Households

Overall, Canadian households have proven resilient. But debt levels are elevated, and some pockets of stress remain. The potential impact on employment from ongoing trade uncertainty and geopolitical conflicts is a key concern.

The financial health of Canadian households has changed little since the previous Report. Household indebtedness remains high but below its peak in 2022. The share of borrowers falling behind on debt payments stabilized over the past 12 months after having increased over the previous four years. But this overall picture hides important differences between households, and some face greater financial pressure than others.

Risks to household finances have increased. Trade‑related risks remain, while the war in the Middle East has added to economic uncertainty. The main risk to households is that economic or geopolitical developments could lead to a downturn and a sharp rise in unemployment.

Household financial health

Debt levels remain elevated, but wealth is rising

Canadian households continue to carry high levels of debt relative to their income, making them vulnerable in the event of a job loss or a large, unexpected expense. The ratio of household debt to disposable income has increased slightly over the past 12 months but remains below the peak level observed in 2022 (Chart 5).

On average, households appear better off when wealth is taken into account. Debt relative to household net worth has edged down and is well below its pre‑pandemic average. This indicates that, overall, household finances have improved, even though debt levels remain high.

Rising house prices have helped drive up household net worth over time. However, housing markets have softened over the past 12 months. Increases in net worth over this period have come mainly from higher values for financial assets, reflecting strong stock market gains (see the Financial markets section).

But wealth gains are not evenly distributed among Canadians, and some highly indebted households have very little savings or financial flexibility to cope with an unexpected life event.1

Over the past 12 months, borrowers who took out a mortgage at very low interest rates during the pandemic have been renewing at higher rates. Many mortgage holders faced higher payments at renewal in 2025 and in the first half of 2026, but most have been able to manage the increase. As a result, lenders have not seen a broad rise in loan losses.

The mortgage stress test provided some cushioning, since more than 90% of borrowers who renewed in the past 12 months did so at rates below their qualifying rates.2 Some borrowers also lessened the increase in their payments by extending the amortization period on their mortgage.

Mortgage arrears remain low overall, with the share of mortgage accounts more than 60 days behind on payments only slightly above the 2018–19 average (Chart 7). However, arrears have risen more among borrowers with large mortgage balances relative to their income. These borrowers represent about 17% of outstanding mortgage balances. Stress is most acute among Toronto area borrowers who took out a mortgage in 2022–23. These borrowers represent only about 2% of outstanding balances.3

Falling home prices can limit financial flexibility

The price of a typical home in Canada has fallen by about 5% in the past 12 months, and by 20% since prices peaked in 2022. Price declines have been most pronounced in Ontario and British Columbia, where new listings are outpacing sales by a growing margin.

Pressures are greatest in condominium markets, particularly in Toronto and Vancouver, and have created challenges for both homeowners and investors. Some buyers have struggled to close on pre‑construction purchases because price declines have made it harder to secure financing.4

Lower home prices are not necessarily a problem for households that can keep making their mortgage payments. But households that need to refinance to manage their payments may not qualify if they have too little equity to meet lenders’ requirements. In this way, lower home prices increase the risk that some households could fall behind on their payments.

Risks to household finances

Some mortgage holders will face higher renewal rates

Over the next 12 months, the last of the five‑year, fixed‑payment mortgages taken out during the pandemic will renew. This group represents about 12% of all outstanding mortgages in Canada. On average, these borrowers will see their payments increase by about 15%, broadly in line with increases similar borrowers have faced over the past 12 months (Chart 8).

The remaining renewals over the same period, which represent about 14% of outstanding mortgages, are variable‑payment mortgages and shorter‑term, fixed‑payment mortgages that were taken out after rates rose in 2022 and 2023. These borrowers, on average, will not see their payments change at renewal. By the second half of 2027, nearly all mortgage holders facing large payment increases will have renewed.

Strong income growth over the past five years should allow most borrowers to manage payment increases.5 But those with weaker income growth may have less flexibility because the decline in home prices has reduced equity buffers and made refinancing more difficult.6

At current home prices, only a small share of borrowers would not be able to refinance at renewal—an estimated 4% in 2027, or about 9% of borrowers in the Toronto area.7 If home prices were to fall by another 10%, that share would rise modestly to about 7% nationally and 12% in the Toronto area.

Global developments could weaken economic activity and employment

The Canadian economy has been resilient in the face of multiple shocks, and the unemployment rate has remained in the range of about 6½% to 7% over the past 12 months. However, ongoing trade uncertainty and the war in the Middle East could cause economic conditions to deteriorate.

Households would feel the effects of a weaker economy largely through the labour market. If job losses were to rise, households without sufficient savings could fall behind on mortgage and consumer credit payments.

Endnotes