Excerpts
The income gap increased in 2025 as lower income households were negatively affected by declining interest rates and weak growth in employment income. The wealth gap grew throughout 2025 as continued strong financial market gains benefited the wealthiest.
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The income gap—defined as the difference in the share of disposable income between households in the top 40% and the bottom 40% of the income distribution—reached 46.7 percentage points in 2025, up from 46.4 percentage points a year earlier.
Households' ability to maintain their economic well-being differs with changing macroeconomic conditions. In response to easing inflation, the Bank of Canada's policy rate stood at 2.25% by the end of 2025, down 1.0 percentage points from a year earlier. While declining interest rates can moderate borrowing costs, they can also lead to lower returns on interest-bearing investments such as savings and deposit accounts, with varying impacts for households across the income distribution.
Labour market conditions can also have varying impacts on household income. Wages grew by an average of 3.1% in 2025 compared to a year earlier, a slowdown from annual increases of 3.3% in 2024 and 3.7% in 2023. Wage earnings were notably weak in 2025 for goods-producing sectors such as mining and oil and gas extraction, agriculture, and manufacturing, and services-producing sectors such as professional and personal services, transportation and storage, and information and cultural industries.
The lowest income households (bottom 20% of the income distribution) increased their average disposable income at a below average pace in 2025 (+2.6% vs. +3.8% for all households), due mainly to relatively weak gains in wages (+2.3%) and self-employment income (+3.9%). The lowest income households reduced their average net investment income, as a decline in average investment earnings (-$443), mostly from negative returns from interest-bearing deposits, outweighed lower interest payments (-$267). Increases in net transfers, especially for social assistance and government retirement benefits combined with lower tax payments, offset weak gains in employment income.
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The wealthiest households (top 20% of the wealth distribution) accounted for almost two-thirds (65.7%) of Canada's total net worth at the end of 2025 (i.e., fourth quarter of 2025), averaging $3.5 million per household. Meanwhile, the least wealthy households (bottom 40% of the wealth distribution) accounted for 3.0% of total net worth, averaging $81,650 per household. Overall household net worth increased at the end of 2025 relative to a year earlier (+5.3%), entirely due to a strong gain in financial assets (+9.9%), mainly from equity markets. Despite an increase in overall mortgage debt (+4.2%) at the end of 2025, the value of households' real estate assets declined (-0.7%) along with lower average housing values, while growth in consumer durables (+3.4%) was partially offset by an increase in associated non-mortgage liabilities (+2.7%).
The gap in wealth between households in the top 20% and the bottom 40% reached 62.7 percentage points at the end of 2025, up 0.6 percentage points from a year earlier.
The least wealthy households grew their net worth at the slowest pace of any wealth group at the end of 2025 (+2.1% vs. +5.3% for all households), due mainly to a below average gain in the value of their financial assets (+6.1%). The least wealthy increased their mortgage debt throughout 2025 to finance home purchases during a period of lower average housing values, indicating more involvement in the housing market; however, the increase in the value of their real estate assets (+3.5%) was more than offset by the increase in their mortgage costs (+7.5%).
In contrast, the wealthiest households increased their net worth at the fastest pace at the end of 2025 (+6.0%), as they had the strongest growth in the value of their financial assets (+10.8%) while their mortgage debt (+0.7%) grew at the lowest rate of any wealth group.
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