Canadians’ collective household wealth climbed to $17.3 trillion in the third quarter, marking the seventh increase in the last eight quarters — a period during which household net worth ballooned by nearly $1.9 trillion, according to Statistics Canada.

The agency’s latest national balance sheet, released Thursday, showed household net worth grew 1.7 per cent from the second quarter, significantly more than the previous quarter’s gain of 0.4 per cent.

This rise in household wealth was driven by financial assets, which surged 3.9 per cent to hit a new record high of $10.6 trillion, Toronto-Dominion economist Maria Solovieva said.

“We are seeing strong markets almost every day,” said Solovieva. The S&P/TSX Composite Index rose 9.7 per cent in the third quarter, outperforming the S&P 500 Index, and Solovieva anticipates growth in North American equity markets in the next quarter as well.

Households purchased more mutual fund shares, which totalled $26.9 billion in the third quarter, the highest since the first quarter of 2022 and a significant increase from $14.7 billion in the second quarter of 2024. There seems to be a growing appetite for non-money market funds, suggesting Canadians are moving more into risk assets amid interest rate cuts.

In the meanwhile, the household debt-to-income ratio improved for a sixth straight quarter, shrinking to 173.1 per cent in the third quarter, as growth in disposable incomes outpaced borrowing costs.

“Excluding pandemic distortions, this is the lowest ratio since 2015,” wrote Bank of Montreal economist Shelly Kaushik in a note.

The household debt service ratio also dropped from nearly 15 per cent per cent in the second quarter to 14.7 per cent in the third quarter, which Kaushik said is still “historically elevated” but is much lower compared to the all-time high from the fourth quarter of last year.

“While mortgage resets will continue to add upside risk in the near term, income gains and ongoing rate cuts will relieve some pressure on household finances,” she explained.

As a result of higher wages and reduced spending, the household saving rate climbed to a three-year high of 7.1 per cent in the third quarter. Statistics Canada indicated that gains in disposable income expanded at nearly double the rate of consumption.

However, Solovieva wrote in a note that, “This robust growth in household wealth is likely to bolster consumer spending into late 2024 and early 2025, supported further by high-profile events like the Eras Tour and household fiscal measures.”

Solovieva told Financial Post the upcoming GST/HST holiday and the $200 rebate cheques promised to Ontarians early next year could boost household consumption levels, as well.

She added that, although the value of residential real estate declined in the third quarter, she is now seeing the housing market start to warm up, which could further bolster household net worth come next quarter.

“November will be a little bit of a cooler month, but October picked up quite significantly, (in) both sales and prices,” she noted, pointing to the Bank of Canada cutting interest rates. “The Canadian housing market is very sensitive to interest rate changes, so that’s why we think there will be some uptick there, as well.”

Statistics Canada also indicated that housing affordability is improving, with the value of household real estate as a proportion of disposable income falling to 505.7 per cent. This marks its lowest point since the end of 2020 and well off a peak of 630 per cent from the first quarter of 2022.

Still, Royal Bank of Canada (RBC) economist Carrie Freestone says just because housing affordability is softening compared to recent peaks — it still doesn’t make housing affordable for many Canadians.

The most recent RBC housing affordability report indicated the typical family would have to devote about 60 per cent of their pre-tax income to afford homeownership today, compared with the 44 per cent quarterly average recorded in 2019.

While the third quarter balance sheet paints a positive picture of household wealth, Freestone emphasized that much of these gains in net worth have been realized by higher-income earners.

Average net worth held level at just over $1 million per household in the third quarter, Statistics Canada said but added this is not evenly distributed across all wealth quintiles.

In fact, in the second quarter of the year, the gap between the wealthiest (top 20 per cent of the wealth distribution) and the least wealthy (bottom 40 per cent of the wealth distribution) went up 0.4 percentage points to 64.9 percentage points.

With nearly 72 per cent of financial assets held by the highest wealth quintile in the second quarter of 2024, Statistics Canada predicts the wealth gap could worsen. Freestone added that life insurance and pensions accounted for 44 per cent of the appreciation in net worth.

“We’re in a situation where household balance sheets, in some ways, have never looked stronger, but at the same time, we’ve seen (credit card) delinquencies rising, housing is unaffordable … (and) beneath the surface there’s widening inequality,” she said.

• Email: slouis@postmedia.com

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