Canada’s housing agency says the country has the highest level of household debt in the G7, making its economy vulnerable to a global economic crisis.
Canada Mortgage and Housing Corp. deputy chief economist Aled ab Iorwerth says in a new analysis that the country’s household debt has been rising “inexorably.”
Household debt made up 80 per cent of the size of the economy during the 2008 recession, before it rose to 95 per cent in 2010 and exceeded its size in 2021.
Over the same period of time, household debt dropped in the U.S., U.K. and Germany and was nearly unchanged in Italy.
Ab Iorwerth says high levels of debt do most damage when a significantly negative economic event happens and leads to widespread job losses because it becomes difficult, if not impossible, for many mortgage holders to service their debt.
He says widespread job losses in an economy where debt levels are high will make any recession more severe.
The Canadian Press