Canada’s household debt burden falls hardest on younger, lower-income Canadians
What advisors need to know – and what policymakers should do
The report makes three recommendations, each with implications for how advisors counsel clients and how the industry monitors risk.
First, the authors call for maintaining mortgage underwriting guardrails and making longer mortgage terms more viable – a measure that would give financially stretched homeowners more predictability in their debt obligations.
Second, they advocate expanding housing supply in job-concentrated markets and helping mid-sized cities such as Kitchener-Waterloo, London, and Kamloops compete for workers and businesses, which would reduce the concentration of housing risk in Canada’s largest urban markets.
Third – and most relevant for those tracking client insolvency risk – the authors recommend that the Office of the Superintendent of Bankruptcy begin publishing statistics that distinguish between cash-flow insolvency and balance-sheet insolvency.
“A homeowner with significant equity may be able to get back on track by refinancing, while someone whose debts exceed their assets faces a much deeper financial challenge,” said MacKenzie. “Understanding the difference is essential to developing the right policy response and addressing the household debt pressures that are concentrated among younger, lower-income, and highly leveraged Canadians.”
