgages becoming increasingly expensive will accelerate. This is not just due to the increase in rates impacting those with variable mortgages, but also because additional mortgage holders with fixed rates will be ending their terms and need to refinance at current rates.


Out of Control Inflation

Statistics Canada’s data on inflation shows exactly what everyone has been telling us:  everything has become more and more expensive.

While inflation is starting to decline, we are now well above pre-pandemic prices for everything, including energy and food. While prices may flatten in the short term, it is unlikely that they will reduce significantly in the near future. Canadians have to find some way to pay for the basics of life with incomes that have not risen to the same extent. We are finding that those on fixed incomes are especially vulnerable to inflation.

The Tipping Point: Credit Card Debt Increases

While some Canadians have relied in the past on savings or accessing equity in their homes, when those are not available anymore, they turn to use of credit to meet their day-to-day needs.   

If we take a deeper dive into the most current numbers from Statistics Canada we can see that household credit card debt has risen to nearly $93.3 billion at the end of December 2022. 

This is higher than the pre-pandemic all-time high of $89.6 billion in December 2019, and a whopping 31% higher than the pandemic low of $73.3 billion of February 2021. The trend does not show a slowdown anytime soon.

Many Canadians hunkered down during the pandemic and they took the opportunity of the reduced ability to spend their disposable income and used it to pay down their consumer debt. Many of those who were able to receive government support money also managed to reduce their debt loads or often were able to hold the line financially and not increase their debts. 

That changed however as we came out of the pandemic and began spending again. Many Canadians quickly burned through their savings and then had to start relying on their available credit to pay day-to-day bills. Despite tight times in the pandemic, most lenders did not reduce the credit limits of their customers. As Canadians came out of the pandemic and needed credit, it was there waiting for them.

Overall, the situation for the average Canadian is looking poor, in fact much worse than we were before the pandemic. We are expecting more and more people to reach their limits in terms of ability to service their debt, and maxing up their available credit as lenders begin to tighten their belts. 

If you or someone you know has reached their financial limits they should speak with a Licensed Insolvency Trustee. Take advantage of the free initial consultation to find out what alternatives are available to help with unmanageable debt and get a fresh start. 

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David Macdonald

As a Licensed Insolvency Trustee I help people and small business owners resolve their financial problems. I’ve practiced exclusively in both consumer and corporate insolvency, litigation support and forensic accounting since 2003 in British Columbia, Alberta and the Maritime provinces.