The Canadian Debt Bubble In Canada Squeezing Families As Household Debt Skyrockets

Added: 2026-05-10

[00:00:00]before it was on a clear upward trend.

[00:00:02]It went down during COVID and it's been fairly stable since then. I you know as you said though um this isn't equally equally shared across the country or across individuals and you we do see evidence uh consistent with what you said that people who are in debt have been getting more in debt. It's very concentrated in certain uh individuals.

[00:00:25]I only have one video for you guys today, but I feel like it's an important one because it's tied to the discussions around interest rates in Canada from the Bank of Canada. And we have some reactions and some warnings from Tiff Melum who's the head of the Bank of Canada. And it really goes to show how much of a difficult position this is.

[00:00:46]You know, so many things are tied to bonds and interest rates in Canada when it comes to borrowing and lending. And it really does set a framework for the financial institutions in Canada, for banks to really know where the economic forecast of a country is. And I think there's some interesting discussions and pointers here in today's video. So, we're going to react to this. And with that being said, let's just dive into it.

[00:01:13]>> Thank you. Um, we've seen a um alarming rate of delinquencies or or concern about delinquencies going up. Um, can you give us a little bit of information about what you're seeing as far as delinquencies?

[00:01:30]>> Are you are you talking about mortgage delinquencies, >> loans and mortgages? Okay. Uh, well um I think overall uh delinquencies have stayed at a pretty historical low level.

[00:01:43]Where we have seen delinquencies is actually not so much in the in the mortgage market, it's in the non-mortgage market. So consumer loans um those have gone up. So a lot of focus has been on the on mortgage holders because they were affected by interest rate increases. But but where we have seen more concerning trend lines on delinquencies is in is in non-mortgage debt.

[00:02:05]>> Yeah. But non-mortgage debt I don't think is as important as mortgage debt because when you are delinquent on your mortgage and you default on your mortgage, you can lose your home which is the biggest asset most people will ever own. Right? So it's interesting that she went immediately into like a defense to say actually no mortgage you know delinquencies is not that bad.

[00:02:26]Yeah. Compared to the 2008 financial crisis maybe.

[00:02:29]>> So you mean uh credit card debt and and other things.

[00:02:33]>> Yeah. Car loans credit uh yeah non-mortgage credit.

[00:02:39]>> What are you seeing an increase in when it comes to um non mortgage loans or or debt that you're seeing? We did a as one of my colleagues had mentioned, we did a um we did a a study in here about about household debt, which is the highest that in all of G7 countries right now.

[00:02:58]Um and there was a lot of concern about a lot more people now putting more necessities on credit cards like food um and clothing and just the basics. Um, are you seeing an uptick in in the kind of debt people are accumulating like what the actual products are that they're buying?

[00:03:15]>> You know, I don't I don't have that kind of data with me today, but what I would say is the governor mentioned this earlier. Um, you you always have to look at the different segments of the economy. So in total, household debt has improved. But there are segments of the economy that certainly I think are feeling more pressure through uh more more pressure as a result of the affordability challenges and more likely to be putting necessities on credit.

[00:03:47]>> Mortgage reers and delinquencies. Are you seeing a different category of like maybe the the house itself or the value of the house or is there a difference that you're seeing in who's being more delinquent?

[00:04:00]>> Uh I don't know about the value of the house but certainly we are um able to look at delinquencies at a regional level and and areas where you see employment affected more you're more likely to see delinquencies. Have you guys done any um analysis on if the interest rate does go up, is that going to affect the delinquencies?

[00:04:26]>> Uh I mean we don't have a a specific stress test. We would call that a stress test. Um you typically when you see interest rates go up, you you can see that show up. Usually there's a lag, but it does show up in delinquencies over time. But even when interest rates were up at the peak, uh we did see some increase in delinquencies, but they stayed um again in aggregate they stayed within um historical ranges.

[00:04:57]>> We know that the debt interest costs uh according to the recent spring update um they're going to go up by 50% um by 2030. They're going to go from $50 billion a year up and up to $80 billion a year. If the interest rates have to be raised because of persistent inflation, what is that going to do to the debt interesting debt interest costs?

[00:05:21]>> Well, I mean, you know, it depends a little bit why interest rates have to go up. If the economy is stronger and the and there's more revenue and people are spending more and that's building inflationary pressures um you know that the government's beginning more revenue there yes there'll be higher uh they'll also have higher interest rate costs. I think the more you know the more worrisome scenario is uh if you get a scenario where the economy is weaker but inflation is stronger uh then yes it it it it's tougher on Canadians it's tougher on governments >> that's going to take over >> just uh if I'm if I can finish out the the segment here uh are when you say that Canadian that the savings rates are are higher um how is that distributed because what we were told by both of the credit reg rating agencies in Canada for consumer debt is that the number of Canadian of people the number of debtors is not rising but the amount of indebtedness is among existing borrowers the people that are in debt are getting deeper in debt. Uh so across the income spectrum how is it is it a case of the very wealthiest that are able to save and everybody else is going deeper into debt?

[00:06:37]Un unfortunately that's time for this round. Um so we'll have to conclude there. Uh but >> perhaps now we'll be able to get to the the answer. Uh but just to to >> it's probably because the answer is yes.

[00:06:49]The wealthy are still able to actually save but the poor not so much.

[00:06:53]>> Reput the the question if I can as succinctly as possible. We we had testimony at this committee that said that uh Canadians that are in debt are getting deeper in debt and they are coping with their debts. uh by exhausting their savings, refinancing their loans, and cutting back on other necessities. So, um this was alarming information and and quite troubling. It came from Equifax, it came from TransUnion, it came from a variety of other u witnesses that confirmed this.

[00:07:23]So uh if consumption is the main driver of GDP growth and consumers we already have the most indebted uh uh consumers uh in uh in the in the G7. Um is this a concern for future GDP?

[00:07:41]Um well look Canada's had a high level of household indebtedness uh for a number of years now and that is a vulnerability for the economy and certainly uh if interest rates go up uh it means the economy is more you know consumption is more sensitive to increases in interest rates obviously we you know that's something we would take account of uh but it is a vulnerability having said that um you during COVID household indebtedness went down quite a bit. Uh and you know if you look at the six years since then >> yeah it's because a lot of people are getting government checks right like Serb so that kind of kept them afloat you know before it was on a clear upward trend it went down during co and it's been fairly stable since then I you know as you said though um this isn't equally equally shared across the country or across individuals and we do see evidence uh consistent with what you said that people who are in debt have been getting more in debt. It's very concentrated in certain uh individuals.

[00:08:50]Um and yes, they're they're in a difficult situation, but it's not the case that households overall >> I thank you for the uh the detailed answer now, but I I my time is very limited. I actually did want to share it with Mr. Mlan, so I'll let him go ahead.

[00:09:06]>> Well, thank you. Um and thank you uh Governor. I did get a quote this weekend that said, "Bank of Canada Governor Tiff Mlin has warned about Canada's huge household debt problem, which some economists believe is a bigger problem than government debt, which is also skyrocketing as you know. U the expectations of interest rates here, you've held at two and a quarter%. And yet the spread has gone up by 50 basis points in the last two months. So what's the likelihood that you're going to be able to market debt at the current rates at in the in the foreseeable future? or are we going to face an increase in our interest rates across the board in Canada?

[00:09:44]>> So which which spread are you referring to?

[00:09:47]>> Well, you can do the 5-year, you can do the 10-year, but you're talking about the spread to the policy rate.

[00:09:51]>> The term the term premium >> no the spread either spread is advanced 50 points policy rate.

[00:09:57]>> Look um issues of fiscal policy are really for the government.

[00:10:02]>> It's not fiscal, this is monetary. We we are the uh you know we do execute um we do we we do run the bond auctions for the government of Canada. I can assure you they're they're very well covered.

[00:10:14]Uh there is you know Canada when you look around the world uh I don't want to minimize our problems in Canada but we're in a relatively good place compared to many countries. Uh our deficit to GDP is relatively low compared to many other countries. Uh we have energy uh we have fertilizer. So when international investors are looking at where they're going to put their money, Canada's looking pretty good.

[00:10:39]>> Uh thank you. Um and that's the metric you'll land on I guess deficit to GDP and you'll just include the federal government's portion of that alone. I suppose when you measure that >> you'd want to look at it on a consolidated basis country.

[00:10:54]>> Yeah. Thank you. So with with the inflation, the broad-based producer price indexes in Canada look like they're going to go up significantly here in the near future. That is an indication that interest rates are going to rise. Do you have any planning about what your balance sheet is going to look like when those interest rates do go up because it will affect the whole of the economy once we start having to raise interest rates in Canada? I mean coming back to our balance sheet um our balance sheet is not something you know we don't we run monetary policy to keep inflation low and stable. Um we don't we don't run monetary policy to to maximize the profitability of our balance sheet. The balance sheet is is a is an outcome but it's not something that we're we're targeting.

[00:11:45]>> Well, thank you. But there's going to be a serious impact on your balance sheet if you raise interest rates.

[00:11:51]>> Just that concludes the time. Thank you, Mr. Mlan.

[00:11:54]>> Uh it's funny how he points to the fact that we have all these natural resources. That's why Canada's a good place for people to put their money and invest in, but we're not really using any of that, at least right now. So, just kind of weird that that was his counterpoint. But regardless, leave your thoughts about this down below in the comment section, guys, and I'll see you in the next one. Take care.