Concerns that the financial situation of Canada’s middle-income households is shaky appear to be put to rest by newly-released information. Studies typically focus on how much middle-class earn in a year. Here we look at their wealth and how it has changed over the past two decades.
The table covers the years between 1999 and 2016 showing the average value of assets and liabilities owned by Canadian households with middle incomes — to be precise, households with after-tax incomes falling in the the third fifth of household incomes. The amounts are expressed in inflation-adjusted 2016 dollars.
Over these 17 years, the inflation-adjusted value of middle-income household net worth grew at an average annual rate of 4% The growth was mainly driven by the real value of the equity households hold in their principal residence, which grew at an average annual rate of 5%. Although mortgage debt also grew over this period, home equity — the value of a home in excess of the remaining mortgage debt — grew slightly, from 72% to 75%.
As would be expected, in both years most middle-income households’ most important assets were their principal residence and their private pension assets, which together accounted for more than two-thirds of middle-income household assets. It’s interesting that although mortgages accounted for two-thirds of middle-income household debt only about one-third of middle-income households held a mortgage in 2016.
Two-thirds of such households were either renting or had paid off their mortgage. Among those who did hold a mortgage in 2016, its average value was just over $186,000. In 2016, 40% of middle-income households carried debt on their credit cards, virtually the same proportion as in 1999. Vehicle loans, by contrast, were a growing source of debt.
These data suggest that when it comes to household wealth, the average middle-income household is in a steadily improving economic position. These are national averages, however, and the information might look different in some parts of the country. The percentage of mortgages in arrears, for example, differs significantly by province, from 0.09% in Ontario and 0.14% in B.C. to 0.5% in Alberta and 0.85% in Saskatchewan.
