Younger Canadians struggling with debt

By the Editorial Team · Saturday, October 17, 2026

Canada remains the G7 leader in household debt levels, but a C.D. Howe Institute report finds no widespread debt crisis while highlighting growing financial hardship among younger and lower-income Canadians. The report urges the government to maintain strict mortgage lending rules and implement broader economic policies to support productivity and regional growth to address deepening income and generational divides.

Canada continues to hold the highest household debt level among G7 nations, yet a recent report from the C.D. Howe Institute indicates the country is not currently facing a broad debt crisis. The think tank’s analysis highlights that while aggregate debt burdens have eased slightly since 2023, specific demographic groups are experiencing significant financial strain.

Data from Statistics Canada shows that the household debt service ratio (DSR)—which represents the proportion of disposable income devoted to principal and interest payments—declined from 15.17 percent in the first quarter of 2023 to 14.5 percent in the second quarter of 2026. Despite this decrease, the report underscores growing disparities in financial health across income levels and age groups.

Younger Canadians and those with lower incomes or elevated debt levels are encountering greater difficulties managing their financial obligations. The C.D. Howe report details a pronounced divide in savings patterns: in 2025, the top 20 percent of earners saved 34 percent of their disposable income, while the next 20 percent saved 16 percent. Conversely, the middle income quintile recorded a negative savings rate of 12 percent, and the lowest income group faced a severe negative savings rate of 119 percent—indicating that expenditures exceeded earnings by a wide margin.

The report characterizes these outcomes as part of a "K-shaped" economic recovery in Canada, mirroring trends observed across North America, where financial and economic results have diverged significantly between income groups.

The generational divide is also notable. Citing Bank of Canada data from late 2025, the report found that nearly half of Canadians aged 18 to 24 perceived at least a 50 percent chance of missing a debt payment within the following three months. This contrasts with 27 percent among those aged 25 to 54 and less than 1 percent for individuals 55 and older.

Housing market pressures have contributed to the challenges as well. Mortgage holders in high-cost cities such as Toronto and Vancouver carry substantial debt, with mortgage arrears in Toronto more than quadrupling from 2022 to 2025, according to a February report from the Canada Mortgage and Housing Corporation. The agency identified first-time buyers entering the market during the pandemic as particularly vulnerable.

To address these issues, the C.D. Howe Institute recommends that the government retain the current minimum qualifying interest rate for mortgages and uphold loan-to-income limits. It also suggests exploring options to make longer-term mortgages more accessible. Beyond credit measures, the report advocates for policies aimed at boosting productivity per worker, such as competitive business taxation and reducing internal trade barriers, to more sustainably alleviate household debt pressures. Additionally, supporting mid-sized cities in attracting workers and businesses could help ease regional economic disparities.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.