Global household debt is falling, but Canada is bucking the trend—and it’s not good news. The Institute of International Finance’s (IIF) latest update shows global household debt-to-GDP fell in Q3 2025, continuing a general trend since the financial crisis. BMO Capital Markets warns Canada is one of the few exceptions, with its households now the second-most indebted among advanced economies.
Global Household Debt Has Been Shrinking Since 2009
Since the Global Financial Crisis, households have generally been deleveraging. According to the IIF, global household debt dropped to 57% of GDP in Q3 2025. While advanced economies were higher at 67.4%, they’ve shed 1.4 points. “Aside from the wild distortions during 2020, the general pattern for household debt has been on the decline since the Great Recession in 2009,” explains BMO Chief Economist Douglas Porter.
Canadian Household Debt Is 2nd Highest Among Advanced Economies
Porter notes progress is being made in most advanced economies, with Canada being a rare exception. He notes the EU has always maintained modest debt hovering around 57% of GDP. The US transitioned from a high-debt economy just 15 years ago to a moderate-debt economy—at least for households, with its public sector debt rising to partially offset the decline. Not the case in Canada.
“Canada has gone the other way, with household debt hovering around 100% of GDP for the past decade, versus around 80% pre-2009, and showing no real sign of backing down,” he explains. “Among a sampling of 25 advanced economies, only Australia has higher household debt/GDP than Canada.”
High private debt is typically offset by lower public debt and vice versa. Canada proves to be an exception here as well, with Porter noting government debt has also steadily increased since 2009. All roads to growth have been debt-fueled.
Long-Term Success Threatened When Debt Reaches These Heights
Debt at this scale doesn’t just impact borrowers, but creates systemic problems we all deal with. Debt is a useful tool, especially when it comes to improving sentiment to kickstart an economy in a rut. However, the benefits are extremely short-lived—so it’s important to not become overly reliant on that path.
IMF research suggests it’s like a sugar high. They found the temporary economic bump in GDP and employment fades within a year. By the third year, that growth turns into a drag—estimating that every 5 points of household debt-to-GDP reduces GDP growth by 1.25 points annually 3 years later.
The Bank for International Settlements (BIS)—known as the central bank for central banks—has studied the topic extensively. One post-Global Financial Crisis study revealed that household debt above 85% turns into a long-term drag on growth. A subsequent paper found that household debt-to-GDP between 60% and 80% stops becoming effective for short-term growth, and starts intensifying a long-run drag on consumption.
Canada may already be demonstrating the impact of such highly leveraged households and government. Aggressive interest rate easing is producing minimal growth, and failing to drive the credit-driven growth expected in industries like housing.
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