When Canada receives a high world ranking, it's usually good news.

However, a new report from financial services group Desjardins has revealed that the country has come out on top for just how much debt Canadians are in.

According to the report's findings, Canadians have accumulated the third-highest household debt levels in the world, following just Switzerland and Australia.

This startling finding comes after a May 2023 report from the Canada Mortgage and Housing Corporation (CMHC), which revealed that Canada's household debt was the highest in the G7.

Earlier this year, Statistics Canada provided some more detailed insights into the wealth disparities and debt among the country's households.

It highlighted that Canadian households are the second wealthiest in the G7, with the U.S. snagging the top spot. However, the country's reliance on consumer spending as a key source of economic growth has "contributed to greater debt burdens."

Desjardins notes that over half of all debts (including mortgage and consumer) are carried by households belonging to the two highest income quintiles. The three lowest income quintiles carry 45 per cent of the country's household debts.

Desjardins notes that this group has been impacted by growing mortgage debt since 2019 and has a higher debt-to-disposable-income ratio, specifically for working individuals.

Nearly all Canadians are also dealing with a decline in real disposable income, except the richest households, which have seen their disposable income increase since 2021.

Desjardins notes a growing disparity between the wealthiest Canadians and the rest, and one reason is that "higher interest rates affect income distribution, benefitting the rich."

Ever since the BoC began tightening interest rates four years ago, households in the top income quintile have experienced more returns on savings products.

Despite facing high household debts, the country's lowest-income quintiles (which make up 60 per cent of Canada's population) are doing the most spending.

This group was responsible for 58 per cent of consumer spending in 2023, with most purchases going towards necessities such as housing, transportation, and food.

Desjardins' data shows that most households in Canada cut back on non-essential spending in 2023.

When it comes to saving, most Canadians, unfortunately, aren't putting any money aside.

"Soaring interest rates and cost of living have crimped Canadian households' ability to save," reads the report.

However, households in Canada with the top 40 per cent of disposable income distribution were able to save more compared to the other 60 per cent of the population.

The report indicates that the future is uncertain for Canadians in the three lowest income quintiles as they've increased their share of mortgage debt due to high interest rates.

"The recent rise in the cost of living means some households are already having to make tough choices to meet their financial obligations," it states.

"There are limited options for making ends meet; households can curb their spending, take on more debt, or make debt repayment a priority."

What's more concerning is that many Canadians are up for mortgage renewal in the next year.

The financial institution added, however, that some slight relief may be on the way as interest rates slowly decline in the coming months, "but income will also have to go up to absorb the shock."

With files from Imaan Sheikh.