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Canadian Household Debt-to-Disposable Income Ratio

Ratio of the amount households owe compared with the amount they earn net of taxes and deductions.

Key Highlights

  • In Q3 2021, Canadian households owed approximately $1.80 for every $1.00 of disposable income earned.
  • This was higher than the ratio of $1.74 for every $1.00 owed in Q3 2020.
  • This was the second consecutive year-over-year increase in the ratio, following declines in the preceding six quarters.
  • The prevailing low interest rates and the tightening of mortgage rules effective June 1, 2021 contributed to the increase.

In Q3 2021, Canadian households owed approximately $1.80 for every $1.00 of disposable income earned. This was higher than the ratio of $1.74 for every $1.00 owed in Q3 2020.

This was the second consecutive year-over-year increase in the ratio after sustained declined in the preceding six quarters.

Although interest rates fell in Q1 2020, increased uncertainty associated with the COVID-19 induced recession and higher unemployment influenced sustained year-over-year declines in the ratio throughout 2020, and in the first quarter of 2021.

The tightening of mortgage rules on June 1, 2021, while interest rates remained at historically low levels, influenced households to increase debt levels in Q2 2021 before the new rules came into effect.

Households continued to increase debt in Q3 2021, primarily because of higher borrowing for mortgages as home prices continued to increase.

As the economy reopened, households also increased their demand for some goods and services, which supported growth (1.3 per cent) in Gross Domestic Product (GDP) in Q3 2021.

The growth in household debt in Q3 2021 was higher than the rise in disposable income, leading to the increase in the household debt-to-disposable income ratio.