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Heaviest borrowers falling deeper in debt

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guest | 27 Jan 2012, 04:06 PM Agree 0

The report noted that those with a greater than 1.6 debt-to-gross income ratio represented 73% of all household debt in Canada. That debt comes from 34% of all Canadian households, said the CIBC research. Overall, the debt-to-income ratio is 151% nationally, not far from the ratio of 160% in the U.S. before the housing market there collapsed.
The recent rise in that figure in Canada was enough to spark a warning in October from the International Monetary Fund to halt any increase in the ratio.
“Our new analysis found that all of the rise in debt since 2007 has been driven by borrowing from those with a high debt-to-gross income ratio,” said Avery Shenfeld, the chief economist at CIBC. “The growth in debt-to-income ratios has come from a piling on of debt by those with high debt burdens, rather than form the less indebted households getting drawn to the punchbowl by the promise of low rates.”
Much of that debt burden comes from B.C., Alberta, and Ontario, said Shenfeld, where housing is most expensive.
Another trend is that the debt burden seems to be affecting Canadians later in age. Of those above the age of 45, the share of the overall debt burden has climbed from 36% in 2007 to 44% in 2011.
“Canadians nearing retirement who should be in their prime savings years are instead getting themselves deeper into debt,” said Shenfeld. “We are already seeing an uptrend in bankruptcies for those 50 and over, but the more material impact will be that this group’s ability to spend could be severely squeezed upon retirement.”
  • Zlump | 27 Jan 2012, 07:21 PM Agree 0
    Way back, credit cards (Diners Club) were invented as a convenince for people who went out dining (and for the restaurant owners who wanted to be sure to be paid for the the goods and services rendered).

    One could go confidently go into a restaurant and spend even if one hadn't the cash on hand. In those days there were no bank machines - cash was usually only available Mon - Fri during banking business hours. Dining, on the other hand, was during off hours. Never the twain met and this was inconvenient for everyone - hense the credit card.

    HOWEVER, it wasn't long before the banks realized money could be made from credit card debt.

    People adopted (and were encouraged to adopt) behaviours that were foolish i.e. buying things they didn' have the money for and using the bankster's credit card to do so.

    SOLUTION: Only buy what you already can afford i.e. ALREADY have the cash for. Do not credit card borrow for anything. Don't be a fool.
  • Zlump | 27 Jan 2012, 08:21 PM Agree 0
    Way back, credit cards (Diners Club) were invented as a convenince for people who went out dining (and for the restaurant owners who wanted to be sure to be paid for the the goods and services rendered).

    One could go confidently go into a restaurant and spend even if one hadn't the cash on hand. In those days there were no bank machines - cash was usually only available Mon - Fri during banking business hours. Dining, on the other hand, was during off hours. Never the twain met and this was inconvenient for everyone - hense the credit card.

    HOWEVER, it wasn't long before the banks realized money could be made from credit card debt.

    People adopted (and were encouraged to adopt) behaviours that were foolish i.e. buying things they didn' have the money for and using the bankster's credit card to do so.

    SOLUTION: Only buy what you already can afford i.e. ALREADY have the cash for. Do not credit card borrow for anything. Don't be a fool.
  • Teller of Truth | 27 Jan 2012, 09:47 PM Agree 0
    What percentage of that debt is income producing. I'm in my thirties and I have tons of debt, but unlike others, a lot of it is in income producing assets. With interest rates so low, the market is great for purchasing property that has a positive income. Base that positive income against a 6% interest rate and if your still making money, its a no brainer. Make sure there are jobs in area where your purchasing the income property.
    I have also purchased solar panels to be apart of the microfit program in Ontario. I still make money yearly after debts are paid.
    This article put fear in people. I think most Canadians are intelligent and are using low interest rates as an advantage to gain wealth. People have to realize that an asset is something that provides an income. Thats it!!! If you live in a house which is owned with a mortgage, the mortgage is a liability. Also, the property does not put money in your pocket. That bugs me. That is why there are solar panels on my house. Now my house makes me money:)!
    There should be no fear for anyone who realizes what an asset is and tries to go out of there way to purchase them. This includes stocks that have a dividend, bonds, income property, royalties, patents or anything else that puts money IN YOUR POCKET:)!
  • Rick Zelhem | 27 Jan 2012, 10:20 PM Agree 0
    "This article put fear in people. I think most Canadians are intelligent and are using low interest rates as an advantage to gain wealth."

    @Teller of Nonsense; so you call people with already high debt burdens who add on MORE debt intelligent?

    Wow.

    Read the article: "The growth in debt-to-income ratios has come from a piling on of debt by those with high debt burdens, rather than form the less indebted households getting drawn to the punchbowl by the promise of low rates.”

    These numbers don't lie.
  • Teller of Truth | 27 Jan 2012, 10:47 PM Agree 0
    What percentage of that debt is income producing. I'm in my thirties and I have tons of debt, but unlike others, a lot of it is in income producing assets. With interest rates so low, the market is great for purchasing property that has a positive income. Base that positive income against a 6% interest rate and if your still making money, its a no brainer. Make sure there are jobs in area where your purchasing the income property.
    I have also purchased solar panels to be apart of the microfit program in Ontario. I still make money yearly after debts are paid.
    This article put fear in people. I think most Canadians are intelligent and are using low interest rates as an advantage to gain wealth. People have to realize that an asset is something that provides an income. Thats it!!! If you live in a house which is owned with a mortgage, the mortgage is a liability. Also, the property does not put money in your pocket. That bugs me. That is why there are solar panels on my house. Now my house makes me money:)!
    There should be no fear for anyone who realizes what an asset is and tries to go out of there way to purchase them. This includes stocks that have a dividend, bonds, income property, royalties, patents or anything else that puts money IN YOUR POCKET:)!
  • Rick Zelhem | 27 Jan 2012, 11:20 PM Agree 0
    "This article put fear in people. I think most Canadians are intelligent and are using low interest rates as an advantage to gain wealth."

    @Teller of Nonsense; so you call people with already high debt burdens who add on MORE debt intelligent?

    Wow.

    Read the article: "The growth in debt-to-income ratios has come from a piling on of debt by those with high debt burdens, rather than form the less indebted households getting drawn to the punchbowl by the promise of low rates.”

    These numbers don't lie.
  • JMK | 28 Jan 2012, 01:37 AM Agree 0
    Borrow as much as you can and spend it however you like.
    Boost that aggregate demand and help the consumption economy.
    Bankruptcy will wipe away your past sin to give you fresh start.
    In long run, we're all dead.
  • JMK | 28 Jan 2012, 02:37 AM Agree 0
    Borrow as much as you can and spend it however you like.
    Boost that aggregate demand and help the consumption economy.
    Bankruptcy will wipe away your past sin to give you fresh start.
    In long run, we're all dead.
  • Hippo | 28 Jan 2012, 05:52 PM Agree 0
    Poeple who need to borrow more money have higher debt loads, this ins't excatly a revelation. Given Canada's nature resources we are not as venerable as the US market was for such a crash. True there is risk in higher debt loads in the case of a large economic correction but that is an unlikely outcome given that Canadian banks have always had restrictions that would prevent the type of total colapse that almost occured in the US and continues to tetter on the edge. Canada is currently working to broaden it's export base to ensure that a US collapse that appears inevitable due to their lack of willingness to change will have marginal impact on Canada. In the end we might slip but we won't fall the same way.
  • Hippo | 28 Jan 2012, 06:52 PM Agree 0
    Poeple who need to borrow more money have higher debt loads, this ins't excatly a revelation. Given Canada's nature resources we are not as venerable as the US market was for such a crash. True there is risk in higher debt loads in the case of a large economic correction but that is an unlikely outcome given that Canadian banks have always had restrictions that would prevent the type of total colapse that almost occured in the US and continues to tetter on the edge. Canada is currently working to broaden it's export base to ensure that a US collapse that appears inevitable due to their lack of willingness to change will have marginal impact on Canada. In the end we might slip but we won't fall the same way.
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