Younger households are bearing the brunt of the financial pain, Statistics Canada says

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Inflation, higher interest rates and falling property values ​​are exacerbating wealth inequality in Canada, with younger households bearing the brunt of the financial pain.

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The richest 20 percent of households controlled 67.8 percent of the country’s net worth in the first quarter, while the bottom groups accounted for 2.7 percent, the Ottawa Bureau of Statistics said Tuesday.

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This difference of 65.1 percentage points was 1.1 points higher than in the same period of the previous year. It is the fastest increase on record since 2010, although the wealth gap is still slightly narrower than in 2020.

The widening wealth gap is a challenge for Prime Minister Justin Trudeau, whose government has pledged to reduce inequality, only to see it widen during the pandemic as home prices skyrocket. It also highlights the impact of the Bank of Canada’s aggressive interest rate hikes to combat inflation, which is weighing on the country’s indebted households.

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The least wealthy have been more affected by recent economic pressures, with their net worth falling by 13.8 percent, more than three times the rate of decline for the richest.

The difference in the share of disposable income between households in the top and bottom 40 percent reached 44.7 percentage points, which is 0.2 percentage points more than a year ago.

The decrease in the net worth of all households was almost entirely caused by real estate, the average value of which decreased by 8.6 percent year-on-year. The least wealthy group saw their mortgage debt rise much faster than the total value of their assets.

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The debt-to-income ratio for younger and key working-age groups was also at a record high, well above pre-pandemic rates. The ratio for the youngest households reached 207.5 percent, which is 13.4 percentage points more than a year ago. Among 35- to 44-year-olds, the ratio jumped 16.6 percentage points to 275.8 percent.

Younger households have recently increased their share of the overall Canadian population, accounting for 47.3 percent of all growth from the third quarter of 2021, largely due to high levels of immigration.

“Persistently high interest rates and inflation are likely to continue to strain the ability of households to make ends meet without taking on further debt, particularly vulnerable groups such as those on the lowest incomes, the least affluent and younger age groups. said the statistical office.

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