The distribution of mortgage debt
in Canada

By Raj K. Chawla

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From 1982 to 2008, household debt in current dollars increased more than eight-fold. Throughout that period, mortgages accounted for approximately two-thirds of household debt while consumer debt comprised the other third.

Rising real estate prices played a part in the increase in mortgage debt. In current dollars, average housing prices increased from $71,800 in 1982 to $303,500 in 2008. Over the same period, the average mortgage carried by households increased from $41,200 to $176,200.

Since it takes time to pay off a mortgage, mortgagees were much younger, on average, than mortgage-free homeowners. In 2008, more than 80% of households under age 45 became homeowners in the 10 preceding years.

In 2008, Canadians spent an average of 17% of their disposable income on mortgage payments—the 'mortgage-liability ratio.'

The mortgage-liability ratio varied across households. Nearly 4 in 10 mortgagees spent at least 20% of their disposable income on mortgage payments. Another 4 in 10 spent between 10% and 19%, while 2 in 10 had a mortgage-liability ratio of less than 10%.

The average mortgage-liability ratio also varied across regions, from a high of 20% of household income in British Columbia to a low of 14% in Atlantic Canada.

The proportion of mortgagees age 45 to 54 spending at least 20% of their disposable income on mortgage payments remained relatively stable over the 2000s at a level that was lower than in the late 1990s. The increase in recent years was mainly concentrated among mortgagees under 45 and from 55 to 64.

Households spending 20% or more of their disposable income on a mortgage had different spending patterns than those with a lower mortgage-liability ratio. In addition to having higher shelter costs, they spent more on food, clothing and transportation, and saved less than mortgage-free homeowners.