Canada has highest household debt of G7 countries, report warns

May 24 (UPI) -- Canada has the highest levels of household debt among the Group of Seven countries, the government said in its latest economic forecast issued Wednesday.

About three quarters of all household debt in Canada is attributed to housing mortgages, making the country particularly vulnerable to any future global economic crisis, according to the report by the Canada Mortgage and Housing Corporation.

Household debt among Canadians has been soaring for years, and in 2021 eclipsed the size of the economy.

"While U.S. households reduced debt, Canadians increased theirs and this will likely continue to increase unless we address affordability in the housing market," CMHC deputy chief economist Aled ab Iorwerth said in the report.

During the 2008 financial crisis, the debt level of Canadian households stood at around 80%, rising to 95% by 2010. In 2021, the level of household debt reached 107%.

Household debt is made up of all liabilities requiring interest payments to creditors at fixed dates and is measured as a percentage of a household's net disposable income.

The agency points to the COVID-19 pandemic, rising interest rates to combat inflation, disruption of global supply chains and Russia's invasion of Ukraine as reasons behind the economic instability.

By comparison, the United States is managing to reduce its household debt levels, decreasing from 100% in 2008 to 92% in 2010 and 78% in 2021.

Britain has the second-highest level of household debt among the G7 countries at 87%, while Italy's 44% is the lowest.

Among the countries profiled by CMHC, only Australia at 119% has a higher household debt rate than Canada.

"In the event of a severe global economic downturn, Canada's high household debt will be a vulnerability. And the need to repay this debt will damage Canada's long-term growth prospects," the report reads.