Debt 101

Now, class, before we begin let’s recall what some numbers mean, when expressed as time.

A million seconds is a vacation. A billion seconds is a career. A trillion seconds is 31,709 years.

Got it?

There are ten million households in Canada owning residential real estate (according to the latest census). Together they owe just under $2 trillion in mortgage debt – which is about 3% higher than last year (sixty billion).

But wait. Only 35.5% of these households have a mortgage – the other 64.5% are financing-free. According to the credit agency folks at Equifax, the average new mortgage taken out in Canada is $363,778 and for first-time buyers, it’s $441,300. Meanwhile the 35% of ten million mortgaged families owe an average of more than $557,000.

In fact, a half-million-dollar home loan in Toronto or Vancouver, or anywhere in the GTA and LM, is routine, perhaps even a badge of financial prudence. Million-dollar mortgages are increasingly common in cities where average detached homes sell for $1.5-$2 million. To service a loan like that requires a household income of roughly $200,000. And courage.

So are we pooched? After all, 1.2 million families will be refinancing their expiring five-year loans during 2026, and almost all of them will see a higher rate than back in 2021. The Bank of Canada estimates monthlies will rise by about 6%, but that could double or triple for those with a ton of leverage.

Trillions in mortgage debt is terrifying in a country where incomes have only been pacing inflation and real estate values are now in decline. (Sale prices have dropped by abut a quarter in major markets since 2022.) Loan balances do not shrink when the value of a home falls. This is why, in a deflationary world, the indebted are crushed like bar bugs.

But look at who owes.

Homeownership rates have actually declined in Canada, from a peak of 70% in 2011 to 66.5% lately. And, as stated, only 35.5% of those folks with real estate have any financing at all. Meanwhile, the $2 trillion in mortgages, plus $60 billion in new borrowing – is being borne by a smaller share of the population – with a million of them seeing increased payments as they refinance.

By the way, home ownership levels are plopping most rapidly among the young – those between 25 and 29. A few years ago almost 45% owned. Lately it’s down to a third. We all know why.

So, add it up.

Borrowing is higher. Mortgage balances are greater. New debt is being added faster than the rate of inflation. Proportionately fewer Canadians now own residential real estate. And two trillion dollars (the equivalent of 63,000 years in seconds) is being shouldered by just 35% of home-owning Canadians.

Equifax says this week it’s seen an increase of between 30% and 40% of borrowers who are switching lenders trying to get the best deal on their debt. It also reports delinquencies (no payments made for 90+ days) have shot higher by half – even though the vast majority of us pay on time, routinely.

Credit rating agency Fitch states that total consumer debt now sits at $2.65 trillion, most of which is mortgages. “Households with outsized leverage, lower incomes or those employed in U.S. export-reliant sectors will remain more vulnerable,” it says.

Conclusions are obvious.

People with legacy houses and no debt are fine. That’s most of us. Those struggling to get onto the property ladder are paying a huge price for a declining asset. Big risk. If interest rates rise over the next year or two – which most economists believe likely – there may be more downward pressure on real estate, profoundly impacting those who bought most recently and carry the greatest debt.

Tell your kids.

About the picture: “Thank you for everything you do,” writes Caroline in the Maritimes. “As the snow storm rages outside here on the east coast, thought I’d pass along a summertime beach pic of my girl Chloe happy as a clam on the Northumberland Strait. Life sure is sweet here in summer. All the best!”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/02/24/debt-101/