Total household net worth rose in all four quarters of 2024, hitting $17.495 trillion in the latest quarter, according to Statistics Canada. This means households ended the year with a bang — with nearly $1.2 trillion in additional wealth compared with the end of 2023.  

The agency’s latest national balance sheet, released Thursday, revealed household net worth grew 1.4 per cent ($236.3 billion) from the third quarter, mainly driven by financial assets, which attained a new record high of $10.83 trillion.  

The S&P/TSX Composite index rose by three per cent, less than a third of its growth in the previous quarter, but still outperformed the S&P 500 index in Q4. The rapidly depreciating Canadian dollar meant the value of households’ foreign investment holdings saw a boost as well. 

Gains in real estate assets also contributed to household wealth in the last quarter, pushing the value of non-financial assets to $9.745 trillion (a 0.6 per cent increase).  

Toronto-Dominion Bank economist Maria Solovieva pointed out the cumulative impact of interest rate cuts, leading more Canadians to take on mortgages. The Bank of Canada slashed its key rate five times last year and introduced yet another cut on Wednesday, bringing the rate to 2.75 per cent.  

“It takes a bit of time for the market to really absorb (the impact of rate cuts),” Solovieva explained. “Once it becomes obvious that you have better financial conditions, that’s when (buyers) start entering the market — and that’s what we saw in the fourth quarter.” 

However, Solovieva is staying cautious about potential growth in the housing market this year. The latest data from the Canadian Real Estate Association showed sales activity tapered off at the end of January, declining 3.3 per cent for the month compared to December.  

“It’s likely that we will have a little bit of leveling off because the low hanging fruit of (lower) prime rate mortgages has already been picked, and now (any mortgage debt increases) will be just a function of debt growth,” she said. 

Solovieva also flagged that household wealth gains may not continue into 2025, especially amid the current trade war chaos. 

“That momentum may have already run its course,” she wrote in a note. “While financial asset gains extended into early 2025, recent market turbulence triggered by tariff uncertainty has wiped out roughly one per cent of the S&P/TSX and five per cent of the S&P 500 year-to-date.” 

Shelly Kaushik, senior economist and vice-president of economics at Bank of Montreal highlighted in a note that Canada’s household debt-to-income ratio ticked up for the first time in nearly two years in the last quarter, as debt increases outpaced income gains.  

And although the household debt service ratio inched down to 14.35 per cent and has fallen from previous record highs, “It remains above its long-run average and could face upward pressure if income growth cools as the trade tiff weighs on the economy and labour market,” Kaushik said.

Nathan Janzen, assistant chief economist at Royal Bank of Canada, said that international trade risks could overshadow rate cuts and past gains in household wealth.  

“There’s a wide range of possible economic impacts from tariff increases, depending how big they are, but none of them are positive,” Janzen said. 

Janzen forecasted that the overnight rate could fall to 2.25 per cent by mid-year, but cautioned that interest rate policy isn’t necessarily the best tool to fight tariff uncertainty, compared with more targeted support to affected industries. 

He also noted that some households could be disproportionately affected by a trade war, saying that household savings accumulates mostly among higher income households.  

“It’s much more difficult for lower income households to avoid the impact of higher inflation just because they save less in general and spend the larger share, if not all, on consumption,” Janzen said. “They have no choice but to pay higher prices amid big trade disruptions, because typically, unfortunately, most economic shocks disproportionately impact the lower end of the income distribution.”

• Email: slouis@postmedia.com

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