Many Canadian home owners do not have a Credit Strategy. Canada’s household debt-to-income ratio shot up to 163.4% in the second quarter of last year, meaning that the Canadian debt ratio is worse than that of our neighbours to the South. Recent increases indicate homeowners are not acting on warnings about unsustainable debt levels. The debt-to-income ratio in Canada is now higher than it was in Britain and the US preceding housing busts that hit both of those countries.
What will YOU do, if interest rates change – Think Credit Strategy
Let me explain a bit more about the debt-to-income ratio: For each dollar a Canadian makes and before any income taxes are paid, the average Canadian owes $1.63. Deduct taxes from your income, food and transportation, and general living expenses, and about 30% for housing, and quickly you will see how challenging it can be to pay off your debt.
Assume the interest rates are moving upward, and again, and then a bit more, and out of a sudden it will take much longer to pay off your debt. Some folks may not even be able to pay off their debt at all and become debt delinquent. This can have a severe domino impact on the housing market, which in addition will impact your own personal credit history.
Is your personal debt load at a level, where you have become reliant on appreciating real-estate prices and low interest rates? Are you accumulating high priced debt month after month?
Now imagine that markets change: Interest rates are going up in correlation with sinking real-estate prices. This is a scary scenario for many, who have invested into their own homes, have accumulated other debt such as car loans, credit card debt, and perhaps even a second mortgage on their home.
Are you prepared or will you be surprised?
Have a Credit Strategy game plan – consolidate and refinance your debt load to manageable payment amounts without strangling yourself.
I can assist in planning your Credit Strategy with valuable advice.