Canadian household debt has reached record dollar levels even as a key measure of borrowing pressure relative to income improved in the second quarter of 2026, painting a picture of a credit market that looks healthy in aggregate but conceals sharply different realities depending on where borrowers live and how much they carry.
Equifax Canada’s Q2 2026 Market Pulse report put total consumer debt at $2.68 trillion, up 4.18 per cent from a year earlier and 1.3 per cent higher than the first quarter. TransUnion separately reported Canadian consumer debt hitting a record $2.64 trillion in the same quarter, noting that debt levels are growing faster than the number of Canadians actually using credit — meaning existing borrowers are carrying larger balances than they were a year ago, rather than more people simply taking on new debt.
Record Debt, But a Softer Debt-to-Income Ratio
Despite the headline dollar figures, Statistics Canada data released in September showed some easing in the burden debt places on household budgets. The ratio of household credit market debt to disposable income fell to 176.4 per cent on a seasonally adjusted basis in Q2 2026, down from 178.6 per cent in the first quarter — the largest single-quarter drop since the third quarter of 2024. In practical terms, Canadians held about $1.76 in credit market debt for every dollar of disposable income during the period.
The improvement came as income growth of 2.1 per cent outpaced a 1.0 per cent rise in total debt payments. The household debt service ratio, which measures obligated principal and interest payments as a share of disposable income, edged down to 14.52 per cent from 14.68 per cent in the first quarter, though it remains above pre-pandemic norms and below its peak of 15.16 per cent in the first quarter of 2023.
Borrowing itself also slowed. Total seasonally adjusted household credit market borrowing fell to $29.4 billion in Q2, down from $34.4 billion in Q1, with mortgage borrowing — at $19.4 billion — hitting its weakest quarterly pace since early 2024. Household net worth, meanwhile, rose 2.9 per cent to $19.1 trillion, lifted by equity market gains, while the debt-to-asset ratio fell to 14.8 per cent, its lowest level since early 2022.
Ontario’s Growing Fault Line
Beneath those national averages, Equifax’s data pointed to a widening regional split. Non-mortgage debt held by mortgage holders nationally reached $304.6 billion in the second quarter, with a 90-plus-day delinquency rate of 0.77 per cent — up 12.5 per cent from a year earlier. In Ontario, that same delinquency rate hit 0.86 per cent, a 27 per cent jump year-over-year. Strip Ontario out of the national numbers entirely, and the year-over-year increase falls to just 2.1 per cent.
“The data clearly shows that the persistent pressure of higher interest rates and mortgage renewal shocks have impacted many homeowners for several years,” said Rebecca Oakes, Vice President of Advanced Analytics at Equifax Canada. “Ontario continues to stand out, with some mortgage holders struggling to keep up with other credit obligations.”
Leah Zlatkin, a licensed mortgage broker with LowestRates.ca in Toronto, said the national figures don’t erase the pain individual homeowners feel at renewal. “Canada is not in a mortgage default crisis but the pressure on homeowners is real,” she said. “Many borrowers are still renewing mortgages that were taken out when rates were much lower, and even a modest increase in the rate can change the household budget quickly.”
Equifax also flagged a structural shift among first-time buyers: the share using joint mortgages climbed from 57.6 per cent in 2016 to 70.9 per cent by the second quarter of 2026, with younger buyers in Ontario and British Columbia roughly twice as likely as those elsewhere to co-borrow with someone 20 or more years apart in age — a sign, Oakes said, that family financial support has become a structural feature of entering high-cost housing markets.
Credit Cards, Auto Loans and ‘Doom-Spending’
Other categories of consumer debt also grew. Credit card balances rose to $134.2 billion in Q2 from $130.6 billion in Q1, with average inflation-adjusted spending per consumer reaching $2,192. Delinquencies improved slightly quarter-over-quarter but remained 6.8 per cent higher than a year earlier. A separate Equifax consumer survey found 25 per cent of respondents expect to make only minimum payments in coming months, and 7 per cent believe they’re likely to fall behind. Auto loan balances climbed to $179.1 billion, even as new loan originations fell 9.2 per cent year-over-year and average new loan amounts rose from $34,713 to $36,979.
What the Rate Hold Means for Borrowers
The Bank of Canada held its policy rate at 2.25 per cent on September 2, offering stability but little immediate relief. “For the average Canadian, today’s decision means borrowing costs are staying where they are for now,” said Steve Hatzipantelis, vice-president of wealth at Your Neighbourhood Credit Union. “That provides some predictability, but it does not necessarily translate into any immediate relief for households already carrying debt.”
Hatzipantelis pointed to a broader trend of “doom-spending” — stress-driven purchases by Canadians who feel pessimistic about their financial futures — as a compounding pressure alongside inflation and cost-of-living concerns, and urged households to prioritize paying down high-interest debt and building emergency savings.
This article is for informational purposes only and does not constitute financial, investment, or legal advice. Consult a licensed financial advisor before making investment decisions.
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