C.D. Howe Institute report finds national debt averages mask deepening strain on vulnerable Canadians
Canada holds the highest household debt load in the G7, but a new report from the C.D. Howe Institute warns that the real danger lies in who is carrying the weight.
Released October 14, 2026, the report, Beyond the Headlines: Where Canada's Household Debt Problem Lies, finds that while the country's debt-service ratio (DSR) - the share of household income directed toward debt payments - has eased from its 2023 peak, that improvement is unevenly distributed.
Mawakina Bafale, research officer at the C.D. Howe Institute, and Peter MacKenzie, senior policy analyst at the Institute, identify younger Canadians, lower-income households, and highly leveraged homeowners as the groups most exposed to financial distress.
The debt divide hiding in plain sight
In 2025, the highest-income households saved 34 per cent of their disposable income, according to the C.D. Howe Institute report. Those at the bottom of the income scale spent far more than they earned, recording a net saving rate of -119 per cent.
"These diverging fortunes show why national averages can mask the financial strain some Canadians are facing," said Bafale.
Canadian household net worth surpassed $18.6 trillion in the first quarter of 2026, lifted by recovering real estate values and equity market gains, even as debt loads climbed for the sixth consecutive quarter, according to Statistics Canada.
The debt-to-disposable-income ratio reached 179.6 per cent (roughly $1.80 in debt for every dollar of disposable income) underscoring the structural imbalance that the C.D. Howe report places in sharper relief.
Advisors working with clients in the lower and middle-income segments will recognise the environment the report describes: households where rising borrowing costs are not offset by asset appreciation, and where debt repayment is crowding out savings and investment.
Generational pressure and the housing squeeze
The generational dimension of Canada's debt challenge is particularly acute.
In late 2025, Canadians aged 18 to 24 reported a nearly 50 per cent probability of missing a debt payment within the following three months, according to the C.D. Howe Institute. That figure dropped to 27 per cent among those aged 25 to 54 and fell sharply to just 0.7 per cent among Canadians aged 55 and older.
Younger Canadians carrying unsecured debt have also been unable to benefit from the home-equity gains that have cushioned many older households through the rate cycle. For advisors serving younger clients, particularly those who entered the housing market at peak prices, the report reinforces the importance of stress-testing debt capacity and building liquidity buffers into financial plans.
Housing costs compound the pressure for highly leveraged homeowners in Toronto and Vancouver who took out mortgages when interest rates were at historic lows and are now renewing at substantially higher rates.
Rising consumer insolvency filings add to those concerns. The C.D. Howe report notes, however, that current statistics cannot distinguish between households struggling to make payments and those whose debts exceed their assets; a gap the authors argue must be closed.
What advisors need to know - and what policymakers should do
The report makes three recommendations, each with implications for how advisors counsel clients and how the industry monitors risk.
First, the authors call for maintaining mortgage underwriting guardrails and making longer mortgage terms more viable - a measure that would give financially stretched homeowners more predictability in their debt obligations.
Second, they advocate expanding housing supply in job-concentrated markets and helping mid-sized cities such as Kitchener-Waterloo, London, and Kamloops compete for workers and businesses, which would reduce the concentration of housing risk in Canada's largest urban markets.
Third - and most relevant for those tracking client insolvency risk - the authors recommend that the Office of the Superintendent of Bankruptcy begin publishing statistics that distinguish between cash-flow insolvency and balance-sheet insolvency.
"A homeowner with significant equity may be able to get back on track by refinancing, while someone whose debts exceed their assets faces a much deeper financial challenge," said MacKenzie. "Understanding the difference is essential to developing the right policy response and addressing the household debt pressures that are concentrated among younger, lower-income, and highly leveraged Canadians."
For advisors, that distinction matters in practice: a client who is temporarily cash-flow constrained may require a very different strategy than one who is technically insolvent. The C.D. Howe recommendations, if implemented, would give the industry better data to work with and give advisors a clearer picture of where genuine financial distress begins.
