Canada’s economic landscape revealed a growing income disparity, with the gap between the wealthiest and the poorest households widening. The difference in disposable income between the top 40% and bottom 40% reached 47.1 percentage points, the highest it has been since the COVID-19 pandemic began. This marks a continued rise from 2020, when the gap was at its lowest point.
Despite this, there are signs of improvement for lower-income households. The Bank of Canada reduced its policy rate in 2024 from 5.0% to 3.25% in response to easing inflation. This helped lower borrowing costs, giving some relief to households with higher debt. However, the benefits were not universal. While lower borrowing costs helped reduce financial pressures, wages for the lowest-income households actually fell by 3.3%, making it harder for these groups to maintain their financial well-being.
On the other hand, higher-income households saw significant gains. The wealthiest 20% of Canadians experienced a 5.9% increase in disposable income, driven largely by a sharp rise in investment income.
Middle-income households, representing the majority of Canadians, saw a more balanced increase in income, rising by 5.4% in 2024.
The situation with household savings varied across income groups. While the wealthiest households increased their savings by 10.5%, the lowest-income households experienced a rise in dis-saving, as their income growth lagged behind the rising costs of living, particularly for housing and utilities.
A positive note in 2024 was the growth in net worth among lower-income households. These households saw an 8.8% increase in their wealth, largely due to gains in real estate values. Lower interest rates made homeownership more affordable for this group, helping them build wealth. In contrast, the wealthiest households saw minimal growth in their real estate holdings.
Debt trends also showed some divergence. Young households, particularly those under 35, saw a reduction in mortgage debt, reflecting a slower housing market and lower interest rates. Older households, however, increased their mortgage debt, likely due to investments in properties or helping younger family members with home purchases.
Debt service ratios, which measure the percentage of income spent on debt payments, remained stable in 2024. This is a positive sign, indicating that many households are managing their debt more effectively.