Lower-income Canadians squeezed as savings fall and earnings lag behind spending.
Canada’s income and wealth divides deepened in 2025, as weaker wage growth and falling interest income weighed on lower-income households while stronger investment returns boosted higher earners, new data from Statistics Canada shows.
The agency reported that the gap between higher- and lower-income households widened modestly over the year, with the difference in disposable income share reaching 46.7 percentage points, up from 46.4 in 2024.
The divergence comes as economic conditions shifted, including softer wage growth and declining interest rates. While lower borrowing costs provided some relief, reduced returns on savings disproportionately affected households with fewer assets, further pressuring incomes at the lower end.
Lower-income households saw their disposable income rise just 2.6% in 2025, compared with a 3.8% increase across all households. Slower gains in wages and self-employment income, alongside weaker investment returns, contributed to the shortfall.
By contrast, top-income households recorded stronger growth, with disposable income rising 4.1%. Gains were driven by higher self-employment earnings and increased transfers, including employer-sponsored retirement benefits, as well as stronger investment performance tied to equity markets.
The divergence extended beyond income into savings behaviour. Lower-income households saw their financial position deteriorate as spending outpaced income growth, particularly on essentials such as housing, utilities and transportation.
Among middle-income groups, the strain was particularly evident. Households in the second income quintile experienced a notable drop in net savings, as consumption grew faster than income—suggesting increased reliance on borrowing to cover expenses.
Meanwhile, higher-income households improved their savings position, with income gains exceeding spending increases.
Wealth inequality also intensified over the year, underscoring the impact of financial markets. The top 20% of households held nearly two-thirds of total net worth by the end of 2025, while the bottom 40% accounted for just 3%.
Overall household wealth rose 5.3%, driven entirely by financial assets, which surged 9.9% on the back of strong equity market performance. In contrast, real estate values edged lower and debt levels continued to climb.
The wealth gap between top and bottom households widened to 62.7 percentage points, reflecting faster asset growth among higher-income Canadians, who tend to hold more equities.
Lower-wealth households saw more modest gains and took on additional mortgage debt, often to enter the housing market during a period of softer home prices. However, rising borrowing costs offset much of the benefit from increased property values.
Younger households were among the few groups to post above-average wealth gains, supported by stronger growth in financial assets. At the same time, they continued to carry elevated debt burdens, with debt-to-income ratios remaining high despite some improvement.
Even as interest rates eased, debt servicing pressures persisted. For younger Canadians, the share of income devoted to interest payments remained broadly unchanged, reflecting both higher debt levels and refinancing at rates above those seen earlier in the pandemic.
