Higher incomes and lower housing costs give PEI residents an edge in managing debt
Households in Prince Edward Island (PEI) are handling debt more effectively than the rest of Canada, according to new data from Statistics Canada.
The findings suggest that Islanders are in a stronger financial position, benefiting from lower overall debt levels, increased wages, and better investment returns – factors that have helped them reduce their debt-to-income ratios faster than other provinces.
“Overall, we would say PEI is faring better in terms of these financial indicators than other provinces,” said Amanda Sinclair, assistant director of Statistics Canada's national economic accounts division, in an interview with CBC News.
One of the biggest factors driving this trend is rising household incomes. In Q3 2024, wages in PEI grew by 7.7%, more than double the national wage growth rate of 3.6%.
“Wages did increase more in Prince Edward Island relative to Canada in the third quarter of 2024 compared to a year earlier,” Sinclair noted.
At the same time, Islanders tend to carry less debt than residents in high-cost housing markets like Ontario and British Columbia, where mortgage payments take up a larger portion of household income.
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Another contributing factor is stronger-than-average investment earnings. With lower housing costs, many Islanders have had more disposable income to put into savings and investments.
“The fact that housing might be cheaper, their residents are able to save more money or invest more money,” Sinclair explained. “Then, when interest rates go up, they're able to earn bigger returns because they had savings in financial investments. It's sort of like a doubling effect.”
Across the country, household debt levels have been improving. The debt-to-income ratio—which compares the amount of debt Canadians owe to how much they earn—declined for the sixth straight quarter, dropping to 173.1% in Q3 2024 from 175.3% in Q2.
This means that, on average, Canadian households have $1.73 in debt for every dollar of disposable income. The report attributes this improvement to stronger income growth, which has outpaced the rise in borrowing.
However, Sinclair cautioned that Canada’s household debt remains high compared to other countries and that most of it comes from mortgages.
“Regardless of the recent trends of this slowing down, the debt-to-income ratio does remain quite elevated for Canadian households,” she said. “When you compare this to other countries, it does stand out as quite high.”
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