Canadians are among the world’s most indebted. How they handle that debt varies
Global News
The report said interest rate hikes by the Bank of Canada from 2022 to 2023 has left many Canadians facing issues with saving and households debt.
A new report from Desjardins shows Canadians are facing high levels of debt, leaving a majority facing a “fragile situation.”
The report, published Tuesday, showed that while household disposable income and expenditures are up, allowing the household savings rate to stay higher than before the COVID-19 pandemic, disparities exist over how much people can save depending on the income bracket they’re in.
Even after a recent interest rate cut to 4.75 per cent, the rate increases by the Bank of Canada through the pandemic from 0.25 per cent in March 2022 to five per cent in July 2023 came as Canadians had the third-highest household as of the fourth quarter of 2023.
It’s not the first time Canada’s reached this level, having also been the third-most indebted nation in 2021.
“The effect of indebtedness is really unequal for Canadian households of different revenue categories,” Lorenzo Tessier-Moreau, Desjardins principal economist, told Global News. “Canadians on the lower spectrum of income are impacted a lot more by the effect of interest rate hikes.”
More than half the debt, both mortgage and consumer, is held by Canadians in the two highest income quintiles. But 60 per cent of households in the lower three income brackets still hold 45 per cent of total debt even though the report shows just 35 per cent of income and assets belong to them.
The report adds this group also take on more debt through spending.
While the wealthiest Canadians are saddled with the majority of the debt, Tessier-Moreau says they also have more assets and investments. The report suggests the wealthiest households were able to save more than $35,000 on average in 2023.
