The middle 60 per cent of households fared the worst, seeing their relative incomes shrink by one per cent
The snapshot, released on Thursday, revealed that income inequality between the top and bottom 40 per cent of households reached 47.0 percentage points in the second quarter of 2024, the largest gap ever recorded since Statistics Canada started collecting this data in 1999.
Persistently high interest rates over the past year were identified as one of the main factors behind the widening inequality.
“While higher interest rates can lead to increased borrowing costs for households, they can also lead to higher yields on saving and investment accounts,” reads the snapshot.
“Lower income households are more likely to have a limited capacity to take advantage of these higher returns, as on average they have fewer resources available for saving and investment.”
High housing costs further exacerbated household inequality, according to Statistics Canada.
The middle 60 per cent of households fared the worst, seeing their relative incomes shrink by one per cent amidst bigger mortgage and credit card bills.
Meanwhile, robust growth in investment incomes lifted the top 20 per cent of households to the strongest relative gains. The richest Canadian households saw their disposable incomes grow by 7.6 per cent versus the second quarter of 2023.
The poorest households — those in the bottom 20 per cent — fell somewhere in the middle, with wage growth in low-paying fields easing the burden of higher loan payments.
The average low-income household came out slightly ahead from last year, with their relative income growing by about $200.
The snapshot also shows that younger Canadians are de-leveraging their balance sheets in response to the higher interest rates.
The youngest households — those where the primary earners were under 35 — were the only ones to steadily lower their mortgage debt balances since the end of 2022. While good news on its face, this could also reflect a larger share of young Canadians exiting the housing market due to affordability concerns.
“Good news! There’s been a stunning decline in mortgage debt for folks under 35,” Moffatt tweeted on Thursday. “Bad news! It’s because they’re too broke to qualify for mortgages.”
Younger households nevertheless saw higher loan-servicing fees, with the interest-only portion of their debt service ratios increasing by 0.8 percentage points relative to the second quarter of 2023.
National Post
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