Mortgage costs, inflation, and stagnant wages put pressure on borrowers nationwide
Canadian households are facing mounting financial stress as consumer debt and insolvency filings continue to rise, driven by a mix of higher borrowing costs, inflation, and mortgage renewals at elevated rates.
Despite recent interest rate reductions by the Bank of Canada, household debt has not eased.
“Although some consumers are benefiting from lower interest rates and experiencing financial improvements, many in Canada are struggling with debt pressures and high cost of living,” said David MacDonald, insolvency trustee at Allan Marshall & Associates.
According to Equifax Canada, total consumer debt reached $2.54 trillion at the end of 2024, up 4.6% from the year prior. The average non-mortgage debt per consumer stood at $21,931, with those aged 46 to 55 carrying the highest average debt at $34,564, a 3.71% annual increase.
Regionally, Newfoundland and Labrador recorded the highest average debt per consumer at $24,843, followed by Alberta at $24,537, and Prince Edward Island (PEI) at $23,664.
The financial strain is reflected in rising insolvency rates. Consumer insolvencies rose 6.1% in Q4 2024 compared to the same period in 2023, with Ontario, Quebec, and PEI experiencing the largest year-over-year increases. In contrast, business insolvencies declined by 12.4%, though provinces like Nova Scotia, Manitoba, and British Columbia saw notable increases in business-related filings.
Mortgage renewals drive up costs
Canadians renewing their mortgages are encountering sharp increases in monthly payments, especially those who secured low fixed rates in 2020 and 2021. With more than 1.2 million fixed-rate mortgages set to renew in 2025, 85% of which were originated when Bank of Canada rates were at or below 1%—borrowers are facing a new financial reality.
A recent Royal LePage survey found that 57% of homeowners renewing their mortgages this year expect higher monthly payments, and 22% anticipate significant increases. Of those expecting an increase, 81% say it will strain their household finances. Many are preparing to reduce discretionary spending or adjust their budgets to accommodate the added costs.
According to data from Q4 2023, Canadians who already renewed saw average monthly payments rise by $457, with increases in Ontario and British Columbia exceeding $680.
What’s contributing to household debt?
Several underlying factors are contributing to the rising household debt burden. According to TransUnion’s Consumer Pulse Study from Q4 2024, 48% of Canadians expressed concern about how interest rates might affect their ability to manage debt.
At the same time, 44% said their household finances were worse than expected at the end of the year. A staggering 82% identified inflation on essentials, such as groceries and fuel, as one of their top financial worries.
Read next: Canada hasn't seen a mortgage renewal crisis yet – but some are feeling the pain
Stagnant income growth is compounding the issue. TransUnion data shows that 59% of Canadians do not expect their wages to increase in the year ahead. Gen X respondents, in particular, reported that their financial situations deteriorated in 2024 compared to earlier expectations.
To cope with the pressure, Canadians are making hard choices. Many are scaling back discretionary spending by reducing travel, cutting subscriptions, and eating out less often. Others are trying to pay off debt more aggressively or boost their emergency savings. A growing number are even dipping into or reducing their retirement savings just to stay afloat.
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