The Reality of High Canadian Household Debt Is Holding Families Back

The Reality of High Canadian Household Debts Is Holding Families Back

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Canadians pay more of their income carrying debt payments than households in any other G7 country. Canadian household debt statistics may come as a shock to some, but if you’re still paying off your mortgage, juggling credit card debts, working your way out of your student loans, or feeling the pinch thanks to your car loan, it will probably come as no surprise to you.

While it may seem normal if you share this experience with many of your friends and family, the international comparison is cause for concern. According to the Bank of International Settlements, an organization that provides services to central banks around the world, the Canadian household debt service ratio (DSR) is higher even than what US households faced before the 2008 financial crisis.

Canadian Households’ Debt Service Ratio

Household debt service ratio is the percentage of disposable household income that goes to debt payments, i.e., your mortgage, auto loan, credit card bills, etc. Canada’s household debt service ratio was 12.4% in the last quarter of 2020, a drop from 13.5% in 2019 that came as the result of falling interest rates. Actual household debt continued to increase, driven largely by low-interest mortgages.

One of the biggest concerns with rising household debt in Canada is that it comes at a time of historically low interest rates. Credit is widely available at low-interest rates, but as inflation picks up, the Bank of Canada will have to begin raising interest rates. That will make variable-rate mortgages more expensive and raise the DSR even higher.

The high average Canadian household debt also means that Canadians don’t have as much disposable income as households in other countries to spend or save. Lower spending may make the country’s post-pandemic recovery more sluggish, while on a personal level, it’s harder to save for retirement and other financial goals when you’re spending so much of your budget just paying back the money you’ve already borrowed.

How Canadian Household Debt Compares to the Rest of the World

Talking to friends and family, it can feel like your position isn’t unique in the world, even if you’re starting to feel the pinch of debt payments. Unfortunately, what’s “normal” here isn’t the same elsewhere, and it could be a sign that the average Canadian household debt is a problem.

In the United States, the debt service ratio at the end of 2020 was only 7.6%, meaning they spent about a third less on debt payments than Canadians. At the time of the 2008 housing bubble and subsequent financial crisis, it was as high as 11.1%, still lower than the cost of Canadian household debt today.

Looking further abroad at other G7 nations, no one had anywhere close to these levels of household debt. After Canada, the UK had the second-highest DSR in 2020, at only 9%, while the average across the G7, excluding Canada, was 6.9%. All of this is to say that Canadian household debt statistics have many worried about the consequences both to the economy as a whole and to individual Canadians struggling with debt.

Why Are Canadians in So Much Debt?

In total, Canadian households are carrying $2.1 trillion of debt as of June 2021, with growth driven in large part by mortgages and home equity lines of credit (HELOCs). While many expected the country’s housing market to crash as a result of the pandemic, it wound up driving more Canadians than ever to buy. Many first-time buyers found their down payments bolstered after months of staying at home. At the same time, many office workers suddenly enjoying the freedom of work-from-home sought out more space while searching further away from their jobs.

The hot housing market pushed prices higher than ever, and that’s left recent homebuyers in a precarious position. They’ve taken on record debt levels through their mortgages, and a housing correction could quickly leave them in trouble. If they can keep up with their payments, it won’t be a problem, but it’s much harder to build equity in a home when the mortgage is worth more than the property.

Over the course of the pandemic, many Canadians saw their credit card balances shrink, thanks to fewer opportunities to spend money and the introduction of income supports for those unemployed by the pandemic. They paid back a total of $16.6 billion in debt, with many using their CERB payments to repay credit cards. As those benefits come to an end and the world slowly returns to normal, it shouldn’t be a surprise if Canadians’ credit card balances start to climb again.

How to Take Control of Household Debt

The rising cost of servicing debt should make taming household debt an urgent priority for Canadians. Depending on your financial situation, there are several strategies you can take to reduce your debt repayments.

Budgeting & Tackling Debt

Getting out of debt on your own requires two steps: creating a budget and choosing a strategy for paying down debt.

First, you need to find a way to save money in your budget that you can put toward debt. There are a few straightforward tips you can apply to your household budget right away that can free up more money for paying down the money you owe:

  • Track your expenses for a month to find out where your money goes
  • Cancel subscriptions and other recurring expenses that you under-use
  • Stick to your shopping lists as a way to distinguish wants from needs
  • Start doing essential shopping at discount brands.

Once you have extra cash to work with, you can put it toward making extra debt payments. It helps to focus on a single debt, so while you keep up with minimum payments on all of your accounts, you focus on one particular balance to eliminate at a time. Another great idea is to pay off the debt with the highest interest rate first, a strategy known as the Avalanche Method. Once it’s paid off, you’ll notice the difference in your debt service ratio.

If you have a mortgage, how does that fit into all of this? Given today’s interest rates, it is likely to be one of the lowest-interest debts you’re carrying, and you’re better off focusing on paying off your credit cards first. Once that’s done, check the terms of your mortgage for penalties related to paying off your mortgage early. Contribute whatever you can up to the maximum allowed without penalty.

Restructuring Debt

When your debt repayments are too expensive to keep up, it may be time to restructure them. There are ways to consolidate debt to save on the interest payments you make. A better way to consolidate debt payments than a loan might be a consumer proposal.

A consumer proposal can reduce the total debt that you owe, stop collection calls, and put a stop to interest charges altogether. In a consumer proposal, you agree to make monthly payments to your creditors in exchange for significant relief. You can have up to 80% of your original debts discharged. With a debt consolidation loan, you would only be saving on interest rates. If you’ve fallen behind on your debt payments and you’re not sure how to get back on track, talk to credit counsellors about your options for restructuring your debt payments.


With mortgage debt leading the growth of Canadian household debt, there are some homeowners for whom selling and downsizing may make the most sense, especially while the housing market remains strong and their homes are worth more than their mortgage.

Downsizing or selling your home to go back to renting may be the last resort for many families, and budgeting or going through insolvency can help keep your home. However, if options like bankruptcy or a consumer proposal are off the table, this may be a direction you have to consider.

Working with experienced Licensed Insolvency Trustees is the best way to navigate these options. Book a free consultation and discuss your financial situation with us. Together, we can find a way out of debt that makes sense for you and your family. Give us a call or fill out the form below to get started on the road to debt freedom.

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Dealing with Post-Pandemic Debt

Not everyone was lucky enough to buy a home or repay their credit card balances over the pandemic. Many in hard-hit industries like arts and culture, hospitality, and tourism went for extended periods unemployed or underemployed, depleting their savings as they hoped to return to work. Many seniors who claim old age benefits saw those payments clawed back after CERB, leaving them with tough decisions and debts now.

The fact is, COVID 19’s impact on household debt has been uneven, benefiting some, while others are now dealing with eviction or mortgage arrears, depleted savings, and higher debt levels than ever.

Call David Sklar & Associates for help dealing with post-pandemic debt. A Licensed Insolvency Trustee will work with you to find a solution to your financial situation.

Take Your First Step Towards A Debt Free Life

If you are overwhelmed by debt, call us at 1-844-962-9200 to book a FREE, confidential appointment. We will review your financial situation in detail and discuss all of your options with you. Alternatively, you can fill out the form below and our team will reach out to you. 

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The team at David Sklar and Associates Inc are very professional and are willing to help you get out of debt. Highly recommended.
Melissa MacKenzie
12:35 29 Mar 23
I would like to thank the team at David Sklar and associates inc. for all the time and effort they put in to support this process for me. This topic can be challenging to disclose but a big thank you to Christine for going above and beyond in guiding me through all my options and supporting me through the decisions. I cannot recommend this group enough , as they have shown me compassion , knowledge , and understanding throughout the entire process. I look forward to the next step of this process and learning how the proper way of becoming financially educated through the support of their financial counselling team. For anyone who is struggling , just know that there is a wonderful group of educated professionals at David Sklar who are available to help!
Michelle Plouffe
18:45 14 Mar 23
It took me awhile to get up the courage to contact David Sklar but I’m so glad I did. Trina walked through my options with me and provided the knowledge I needed to make a decision to help turn my financial situation around. She is patient and empathetic and answered any and every question that I had. Trina provided me the reassurance I needed that I was making the best decisions for me and my family. I’m so happy that I reached out and now have a plan to get back on track.
M. Mackenzie
19:59 12 Mar 23
Trina was very helpful and thorough.
Sam M
15:26 12 Mar 23
Christine was very helpful, kind, and understanding. She explained everything thoroughly, answered any questions I had, and was responsive to any concerns I had. 100% would recommend
Katherine Campbell
17:29 08 Mar 23
Jackie Stanley is excellent she took the time to explain everything to me and I am so grateful to her for giving me a fresh financial start so if you have any doubts don’t and go see her if you want to achieve financial freedom!
Heather Helfield
21:24 06 Mar 23
Amazing friendly staff that knows what they are going. They make a difficult situation not so bad. Would give 10 stars if I could.
alie Balan
22:37 25 Feb 23
Very helpful and kind and gave me all the available options before helping me decide which one was best for me. I would definitely recommend Jackie
Alison Rivard
01:01 21 Feb 23
Great experience i was in financial trouble and someone of my friends recommended this company. Cori is a wonderful and welcoming person she did a very good job and came up with a smooth and flexible monthly payment after the reduction. i highly recommend this company. Thank you David sklar and special thanks to Cori.❤️🙏🏻
Jasmine Joseph
22:08 13 Jan 23
Met up with Mr. Jason Sklar to discuss more in person, very thorough and clear. He is very kind and thoughtful, I will be referring anyone with the same situation to David Sklar & Associates.
Ariel Domingo
02:33 29 Dec 22
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