March 12, 2018

Canadian Household Debt is Compromising the Banking System

Excepts from an article in REP online by Armina Ligaya of the Associate Press:

Canadians’ collective household debt has climbed to $1.8 trillion as an international financial group sounds an early warning that the country’s banking system is at risk from rising debt levels.

The country’s credit-to-GDP gap is 9.6, above the group’s critical red zone threshold of nine. This indicator measures the gap between the country’s credit-to-GDP ratio and the overall long-term trend over time _ a widening of which can indicate a possible financial imbalance. Canada is one of four countries in the red zone on this metric along with Hong Kong, China and Switzerland, at 30.7 per cent, 16.7 per cent and 16.3 per cent, respectively. The United States, for comparison, is -6.9

As well, Canada’s debt-service ratio, which measures interest payments and amortizations relative to income, is at 2.9 per cent. That surpasses BIS’ critical threshold on this measure of 1.8 per cent. Canada is one of five countries in the red on this metric, again along with Hong Kong and China at 6.9 per cent and 5.1 per cent, respectively. The debt-service ratio in both Russia and Turkey were also showing signs of risk, at 1.8 per cent and 6.1 per cent, respectively.

how this affects the Newmaket real estate market has yet to be seen, as there is still a lot of good employment in the area, but it’s a troubling sign as to why the government is taking, what might seem to be, some extreme measures with regards to financing requirements.

it’s harder to qualify for mortgages for many buyers which is a contributing factor for a decline in prices… as well as a switch from Sellers Market to Buyers Market.

Posted by dtoombs at 6:36 AM

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