Changes in debt and assets of Canadian families, 1999 to 2012

by Sharanjit Uppal and Sébastien LaRochelle-Côté

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Overview of the study

This paper examines changes in debt, assets and net worth among Canadian families with debt over the period 1999 to 2012, by selected family characteristics. It also examines the extent to which two key ratios of indebtedness, the debt-to-income ratio and the debt-to-asset ratio, varied over the period.

  • In 2012, the percentage of Canadian families with debt was 71%, up from 67% in 1999. The median debt held by these families was $60,100, up from $36,700 in 1999 (in 2012 constant dollars).
  • Between 1999 and 2012, median debt and median assets increased for most types of families, but not equally for all categories of families. Median debt, for instance, increased faster among those in the 35-to-44 age group, among couples with children under 18, and among mortgagees.
  • Between 1999 and 2012, the median debt-to-income ratio rose from 0.78 to 1.10, while the median debt-to-asset ratio remained stable, at around 0.25. Families in the 35-to-44 age group witnessed significant increases in both their debt-to-income and debt-to-asset ratios.
  • In 2012, 35% of Canadian families had a debt-to-income ratio above 2.0—meaning that their debt was at least twice the level of their annual after-tax income. This compared with 23% of Canadian families in 1999.
  • In 2012, 14% of families had consumer debt (i.e., debt other than mortgage debt) that was larger than their annual after-tax family income. In comparison, 8% were facing the same situation in 1999.

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Introduction

In the social sciences literature, income is often portrayed as a key measure of economic and social well-being. Yet other measures of economic well-being are equally important, for instance wealth, which can be defined as the present value of total assets of the family minus the sum of all debts held by that same family. Assets are typically made up of real estate, personal belongings and savings, and financial investments, but may also include the present value of employer pension plans. Debt includes mortgage debt and consumer debt (such as student and other loans, personal and home equity lines of credit, unpaid bills, and credit card balances).

Debt is a central feature of household finances, in good part because it plays a fundamental role in maintaining consumption levels relatively constant over the life cycle.Note 1 In the early stages of the life cycle, saving and borrowing can be used for education and the acquisition of housing. Later, debt is repaid as income rises relative to consumption, thus leading to an accumulation of wealth. In the latter stages of the life cycle, wealth can provide a form of financial security in retirement, particularly in the absence of adequate pension plan coverage.Note 2

The process of wealth accumulation, however, has changed over time. The past 15 years have been characterized by falling interest rates, rising housing prices, variations in the performance of financial markets, and changes in economic conditions.Note 3 As a result of these changes, both assets and debts have taken on increasing importance in family finances—at least in relation to income. In 2013, the aggregate ratio of household debt to disposable income was 1.63 (or $1.63 of debt for every dollar of disposable income), compared with a ratio of 0.89 in 1990. Over the same period, the ratio of household debt to household assets varied little, hovering around 0.2 or below (Chart 1).Note 4

Chart 1 Household debt as a proportion of assets and disposable income, 1990 to 2013

Description for chart 1

Changes in debt and assets, however, may not have been the same for all types of families. In a previous study based on 2009 debt data,Note 5 debt levels were found to be typically higher among mortgagees, university-educated individuals, couples with children, people living in Alberta and British Columbia, and people with higher family incomes. Little is known about changes in asset and debt accumulation across various characteristics of families since 2005, the date of the last complete survey on household debt and assets conducted by Statistics Canada. Using newly available data from the 2012 Survey of Financial Security (SFS) and data from the 1999 cycle of the same survey, this study fills the gap by examining changes in both debt and asset levels of Canadian families during the period from 1999 to 2012 (see Data sources, methods and definitions).Note 6 All numbers in this article are expressed in 2012 dollars using the Consumer Price Index (All Items) as a deflator.

In this paper, indicators of debt and assets are examined over the 1999 to 2012 period across key family characteristics—including age, education, family structure, region, homeownership status, and family income. This paper also examines how two key indicators of indebtedness varied over the period across family characteristics: the debt-to-income ratio (total amount of debt divided by after-tax income) and the debt-to-asset ratio (total debt divided by total assets).

The percentage of families with debt increased among all types of families

What is the proportion of indebted families (the percentage of ‘borrowers’) in Canada? In 2012, the percentage of Canadian families with debt was 71%, up from 67% in 1999 (Table 1). Several characteristics were associated with higher proportions of borrowers.Note 7

Table 1
Percentage of families with debt, 1999 and 2012
Table summary
This table displays the results of Percentage of families with debt 1999 and 2012, calculated using percentage units of measure (appearing as column headers).
  1999 2012
percentage
Families with debt 67.3 71.1
Age of major income earner  
15 to 34 79.6 78.6
35 to 44 80.0 84.7
45 to 54 76.4 80.7
55 to 64 60.9 70.3
65 and over 27.4 42.5
Education of major income earner  
Less than high school 51.1 51.2
High school 69.9 70.1
College/trades 75.1 78.0
University degree 75.1 76.3
Family structure  
Non-seniors (under age 65)  
Singles 64.4 65.6
Couples without children or with children 18 and over 77.9 82.5
Couples with children under 18 87.2 90.4
Lone parents 71.7 79.6
Others 73.6 77.9
Seniors (65 and over) 27.4 42.5
Immigrant status of major income earner  
Immigrated within the last 10 years 63.0 76.0
More than 10 years since immigration 62.9 66.3
Canadian-born 68.3 71.8
Region  
Atlantic 73.4 76.4
Quebec 64.3 71.3
Ontario 67.2 70.7
Manitoba and Saskatchewan 63.5 68.9
Alberta 71.6 73.1
British Columbia 68.3 68.8
Homeownership status  
Owners with a mortgage 100.0 100.0
Owners without a mortgage 42.5 51.3
Non-owners 58.3 60.3
Income quintile  
Bottom quintile 54.0 54.6
Second quintile 56.5 65.6
Middle quintile 70.6 76.1
Fourth quintile 77.4 78.8
Top quintile 77.8 80.7

In both 1999 and 2012, the highest proportions of families with debt were found among younger families; families whose major income earner was university-educated; couples with childrenNote 8; and families in the top income quintile. Conversely, those with the lowest proportions of debt were families whose major income earner was aged 65 and over; families whose major income earner had less than a high school education; and families in the bottom income quintile.Note 9

Such results are in line with the life-cycle theory of consumption since young people and families with children living at home are generally expected to hold debt to finance their consumption (for example, the purchase of a home).Note 10 Older individuals, by contrast, are more likely to own their properties outright and thus likely to have less debt remaining on their balance sheet.

The overall percentage of borrowers increased for almost all categories of families between 1999 and 2012, but rose faster in some cases. This was the situation among families in the 65-and-over age group (from 27% to 43%); recent immigrants (from 63% to 76%); families in the second income quintile (from 57% to 66%); and owners without a mortgage (from 43% to 51%). The increase among older families suggests that a rising portion of near-retirees still carry debt as they are about to enter retirement.Note 11

Median debt rose faster among middle-aged families and couples with children

In 2012, the median amount of debt held by Canadian families (expressed in 2012 constant dollars) was $60,100, up from $36,700 in 1999 (Table 2). The median level of assets held by families with debt also rose, from $225,400 to $405,200.Note 12 These numbers, however, varied across family and personal characteristics.

Table 2
Median debt and assets, families with debt, 1999 and 2012
Table summary
This table displays the results of Median debt and assets Median debt, Change, Median assets, 1999, 2012 and 1999 to 2012, calculated using 2012 dollars units of measure (appearing as column headers).
  Median debt Change Median assets Change
1999 2012 1999 to 2012 1999 2012 1999 to 2012
2012 dollars
All 36,700 60,100 23,400Note * 225,400 405,200 179,800Note *
Age of major income earner  
15 to 34 24,400 39,300 14,900Note * 63,600 92,700 29,100
35 to 44 63,000 142,600 79,600Note * 234,000 413,800 179,800Note *
45 to 54 50,500 87,800 37,300Note * 355,400 552,700 197,300Note *
55 to 64 26,200 49,300 23,100Note * 404,100 656,800 252,700Note *
65 and over 8,500 18,000 9,500Note * 310,100 484,300 174,200Note *
Education of major income earner  
Less than high school 15,100 19,000 3,900 150,600 208,100 57,500
High school 36,400 42,500 6,100 206,000 346,100 140,100Note *
College/trades 43,000 75,000 32,000Note * 221,900 388,100 166,200Note *
University degree 61,600 109,000 47,400Note * 351,200 621,700 270,500Note *
Family structure  
Non-seniors (under age 65)  
Singles 12,100 19,700 7,600Note * 42,200 58,200 16,000
Couples without children or with children 18 and over 48,500 91,000 42,500Note * 325,100 578,300 253,200Note *
Couples with children under 18 82,600 170,000 87,400Note * 283,600 528,700 245,100Note *
Lone parents 19,300 22,300 3,000 65,000 89,500 24,500
Others 26,200 43,000 16,800 225,500 401,200 175,700Note *
Seniors (65 and over) 8,500 18,000 9,500Note * 310,100 484,300 174,200Note *
Immigrant status of major income earner  
Immigrated within the last 10 years 34,100 58,000 23,900 122,000 274,000 152,000
More than 10 years since immigration 53,900 88,500 34,600Note * 335,900 559,900 224,000Note *
Canadian-born 34,500 56,000 21,500Note * 215,100 388,600 173,500Note *
Region  
Atlantic 23,900 39,000 15,100Note * 163,900 284,600 120,700Note *
Quebec 27,500 34,300 6,800 176,600 334,000 157,400Note *
Ontario 48,200 72,000 23,800Note * 271,600 449,000 177,400Note *
Manitoba and Saskatchewan 31,500 61,000 29,500Note * 198,000 369,700 171,700Note *
Alberta 52,400 117,000 64,600Note * 242,100 460,600 218,500Note *
British Columbia 45,900 72,300 26,400 274,600 531,400 256,800Note *
Homeownership status  
Owners with a mortgage 105,000 180,000 75,000Note * 319,400 547,800 228,400Note *
Owners without a mortgage 13,100 24,300 11,200Note * 462,200 846,500 384,300Note *
Non-owners 7,900 10,000 2,100Note * 22,800 23,400 600
Income quintile  
Bottom quintile 9,100 12,000 2,900 19,800 24,800 5,000
Second quintile 23,700 31,900 8,200 141,300 241,700 100,400Note *
Middle quintile 44,300 84,000 39,700Note * 228,200 406,000 177,800Note *
Fourth quintile 62,300 105,000 42,700Note * 307,000 562,100 255,100Note *
Top quintile 90,400 158,500 68,100Note * 492,400 1,023,900 531,500Note *

Differences in levels of debt and assets across family categories reflected the life-cycle hypothesis. For instance, middle-aged families (whose major income earner was aged 35 to 44) had a higher median debt in 2012 ($142,600) as did couple families with children ($170,000) and home owners with a mortgage ($180,000). Conversely, median asset values were higher among families in the 55-to-64 age group ($656,800), and among home owners without a mortgage ($846,500). Such results are expected since younger families are in the early stages of their life cycle, and thus have higher levels of debt in relationship to assets. Older families, in contrast, typically have lower debt and higher assets.

Other family categories were associated with higher levels of both debt and assets. These families included those whose major income earner was a university graduate, families in the group of immigrants who have been in Canada for more than 10 years, families residing in Alberta and British Columbia, and families in the top income quintile.

Changes in debt and assets over the period also varied across family categories. Between 1999 and 2012, median debt rose among all age groups, but particularly among families in the 35-to-44 age group (by $79,600). Couples with children also faced a comparatively large increase in their median debt ($87,400), as did mortgagees ($75,000).

Other family categories with significant increases in median debt included couples without children and single people; families with higher levels of educational attainment; immigrant families that have been in Canada for at least 10 years; and families that were in the top three quintiles of family income. Regionally, median debt increased by $64,600 in Alberta, the largest increase of all regions. Other significant increases took place in Manitoba and Saskatchewan, Ontario, and in the Atlantic region.

In general, significant increases in debt were accompanied by significant increases in median assets over the period. Among Alberta residents, for instance, median assets increased by $218,500 over the period. Similarly, median assets increased by $179,800 among those in the 35-to-44 age group, by $245,100 among couples with children, and by $228,400 among mortgagees.

For some categories of families, median assets increased somewhat faster than median debt did. This was the case among families in the older age groups (55 and over), and home owners without a mortgage—with the latter gaining $384,300 in median assets against a relatively small (but statistically significant) $11,200 increase in median debt. Families whose major income earner was a high school graduate, families with “other” family structuresNote 13, families living in Quebec and in British Columbia, and families in the second income quintile also saw increases in their median assets that were not matched by statistically significant increases in their median debt levels.

Other family types, however, were characterized by significant increases in median debt, but did not benefit from significant increases in median assets. This was the case among non-owners, singles, and families in the 15-to-34 age group.

Changes in median wealth across family characteristics

The results above raise the question as to which families had the largest increase in wealth, or net worth, over the period. In this paper, net worth is defined as the overall value of assets (including employer pensions) held by a family, minus the overall value of debt held by that same family. In 2012, for instance, the median net worth of all Canadian families with debt was $248,000, up from $131,100 in 1999 (Table 3). As was the case with debt and assets, however, changes in median net worth also varied across family categories.

Table 3
Median net worth, families with debt, 1999 and 2012
Table summary
This table displays the results of Median net worth 1999, 2012 and Change, 1999 to 2012, calculated using 2012 constant dollars, dollars and percentage units of measure (appearing as column headers).
  1999 2012 Change, 1999 to 2012
2012 constant dollars dollars percentage
All 131,100 248,000 116,900Note T3s_1asterisk-refa* 89.2
Age of major income earner  
15 to 34 34,100 42,200 8,100 23.8
35 to 44 141,500 218,000 76,500Note T3s_1asterisk-refb* 54.1
45 to 54 253,100 402,600 149,500Note T3s_1asterisk-refc* 59.1
55 to 64 349,100 539,400 190,300Note T3s_1asterisk-refd* 54.5
65 and over 283,400 447,400 164,000Note T3s_1asterisk-refe* 57.9
Education of major income earner  
Less than high school 95,600 114,600 19,000 19.9
High school 118,200 190,000 71,800Note T3s_1asterisk-reff* 60.7
College/trades 124,700 220,000 95,300Note T3s_1asterisk-refg* 76.4
University degree 231,600 430,100 198,500Note T3s_1asterisk-refh* 85.7
Family structure  
Non-seniors (under age 65)  
Singles 26,000 36,500 10,500 40.4
Couples without children or with children 18 and over 223,600 408,600 185,000Note T3s_1asterisk-refi* 82.7
Couples with children under 18 165,800 303,000 137,200Note T3s_1asterisk-refj* 82.8
Lone parents 30,700 47,300 16,600 54.1
Others 171,800 304,500 132,700Note T3s_1asterisk-refk* 77.2
Seniors (65 and over) 283,400 447,400 164,000Note T3s_1asterisk-refl* 57.9
Immigrant status of major income earner  
Immigrated within the last 10 years 47,300 74,400 27,100 57.3
More than 10 years since immigration 216,400 346,300 129,900Note T3s_1asterisk-refm* 60.0
Canadian-born 125,400 240,900 115,500Note T3s_1asterisk-refn* 92.1
Region  
Atlantic 113,000 179,500 66,500Note T3s_1asterisk-refo* 58.8
Quebec 104,200 217,600 113,400Note T3s_1asterisk-refp* 108.8
Ontario 155,100 272,900 117,800Note T3s_1asterisk-refq* 76.0
Manitoba and Saskatchewan 135,900 240,200 104,300Note T3s_1asterisk-refr* 76.7
Alberta 142,000 260,000 118,000Note T3s_1asterisk-refs* 83.1
British Columbia 144,000 316,900 172,900Note T3s_1asterisk-reft* 120.1
Homeownership status  
Owners with a mortgage 190,900 331,900 141,000Note T3s_1asterisk-refu* 73.9
Owners without a mortgage 427,400 784,800 357,400Note T3s_1asterisk-refv* 83.6
Non-owners 12,300 10,100 -2,200 -17.9
Income quintile  
Bottom quintile 11,300 13,500 2,200 19.5
Second quintile 81,500 126,200 44,700Note T3s_1asterisk-refw* 54.8
Middle quintile 137,700 234,800 97,100Note T3s_1asterisk-refx* 70.5
Fourth quintile 196,600 419,900 223,300Note T3s_1asterisk-refy* 113.6
Top quintile 366,300 839,000 472,700Note T3s_1asterisk-refz* 129.0

Most categories of families saw significant increases in their net worth between 1999 and 2012. The largest increases took place among top income quintile families ($472,700); home owners without a mortgage ($357,400); families whose major income earner had a university degree ($198,500); families in the 55-to-64 age group ($190,300); and couples without children ($185,000). Such results are not surprising since these categories of families experienced relatively large gains in their median assets, with comparatively smaller increases in their median debt levels.

Conversely, net worth did not increase significantly among families in the 15-to-34 age group, families in the less than high school education group, singles, lone-parent families, recent immigrants, non-owners, and families in the bottom income quintile. In the case of younger families, singles and non-owners, net worth did not increase because median assets did not grow proportionately with the increase in their debt levels. In the case of families in the less than high school group, lone parents, recent immigrants, and bottom quintile families, neither median debt nor median assets increased significantly over the period.

These results suggest that real estate assets played a key role in the overall increase in the value of assets over the period (see Decomposition of changes in debt and assets across family characteristics for additional information).

Changes in debt-to-income ratio and debt-to-asset ratio

The debt-to-asset and debt-to-income ratios provide another, but no less important, perspective on household finances.Note 14 The debt-to-income ratio is considered to be one of the most important indicators of a family’s indebtedness. Families with a relatively high debt-to-income ratio are more likely to spend a higher proportion of their income on repaying their debt, leaving less for other consumption (or saving). Another important indicator is the debt-to-asset ratio, which reveals the potential vulnerability of families to changes in asset values—particularly housing.

In this paper, the median ratio for each family category is used. It is obtained by calculating the debt-to-income and debt-to-assets ratios for each family belonging to a particular category, and by identifying the value for the median family within the category. This method has the advantage of being more representative of the financial situation of ‘typical’ families within the category. On the other hand, such values cannot be compared to aggregate values of household debt and disposable income that are provided by the System of National Accounts.Note 15 In the accounts, the overall value of household debt is divided by the overall value of income (for the debt-to-income ratio) or assets (for the debt-to-asset ratio). While this method could also be used to generate estimates of the debt-to-income and debt-to-asset ratio for each category, they would not necessarily be representative of typical families within each category.Note 16 The aggregate ratios by family category are available in a supplementary table (see Table A.2).

Between 1999 and 2012, the median debt-to-income ratio increased significantly, from 0.78 to 1.10. This means that the median family, in 2012, had a debt corresponding to 110% of the family income (up from 78% in 1999). However, the median debt-to-asset ratio changed little, amounting to 0.27 in 1999 and 0.25 in 2012 (Table 4) —thereby suggesting that the median family had a debt level corresponding to roughly one quarter of assets in both years.Note 17

Table 4
Median debt-to-income ratio and debt-to-asset ratio across family characteristics, families with debt, 1999 and 2012
Table summary
This table displays the results of Median debt-to-income ratio and debt-to-asset ratio across family characteristics 1999 and 2012, calculated using Median debt-to-income ratio and Median debt-to-asset ratio units of measure (appearing as column headers).
  1999 2012 1999 2012
Median debt-to-income ratio Median debt-to-asset ratio
All 0.78 1.10Note T4s_1asterisk-refa* 0.27 0.25
Age of major income earner  
15 to 34 0.83 1.28Note T4s_1asterisk-refb* 0.52 0.53
35 to 44 1.15 1.93Note T4s_1asterisk-refc* 0.31 0.39Note T4s_1asterisk-refv*
45 to 54 0.75 1.16Note T4s_1asterisk-refd* 0.18 0.20
55 to 64 0.48 0.84Note T4s_1asterisk-ref* 0.08 0.11
65 and over 0.24 0.42Note T4s_1asterisk-reff* 0.05 0.05
Education of major income earner  
Less than high school 0.44 0.50 0.22 0.20
High school 0.83 0.94 0.29 0.26
College/trades 0.93 1.26Note T4s_1asterisk-refg* 0.30 0.28
University degree 0.96 1.43Note T4s_1asterisk-ref* 0.24 0.23
Family structure  
Non-seniors (under age 65)  
Singles 0.55 0.82 0.40 0.40
Couples without children or with children 18 and over 0.79 1.20Note T4s_1asterisk-refi* 0.20 0.19
Couples with children under 18 1.24 1.94Note T4s_1asterisk-refj* 0.33 0.34
Lone parents 0.62 0.62 0.42 0.37
Others 0.48 0.65 0.17 0.21
Seniors (65 and over) 0.24 0.42Note T4s_1asterisk-refk* 0.05 0.05
Immigrant status of major income earner  
Immigrated within the last 10 years 0.89 1.66 0.52 0.45
More than 10 years since immigration 0.88 1.37Note T4s_1asterisk-refl* 0.25 0.26
Canadian-born 0.76 1.03Note T4s_1asterisk-refm* 0.26 0.24
Region  
Atlantic 0.56 0.87Note T4s_1asterisk-refn* 0.20 0.22
Quebec 0.66 0.75 0.24 0.19Note T4s_1asterisk-refw*
Ontario 0.92 1.18 0.29 0.27
Manitoba and Saskatchewan 0.72 0.99 0.22 0.23
Alberta 0.92 1.60Note T4s_1asterisk-refo* 0.31 0.31
British Columbia 0.98 1.43Note T4s_1asterisk-refp* 0.31 0.27
Homeownership status  
Owners with a mortgage 1.72 2.46Note T4s_1asterisk-refq* 0.35 0.35
Owners without a mortgage 0.25 0.38Note T4s_1asterisk-refr* 0.03 0.03
Non-owners 0.27 0.31 0.34 0.37
Income quintile  
Bottom quintile 0.62 0.76 0.45 0.40
Second quintile 0.64 0.79 0.28 0.28
Middle quintile 0.88 1.36Note T4s_1asterisk-refs* 0.28 0.27
Fourth quintile 0.91 1.34Note T4s_1asterisk-reft* 0.24 0.21
Top quintile 0.87 1.24Note T4s_1asterisk-refu* 0.18 0.16

The debt-to-income ratio reaches a peak among families in the 35-to-44 age group, then declines with age. This is expected, as levels of debt are lower for older age groups. Between 1999 and 2012, the median ratio increased for all age groups—particularly among those aged 35 to 44, whose debt-to-income ratio increased from 1.15 in 1999 to 1.93 in 2012. The median ratio also increased among families in the 65-and-over group, from 0.24 in 1999 to 0.42 in 2012.

Families whose major income earner was aged 35 to 44 also had the distinction of being the only age category for which the median debt-to-asset ratio rose over the period, from 0.31 to 0.39. This supports our earlier findings, which showed a relatively rapid rise in median debt levels compared with median assets among families in this age group. Other age groups had similar debt-to-asset ratios in both 1999 and 2012, with younger families having higher ratios and older families having lower ratios.

Between 1999 and 2012, the debt-to-income ratio increased significantly among families whose major income earner had a college/trades diploma or a university degree. However, the debt-to-asset ratio remained stable over the period in all educational categories.

Significant increases in the debt-to-income ratio also took place among couple families with children (from 1.24 to 1.94), and couple families without children (from 0.79 to 1.20). In contrast, changes in the debt-to-asset ratio were not significant across family structures.

The increases in the debt-to-income ratios were statistically significant among families of immigrants who have been in Canada for at least 10 years and among the Canadian-born. Conversely, the debt-to-asset ratios remained stable over the period for the two types of immigrant families and for the Canadian-born.

Homeownership was associated with significant increases in the debt-to-income ratio—especially among mortgagees, for whom the median debt-to-income ratio rose from 1.72 in 1999 to 2.46 in 2012. The debt-to-asset ratio of mortgagees, however, remained stable over the period (at 0.35).

Regionally, the largest increases in the debt-to-income ratio took place in Alberta and British Columbia, widening the gap with the other provinces. On the other side of the country, the Atlantic also registered a smaller, yet significant, increase over the period. Changes in the median debt-to-income ratio were not significant in the other three regions.

Lastly, median debt-to-asset ratios remained stable in all regions except Quebec, where the median ratio declined from 0.24 in 1999 to 0.19 in 2012. Such results are in line with our earlier findings, which indicated that median assets increased significantly in Quebec, while median debt did not do so.

More than one-third of Canadian families had a debt-to-income ratio above 2.0 in 2012

Since there are considerable variations between Canadian families in their household finances, examining changes in the distribution of both ratios can provide additional insight.

In 2012, for instance, about one-third of Canadian families had a debt-to-income ratio up to 0.5, meaning the total value of their debt did not exceed 50% of their overall after-tax family income (Chart 2). These families may be less at risk of a financial shock, since they have a lower degree of debt exposure.

Chart 2 Distribution of Canadian families by level of debt-to-income ratio, families with debt, 1999 and 2012

Description for chart 2

However, another one-third (35%) of Canadian families had a debt-to-income ratio above 2.0 in 2012. In comparison, the proportion of families in such a situation was 23% in 1999. In fact, the families-with-a-ratio-above-2.0 category was the only one to increase over the period—the proportion declined in all other categories with lower ratios.

In addition, 14% of Canadian families had consumer debt that was higher than their after-tax family income in 2012, up from 8% in 1999. Consumer debt can be described as the total amount of debt that is not mortgage debt—debt outstanding on credit cards, personal and home equity lines of credit, secured and unsecured loans from banks and other institutions including vehicle loans, and other unpaid bills. Meeting financial obligations could be a challenge for these families—some of them potentially dedicate a large portion of their income to servicing a debt that does not contribute to building housing equity.

The proportion of Canadian families with consumer debt larger than after-tax family income was somewhat larger in certain family categories, such as single people (21%) and British Columbia residents (20%). However, the increase in the ratio over the period is not because of a particular increase in the share of families that were more at risk of having a larger ratio. Rather, the ratio increased in almost all family categories over the period.

In comparison, the distribution of the debt-to-asset ratio remained relatively stable over the period (Chart 3). In 2012, 31% of Canadian families had a debt-to-asset ratio that was equal to or lower than 0.1 (families with debt levels that were 10% of the value of their assets). Conversely, 37% of Canadian families had a debt-to-asset ratio of above 0.4 in 2012. These percentages were relatively similar in 1999.

Chart 3 Distribution of Canadian families by level of debt-to-asset ratio, families with debt, 1999 and 2012

Description for chart 3

Conclusion

The period from 1999 to 2012 was characterized by significant increases in both assets and debts for nearly all types of families in the country. The magnitude of these changes, however, was not the same from one type of family to another. Debt, in particular, increased faster among families that were at the beginning of their life cycle, such as families in the 35-to-44 age group and couples with children. These families also benefited from increases in assets, but other types of families also benefited in this regard—particularly those in the later stages of their life cycle. For instance, median assets rose by $252,700 among those aged 55 to 64 over the period, compared with $179,800 among those aged 35 to 44.

Another perspective on family finances can be obtained by examining indebtedness ratios. In this paper, two particular ratios are examined: the debt-to-income ratio and the debt-to-asset ratio. Between 1999 and 2012, the median debt-to-income ratio of Canadian families increased from 0.78 to 1.10, while the median debt-to-asset ratio remained relatively stable (around 0.25). The debt-to-income ratio increased faster for some types of families than others. This was the case among families whose major income earner was aged 35 to 44 and couple families with children under 18. Families in the 35-to-44 age group were the only group for whom median debt-to-assets increased over the period, from 0.31 to 0.39.

Because some families have very low ratios and others have higher ratios, it is also important to examine the distribution of families across categories of debt-to-income and debt-to-asset ratios. In 2012, more than one-third of all Canadian families (about 35%) had a debt-to-income ratio above 2.0 (or at least 200% of their income), up from 23% in 2012. Conversely, 34% had a debt-to-income ratio up to 0.5, down from 40% in 1999. In contrast, the distribution of families across debt-to-asset ratios remained largely unchanged between 1999 and 2012.

Sharanjit Uppal is a senior analyst with the Labour Statistics Division and Sébastien LaRochelle-Côté is Editor-in-Chief of Insights on Canadian Society at Statistics Canada.

Notes

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