The Reality of High Canadian Household Debt Is Holding Families Back

The Reality of High Canadian Household Debts Is Holding Families Back

Table of Contents

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.

Contact A Trustee

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. 

Share This!

I was quite nervous and a little embarrassed that I needed financial advice. I met with Jerry Janiec and he was very helpful. He made me feel comfortable and explained everything in easy to understand terms so that I understood what my options were. I would recommend David Sklar & Associates for anyone in my position.
Melissa Blackburn
19:53 17 Nov 22
I was fortunate enough to be referred to David Sklar & Associates Inc. by a family member. Now in the10th month of a Consumer Proposal process, I am very impressed with the organization, professionalism and impeccable customer representation that I have experienced. To this effect, I amparticularly thankful to Jerry Janiec and Rhoda Lewis for their excellent work.
Suzanna Vaclavik
12:21 16 Nov 22
Recently dealt with Christine at David Sklar & Assoc. and worked out a Consumer Proposal to put forth to my creditors for my Credit Card debt. She was very courteous, professional and put me at ease with a proposal that I can afford on a monthly basis, which will eliminate my debit in a reasonable timeframe. I would recommend Christine and this firm in a heartbeat. Very happy with the service and attention I got !!
Patrick Kovanchak
01:59 15 Nov 22
Excellent customer service. Special thanks to Olga for being prompt and helpful. She’s a star. Bibi is helpful as well. Great agency to work with.
Fady Tadros
19:28 14 Nov 22
After seeing your commercial play on CP24, I realized that it addressed all the questions and concerns I had about my financial situation. It all started with my one phone call to your office. I had the extreme pleasure of working with Cori Naron at your St. Clair West office in September 2022. She took the time to explain what my options were knowing that it was a very stressful situation with my debt load. She made me feel at ease with my decision to file a consumer proposal and outlined the benefits to me. She is thorough and her attention to detail is outstanding. While it takes a little while to reap the benefits of making this hard decision, she took the time to reassure me that it was in my best financial interest. Well done David Sklar & Associates for having such an amazing representative at your company and for allowing me to "get a fresh start"!
14:31 14 Nov 22
Very highly perfection individual, well executed and greatly knowledgeable in his work, which guided me me the right decisions making opportunities. Thank you.Sincerely, Peter Romasz
Peter Romasz
20:18 13 Nov 22
Trina Powell was very helpful and made the process very easy. Thanks again for all your help.
Jennifer Hager
17:59 06 Nov 22
Jerry is a caring, trustful, knowledgeable and competent Sklar associate. He understood my needs and quickly went to work on my behalf. Ever indebted to David Sklar and Associates and especially to Jerry for his professionalism and caring approach.
David Craig
19:31 31 Oct 22
Jerry Janiec is very knowledgeable and very helpful everything he explained to me was straightforward and very easy to understand. I'm very pleased to be working with Jerry to become debt free. I will definitely be recommending to any friends or colleagues your services.Thank you again for helping me get on the road to be debt free. 5 Stars is well deserved.
Christopher Rakobowchuk
17:41 27 Oct 22
Hi there! I am very glad to met this company, especially Jackie Stanley. Thanks for her great work and help me to save my money! Very appreciable!
Mehri Agil
02:43 26 Oct 22
DS david skalr icon

Book your free consultation.

Call 1-844-962-9200 or fill out the form below.

We know this is stressful, but you’re not alone. It’s going to be okay. 
Book your free consultation today. We’ll do the rest.

Contact Us