Understanding Canadian Debt in 2025: How Many Canadians Carry Debt and Why It Matters

Debt touches most Canadian households, but not always in the same way. For some, it’s a low-interest mortgage they can comfortably manage; for others, it’s revolving credit and rising bills that feel harder to control as prices and interest costs add up. Understanding Canadian debt today means looking beyond a single number to the mix of mortgages, car loans, lines of credit, student loans, and credit cards—and how economic conditions in 2025 are shaping what Canadians owe and how they repay it.

This article explains how many Canadians are in debt, what’s driving the trend, the risks and broader economic implications, and practical steps you can take to strengthen your financial position this year.

Canadian debt at a glance in 2025

Canada’s household debt picture has been building over a decade, influenced by low rates pre-2022, a rapid rate-tightening cycle, and elevated living costs since the pandemic. Households now carry a complex mix of mortgage and non-mortgage credit. According to Statistics Canada, key measures such as the household debt-to-disposable-income ratio and total credit market debt are tracked regularly to assess household vulnerability and financial stability. Industry analyses also show that total consumer debt in Canada remains elevated, reflecting both mortgage balances and rising use of non-mortgage credit.

It’s important to remember that not all debt is bad—responsible borrowing can help build assets and smooth cash flow. The challenge in 2025 is that higher interest costs and stubborn prices for essentials have reduced breathing room for many households.

How many Canadians are in debt?

Most Canadian households carry some form of debt—typically a mortgage, car loan, student loan, line of credit, or credit card. Survey-based estimates vary by source and timeframe, but they commonly show a large majority of households with at least one debt obligation. For context on prevalence and composition, see our overview on the percentage of Canadians with household debt and how that share has changed over time.

Why the range? The answer depends on the population measured (households vs. individuals), the types of credit included (mortgage and non-mortgage), and when the survey was conducted. What’s consistent is that debt is widespread—and the cost to carry it has risen in recent years.

What’s driving Canadian debt right now?

Debt levels reflect a mix of structural and cyclical factors. In 2025, five drivers stand out.

Housing costs and mortgage renewals

Mortgage debt is the largest component of household borrowing. Elevated home prices mean bigger mortgages, and renewals are cycling through at higher rates than many borrowers locked in pre-2022. This can increase monthly payments materially, even if principal has declined. Those with variable-rate products have already felt payment or interest-cost pressures.

Interest rates and the cost of credit

Even small rate changes can shift the affordability of variable-rate mortgages, lines of credit, and credit cards. For revolving credit in particular, carrying balances has become more expensive. See current trends in the average credit card interest rate in Canada and consider how a one- or two-point rate change compounds interest over a year if balances aren’t paid in full.

Inflation on essentials

Although inflation has moderated from its peak, many essentials—food, rent, utilities, transportation—remain higher than pre-2020 norms. Persistent cost pressures can push day-to-day purchases onto credit, especially for households without emergency savings. For broader context on how elevated costs affect budgeting decisions and debt, review our expert guide to debt management solutions for high-cost living in Canada.

Income growth and employment

Wage growth helps offset higher prices and borrowing costs, but pay increases haven’t always kept pace with household budgets. When incomes don’t stretch as far, households may add to balances or delay repayment. For those facing job loss or reduced hours, challenges can escalate quickly; government programs administered by Employment and Social Development Canada can provide temporary support, but gaps still occur.

Demographics and life events

Student debt, family formation, caregiving, and retirement all affect borrowing patterns. Younger households tend to rely more on credit as they establish themselves, while retirees might face fixed incomes along with rising medical or housing costs. These life stages influence both the level and type of debt carried.

How debt affects households and the economy

Debt can build wealth when it finances productive assets like homes, education, or businesses. Problems arise when the cost of borrowing grows faster than income or when balances shift toward high-interest credit that’s tough to pay down.

Household risks to watch

• Payment shock at renewal: Moving from ultra-low rates to current rates can raise monthly mortgage costs substantially.
• High utilization on credit cards: Using a large share of available credit can weigh on credit scores and increase interest paid.
• Variable-rate sensitivity: Interest changes can ripple through monthly budgets quickly for variable-rate borrowers.
• Limited emergency savings: Without a buffer, unexpected expenses often revert to high-cost credit.

For a deeper analysis of household vulnerabilities, see our data-led review on the growing impact of debt on Canadian households.

Macro impacts to monitor

• Consumption patterns: As more income goes to debt service, discretionary spending can soften.
• Housing market dynamics: Renewals and affordability shape listings, rent demand, and renovation activity.
• Financial stability: Aggregate measures tracked by Statistics Canada—like debt-to-income and debt-service ratios—help policymakers gauge systemic risk.

Debt trends to watch through 2025

Three storylines are likely to shape the rest of the year:

• Renewal waves: A steady stream of fixed-rate mortgages will mature, resetting at higher rates than the pre-2022 cycle. Budget planning ahead of renewal is critical.
• Stabilizing but elevated credit costs: Even if interest rates ease, they’re unlikely to return to the ultra-low levels of the late 2010s in the near term. Borrowing discipline will matter more.
• Persistent cost-of-living pressures: Essentials may cool from peak inflation, but many prices remain structurally higher than five years ago.

Mid-year updates and bank guidance can shift expectations, but the core themes are already visible in 2025 lifecycle data. For context on how the year is unfolding, see our summary of mid-year market trends and debt relief guidance.

Practical ways to manage and reduce debt

Immediate actions (next 30–90 days)

• List every balance, APR, and payment date: Visibility is the first step to control.
• Prioritise high-APR balances: Focus extra payments where interest is highest while keeping other accounts current.
• Trim persistent leaks: Subscription audits, renegotiated bills, and meal planning can free cash flow quickly.
• Build a micro-emergency fund: Even $500–$1,000 can prevent new debt after an unexpected expense.

Medium-term strategies (6–24 months)

• Plan for mortgage renewal: Ask lenders for estimates 6–12 months ahead, test different term options, and compare penalties and prepayment flexibility.
• Consider structured solutions: For some borrowers, consolidating high-interest debt at a lower rate can cut monthly costs and simplify payments. Others may benefit from a regulated repayment plan. Learn about the full landscape in our guide to Canadian debt relief options.
• Automate good habits: Move “found money” (raises, tax refunds) into debt reduction or emergency savings.

When professional help makes sense

• Minimums only for several months and balances aren’t shrinking
• Frequent reliance on credit for essentials
• Collections activity or missed payments
• Upcoming mortgage renewal with tight affordability

If any of these apply, a conversation with a qualified professional can surface options you might not know about, from creditor-approved repayment plans to federally regulated proposals.

Real-world examples: Different life stages

Renters and first-time buyers

Renters managing rising rents and everyday costs can struggle to save for a down payment while paying down debt. A budget-first approach—paired with reducing high-interest balances—can make saving more predictable. If buying is a near-term goal, watch your credit utilisation and payment history closely.

Homeowners facing renewal

Run scenarios for 1–3 years to see how different terms and rates affect monthly payments and total interest. Ask lenders about blended or extended amortisations and prepayment options. If unsecured balances are adding stress, compare the true cost and risks of consolidating before renewal.

Students and recent graduates

Federal and provincial programs offer repayment assistance for student loans in hardship periods through Employment and Social Development Canada. Align payments with income, and avoid adding high-interest credit unless absolutely necessary.

Newcomers to Canada

Building credit takes time. Start with a secured card and on-time payments, and avoid products with high fees or teaser rates. As you establish a file, compare mainstream products before upgrading limits.

Seniors on fixed incomes

Track all recurring bills and look for eligibility-based savings (e.g., provincial supports). If debt service is crowding essentials, consider options to lower rates, restructure payments, or access equity carefully. Prioritise stability and risk control.

Key metrics to gauge your debt risk

• Debt-to-income (DTI): Your total monthly debt payments divided by gross monthly income. Lower is better; many lenders prefer ratios below 36–42% depending on the product.
• Debt-service ratios (GDS/TDS): Used in mortgage underwriting to gauge affordability of housing costs (GDS) and all debt (TDS).
• Credit utilisation: The share of revolving credit you’re using. Keeping utilisation under 30% (and ideally lower) can support your credit score.
• Average interest rate: Your weighted average APR across debts. Target the highest-interest balances first to cut total interest paid. For current card trends, see the average credit card interest rate in Canada.

Monitoring these metrics monthly can warn you early when affordability is tightening—giving you more time to adjust.

Trusted sources for Canadian debt data

• Statistics Canada: Official measures of household credit market debt, debt-service ratios, and savings behaviour.
• Government of Canada (Canada.ca): Consumer information, benefits, and policy updates affecting household finances.
• Employment and Social Development Canada: Program details on income supports, student loan repayment assistance, and workplace trends.

For an integrated view using official and industry sources, see our explainer on total consumer debt and how it’s evolved into 2025.

Conclusion

Understanding Canadian debt in 2025 isn’t only about how many people owe—it’s about what they owe, what it costs, and how resilient their budgets are to change. Most households carry some debt, and the price of carrying it has risen. The most effective responses are practical: map your balances and rates, prioritise high-interest debt, prepare early for mortgage renewal, and track key ratios that signal stress. If affordability feels tight, explore structured solutions and credible guidance. With the right information and plan, households can navigate today’s environment more confidently and protect their long-term financial stability.