Canada has more household debt than any other G7 country, according to a report from the Canada Mortgage and Housing Corporation.
The debt owed by Canadian households is higher than the country’s gross domestic product (GDP), the report said, and the agency warned Canadians may not able able to weather a recession as a result.
"Unfortunately, Canada's very high levels of household debt - and the highest in the G7 - makes the economy vulnerable to any global economic crisis," said Aled ab Iorwerth, the agency's deputy chief economist.
The report noted that 75% of Canada's household debt comes from mortgages and pinned the blame on higher home prices.
"Longer term, re-establishing housing affordability in Canada will be key to reducing household debt if they want to become homeowners," ab Iorwerth said.
The average home in Canada goes for C$716,083 (US$528,000) according to the Canada Real Estate Association. In Toronto, the average is roughly C$1.15 million, and in Vancouver, it's even higher at C$1.29 million.
All told household debt is 7% higher than the country’s GDP. That ratio has flipped since 2019 when debt was roughly 5% lower than GDP.
Meanwhile, household debt in the US has fallen from 100% of GDP in 2008 to 75% of GDP in 2021, according to reports. UK household debt has declined from 94% of GDP in 2010 to 86% in 2021.
"While US households reduced debt, Canadians increased theirs and this will likely continue to increase unless we address affordability in the housing market," ab Iorwerth said.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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