Canadian households are more in debt than those in any other G7 country, and the amount they owe is now more than the value of the country’s entire economy.
That was one of the main takeaways of a new report from Canada’s housing agency, the Canada Mortgage and Housing Corporation, which backstops much of the country’s housing market via mortgage insurance.
In a report published Tuesday, the CMHC’s deputy chief economist Aled ab Iorwerth said Canada’s economy is more at risk to whatever crises may arise because of how much debt Canadian households have racked up.
“Canada’s very high levels of household debt — the highest in the G7 — makes the economy vulnerable to any global economic crisis,” he said. “When many households in an economy are heavily indebted, the situation can quickly deteriorate, such as what was witnessed in the U.S. in 2007 and 2008.”
Household debt now sits at 107 per cent of Canada’s GDP, the report notes, a ratio ab lorwerth said has marched “inexorably” higher in recent years. As recently as 2008, household debt in Canada was 80 per cent of GDP, before rising to 95 per cent by 2010 and eclipsing 100 per cent during the pandemic.
“By contrast, household debt in the U.S. fell from 100 per cent of GDP in 2008 to about 75 per cent in 2021,” he said, adding that the ratio also dropped in places like the U.K. and Germany. “While U.S. households reduced debt, Canadians increased theirs and this will likely continue to increase unless we address affordability in the housing market.”
The CMHC report is the second in as many weeks to sound the alarm on debt loads. The Bank of Canada’s Financial System Review last week warned that the sharply higher cost of carrying a mortgage is a major risk to the economy in the coming years.
The central bank has raised its benchmark lending rate aggressively in recent months in an attempt to bring down record-high inflation.
Variable rate mortgage holders have felt the pinch of higher rates immediately, but the central bank warned that fixed-rate holders should brace for a similar impact when they renew in the coming years.
While many families manage to stay on top of their debt loads as long as their income level stays the same, it becomes a problem for the entire economy when that suddenly and unexpectedly changes, the CMHC warned.
“We see early warning signs that more and more consumers are getting into financial difficulties,” the report said. “It becomes difficult, if not impossible, for many mortgage holders to service their debt.”
Mortgage debt the biggest problem
The CMHC report noted that three quarters of Canadian household debt is tied to mortgages. The housing agency said that any desire to address a looming debt problem is closely linked to the country’s housing market.
“As house prices increase in Canada, households take on debt leading to a rise in the total amount of debt in the economy,” ab Iorwerth said. “Longer term, reestablishing housing affordability in Canada will be key to reducing household debt if they want to become homeowners.”
Canadians are seeing unexpected inflation increases for the first time in almost a year largely driven by the rising costs of rent, mortgages and groceries.
Benjamin Tal, an economist with CIBC, said Canada is in the midst of an “affordability crisis” when it comes to housing, and it’s one that has been years in the making.
The current surge in immigration is drawing attention to the problem and spurring provincial, municipal and federal governments to do whatever they can to get more housing units built, but he said at least part of the solution must come from ending the obsession with home ownership in the first place.
“We need to create a situation in which you are 35 years old, you’re married, you have two kids and you are renting — nothing is wrong with you,” he told CBC News in an interview.
“The situation is getting worse and worse and worse so we have to treat it as a crisis — and the rental solution must be part of it.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
