Canadian households ended the first quarter of this year with a little more net worth and a bit more debt.
Statistics Canada reports that the debt-to-disposable-income ratio climbed to 173.9% in Q1, up from 173.5% in the last quarter of 2024. Canadian households now owe $1.74 for every dollar they have left over after making mandatory payments for things like taxes, food and shelter.
Total borrowing slowed to about $34.5 billion during the first quarter, down from $41.6 billion in the previous quarter. The household debt service ratio, which is the portion of disposable income allocated to required principal and interest payments, held steady at 14.40%. It has been holding in this area for a number of quarters, suggesting that the amount households are spending to meet their debt obligations has not changed significantly despite shifts in borrowing levels.
Despite the stability of the debt service ratio, debt payments are expected to rise throughout this year as 4 and 5-year fixed-rate mortgages, that were taken out during pandemic lows, continue to renew at elevated rates. Mortgages, once again, make up the bulk of household debt, accounting for about 75% of the total.
Overall household net worth improved slightly to $17.6 trillion in Q1, led by modest increases in real estate values. However, the improvement was not spread evenly through the economy, concentrating in the top 20% of income earning households.