Despite widespread concerns about high debt levels, Canada’s household balance sheet is in surprisingly strong shape. While household debt remains elevated at 177% of disposable income, it has remained stable as a share of income for over a decade. The real story is the massive accumulation of financial assets, which has pushed national net worth to nearly $20 trillion. This creates a “wall of wealth”, with roughly $7 in assets for every $1 of debt, according to Bank of Montreal chief economist Doug Porter.
The financial cushion has helped cushion the economy against shocks, supporting consumer spending and preventing a mortgage renewal crisis. Only 0.29% of mortgages were in arrears as of July, near historic lows. Canadian bank stocks have also surged, up over 80% on average since the housing market peaked in 2022, as major credit losses failed to materialize.
Much of this wealth comes from the stock market, not wage growth or housing. The S&P/TSX Composite Index has risen more than 70% since 2022, adding $2 trillion to household net worth. However, this reliance on financial markets introduces new risks. As Porter noted, the economy is now more sensitive to financial cycles than traditional economic factors.
Not all Canadians are benefiting equally. Lower-income households and those under 25 face significant financial strain, with nearly 50% reporting a likelihood of missing debt payments. In contrast, those aged 55 and older reported just a 0.7% chance. The national averages mask these disparities, highlighting a growing divide across income levels and generations.