Household Debt – The Debt No One Talks About

Household debt – we all carry it yet we don’t acknowledge this type of debt. What exactly is household debt? Quite simply, debt that is incurred by the household i.e.in mortgage payments, credit card debt, and loan interests etc. As debts go, this kind of debt provides the same risk because households carrying high level of debt have to compromise their disposable income, drastically.

The entire household faces the difficulties of making debt repayments, on the same or even reduced income. Additionally, a large chunk of household debt is the direct result of drop in price of property assets.

Household Debt Ratio In Canada Is At Its Historically High!

Measured by the amount of borrowing in relation to disposable income, Canada’s household debt ratio has increased exponentially over the past 25 years! As of 2015, the number has almost doubled from 87% in 1992 to 166% last year.

Still – household debt is something we don’t talk about, nor its harrowing effects on Canadian households.

Canada Is Now the Most Leveraged Country in the G7

The Canadian economy is in poor state – the effects households feel whether rates are high or low is irrelevant. There are a number of concerns policy makers will need to assess to get the situation back under control. This won’t however take away the fact that we are the country that borrows the most –whether in loans, capital, or unpaid mortgages.

Household Debt-to-Income Ratio – A Whopping 171%

This means for every $100 (in disposable income), Canadian households feature debt obligations of $171 according to the new report from Parliamentary Budget Officer (PBO).

The above case-scenario will be bad even if the economic environment was favourable. As the situation is – Canadian economy is hurtling headlong into recession which could also be a veritable nightmare. If only people knew about it. Policy makers are hoping to rectify and normalize this situation, over the next 5 or 10 years.

What Will Happen Next?

Homeowners should expect the worse, as this unknown depression worsens. Already overburdened households can simply give up and fold under the pressure. This is when the real damage to the market will make itself known – in a series of foreclosures.

Prominent Concerns When It Comes To Financial Vulnerability

Financial vulnerability is guaranteed for debt ridden households if we take the current economic weakness into consideration as well as expectation that interest rates will continue to rise.  Of course, this situation will not be any better (if not worse) for Canadian households if rates don’t rise at all!

It’s a good idea to get your finances and debt under control when facing such financial turmoil. Find out options other than declaring bankruptcy (however benefits of claiming bankruptcy are many) with the help of EmpireOne.

 

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