Experts
expect household debt to grow, as credit card companies continue to loosen their standards after tightening them during the Great Recession.
Not exact matches
Late last year, economists at CIBC said rising
household debt was to be
expected; Canadians «responded rationally to an era of very low interest rates.»
The central bank has concerns about the ability of
households to keep paying down their high levels of
debt when interest rates continue their rise, as is widely
expected over the coming months.
So, in summary these are some of the themes we might
expect to see in the next chapter — the impact of technology and the growth of Asia; the normalisation of monetary conditions; the effects of higher levels of
household debt; and the capability of our workforce and businesses to be flexible, innovative and adaptable.
Strong job gains, growing wages, and low
debt levels have helped bolster
household spending, which is
expected to keep growing this year.
household debt ratios are
expected to rise further before stabilizing by the end of the projection horizon -LRB-...)
«The bank
expects trend growth in
household credit to moderate further, with the
debt - to - income ratio stabilizing near current levels.»
Until we understand this do not
expect the global crisis to end anytime soon, except perhaps temporarily with a new surge in credit - fueled consumption in the US (which will cause the trade deficit to worsen) and more wasted investment in China (which, because it is financed with cheap
debt, which comes at the expense of the
household sector, may simply increase investment at the expense of consumption).
While such a rate of expansion will clearly not be sustainable in the longer run, there is little sign at this stage that the appetite for borrowing has been restrained by the recent increases in interest rates, even though the higher
debt burden of
households might be
expected to make them more responsive to interest rate changes.
The ongoing accumulation of
household debt has led to a further increase in the
debt - servicing ratio; interest payments as a proportion of disposable income rose to 9.3 per cent in the September quarter (Graph 23), and are
expected to rise further.
In the period ahead, moreover, we might
expect to see
households inclined to save a higher share of current income, and perhaps to be more cautious about the amount of
debt they take on, than in the preceding upswing.
Why would we
expect any different outcome in the United States as the
household debt sector (the main sector that rose and drove the U.S. bull market of the 80s and 90s and also continued adding to the
debt as the housing market took off from 2003 to 2007) is still in the process of deleveraging since 2007?
That is just a little over 4 years, and we can
expect a continuation of deleveraging for many years to come - we have a long way to go in order to get back to the levels of
household debt relative to GDP or Personal Disposable Income (PDI).
If
household debt doesn't follow that path,
expect policy makers to try to do something about it.
The
expected sharp decline in economic activity and employment also represented a possible trigger for Canadian financial stability risks related to elevated
household debt.
However, it is not just the
expected increase in
debt payments that may constrain
household spending.
Although bankruptcy filings have been trending downward for years,
household debt is
expected to hit a new record in 2017.
The bank also
expects the powerful pace of
household spending — particularly in residential investment — to eventually slow next year as
debt levels and borrowing costs rise.
Canada's
household debt is at a record high: it's
expected to rise to 174 % this year (it was at 171 % at the end of 2015).
Creditors will not usually
expect you to sell your home and essential
household items to pay off your
debts.
There is a growing concern among U.S. hedge fund managers regarding the Canadian housing market and Canadian
household debt as many
expect a U.S. - style meltdown in Canada, similar to what happened in the U.S. in 2007 - 2009.
Of those
expecting a refund for the 2013 tax year, 37 % plan to use the money to pay
household bills and / or reduce their overall
debt load, BMO found.
In general, the respondents
expect the quality of
household debt to strengthen with residential mortgages continuing to report the greatest improvements in loan quality.
The short - term impact on the housing market is
expected to be manageable, given that the majority of Canadian families are already taking a prudent approach in managing
household debts.