Mortgage debt is falling for young Canadians. One reason: Parents, grandparents may be picking it up

Yahoo

4 days ago

The average mortgage burden for younger Canadians has been consistently dropping, in contrast to every other age category, a TD Economics study of Statistics Canada data shows.
The report, by economist Maria Solovieva, notes that while average balances have risen among near-retirement and retirement-age households, the usual reasons — more investment properties or renovations — aren't showing up in the data. This raises the possibility that the massive transfer of wealth from older to younger Canadians is also happening via debt.
The data in Statistics Canada's Distributions of Household Economic Accounts (DHEA) may suggest 'that intergenerational wealth transfer increasingly occurs not just through asset gifts, but also through the debt channel,' Solovieva writes.
The massive, ongoing handover of assets from older to younger generations, especially through real estate, has been well documented. For many millennials and Gen Z Canadians, stagnant wages and soaring home prices have put homeownership increasingly out of reach, making family support a critical factor. Surveys consistently show that housing affordability is a top concern among younger Canadians, and access to intergenerational wealth is emerging as a key dividing line between those who can enter the market and those left behind.
The data show average mortgage balances for households under 35 years old have dropped $15,500 from their peak in the third quarter of 2022. Over the same period, average mortgage balances have risen nearly $20,500 for the cohort aged 55 to 64 and nearly $5,000 for those 65 years old and over.
One likely reason for the trend, Solovieva says, is that fewer young people are buying homes — and those who are, are 'opting for less expensive homes due to affordability challenges.'
Data do not support the idea that some young homeowners may be downsizing to contend with higher interest rates, Solovieva says — even as mortgage debt has dropped, the total value of real estate assets within the cohort has increased. 'If downsizing were widespread, we'd expect asset values to fall in tandem with mortgage balances,' she explained.
On the other hand, Solovieva says, it is reasonable to assume higher interest rates have spurred younger households to prioritize prepayments in order to reduce their debt burden on renewal. But because wage and asset growth for younger households have been lower than for other groups, Solovieva suggests funding for prepayments might be coming from older generations.
These gifts – whether drawn from financial assets or sourced through borrowing – lower children's loan-to-value ratios, helping them qualify for mortgages and purchase homes that would otherwise be out of reach.Maria Solovieva, TD economist
Another possible reason for shrinking mortgage balances is that more young households own their homes outright. In 2023, eight per cent of young households were mortgage-free — 'the highest share on record,' Solovieva notes. While modest asset growth and stagnant wages don't fully explain that trend, it fits with the broader picture of intergenerational support quietly shaping homeownership outcomes.
And while debt burdens increased for older generations, 'there is no sign of increased ownership of investment properties or spike in renovation activity that would typically justify an increased leverage among these groups,' Solovieva says. 'That raises the possibility that some of this debt is being used to help adult children with homeownership.'
Other data support this hypothesis. A 2021 Statistics Canada study found that 17.3 per cent of homes owned by people born in the 90s were co-owned with parents. And a Bank of Canada study published in 2024 shows that more than 20 per cent of first-time homebuyers 'received gifted down payments,' with that phenomenon more pronounced among younger buyers.
'These gifts – whether drawn from financial assets or sourced through borrowing – lower children's loan-to-value ratios, helping them qualify for mortgages and purchase homes that would otherwise be out of reach,' Solovieva wrote.
But the trend isn't playing out evenly. Among the lowest-income young households, the debt-to-income ratio has surged from 244 per cent before the pandemic to 446 per cent in the first quarter of 2025 — a sign of mounting financial strain. At the same time, debt-to-income levels improved across all other income groups. As the TD report notes, this 'reinforces concerns that housing-centric wealth transfer could deepen intergeneration inequality, as homeownership becomes increasingly dependent on family support, leaving lower-income young families further behind.'
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf.
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