Household wealth reached record or near-record levels across Canadian provinces last year, said TD.
However, important regional differences reveal nuances in the level of financial resilience, writes the bank in a note to clients.
Strong gains in financial assets helped support spending in 2025, partially offsetting softer labor markets and slower income growth and acting as a financial bridge for households, stated TD.
Household leverage, as measured by debt-to-income ratios, declined across most provinces since the COVID-19 pandemic, except for in Ontario and Prince Edward Island, pointed out the bank. Ontario now has the highest leverage in the country, leaving households more exposed to higher borrowing costs and future economic shocks.
Developments in household balance sheets often draw attention, but scratching beneath the aggregate picture reveals provincial differences, added TD. In 2025, financial wealth gains were more closely correlated with spending than they have been over the long term, where income remains the dominant driver.
This suggests that households may have been drawing on financial wealth gains to help bridge slower income growth. The growing role of financial assets may partly reflect the absence of stronger traditional drivers of spending, particularly housing and income growth.
Another commonly watched element of household balance sheets in Canada is leverage. Higher leverage makes households more sensitive to interest rates and vulnerable in the event of an income shock.
Most provinces have seen leverage decline, but Ontario stands out. As a consequence, provincial differences in leverage remain a key factor to watch when assessing household resilience, noted the bank.
In provinces where debt-to-income ratios remain elevated, households are likely to remain more sensitive to higher borrowing costs and weaker housing conditions. By contrast, provinces with more contained leverage and stronger balance sheet improvement may be better positioned to sustain consumption growth even in a slower economic environment.
These differences may become increasingly important as provincial economies navigate a period of softer growth, still-elevated borrowing costs and a housing market that remains subdued across much of Canada, according to TD.