Back in 2009, this was written during the aftermath of the 2008–09 financial crisis. During that time, rates were slashed to historic lows. CIBC’s warning about rising household debt seemed urgent then but the real irony is that it never stopped growing. In 2025, Canadians now owe roughly $1.83 for every $1 of disposable income, and interest-rate cycles are back with a vengeance.
The CBC pointed me at this report from CIBC about Household Credit Analysis some of the numbers really worry me.
I have been commenting on these historically low interest rates. They are not an excuse to go out and borrow more money. Rather it is a great time to start paying down your debt. You are not being choked to death by interest rates. Of course, I had a mortgage at 12% and thought that was cheap at the time.
Highlights?
Some of the highlights mentioned in the report are:
- On an inflation-adjusted basis, credit is rising at the fastest rate seen in any economic recession in the post-war era.
- Total debt rose by $44 billion during the first six months of the year. However, interest payments on debt fell by $3 billion.
- Non-mortgage consumer credit is still rising by 7% on a year-over-year basis very impressive given the economy’s overall health.
- During the first half of the year, overall household debt rose by 3.4% while personal disposable income in fact fell by 0.2%. This led to an increase in the debt-to-income ratio during this period.
I would strongly suggest reading the entire report. It's only 10 pages and is chocked full of interesting data. I love this kind of data.
There are actual household balance sheets in the report and in there I found two pieces of data that made me worried as well:
- A 4% drop in Financial Assets from Q1 2008 to Q2 2009 (look at the Q1 2009 numbers it is even lower). Our savings dropped by that much? Wow.
- A 6% drop in Net Worth Q1 2008 to Q1 2009, again, not something we didn't know, but still a worry.
What does this data mean? We are still living outside of our means and borrowing to live up to this lifestyle, but someday very soon, the piper will need to be paid, and he may have a much higher interest rate to dance to. It's time to think about paying off debt, folks.
🚩 Red flags
- Debt-to-income ratios over 170% are unsustainable.
- “I can afford the payments,” thinking not the total cost.
- Treating HELOCs as emergency funds instead of debt.
Supporting reads: Bank of Canada Financial System Review, StatCan Household Debt data.
A Stern View on Things
This pattern is predictable: cheap credit breeds complacency, not caution. Every time interest rates drop, Canadians take on more debt, and every time they rise, panic returns. The big misunderstanding? Debt isn’t about affordability today; it’s about resilience tomorrow. The individuals who utilize low-rate years to "deleverage" quietly build freedom, while everyone else stretches for “just one more upgrade.”
Canadians were taking on record debt even as incomes fell the highest borrowing growth in any post-war recession.
Cheap borrowing made people feel richer, so they spent more instead of paying down balances.
Rates eventually rise, and debt servicing costs spike same warning, bigger numbers.
Use low-rate periods to pay down principal, not take on new loans.
Very interesting … at the same time I am reading that investor Canadians are sitting on a huge pile of cash deposits. e.g. Connie Stefankiewicz writes to BMOIL clients “… the ongoing volatility of the markets has continued to cause many investors to sit on the sidelines – as evidenced by the record high cash levels we are seeing”. Is there an increasing divide between owes and owe-nots developing?