Borrowers will need
higher debt service coverage ratios than they did three to four years ago.
Another park of paying 20 % down payment was the ability to qualify for a loan with
higher debt service ratio.
The global banking body cautioned that its interest rate sensitivity figures are not the result of a «proper stress test,» and noted that a rise in rates would take time to translate into
higher debt service demands.
Mr. Ceci also announced that the government would legislate a debt ceiling of 15 percent debt - to - GDP in order to hold off a risk of credit downgrades and
higher debt service costs.
That's because raising rates means sooner or later consumers will pay
higher debt servicing costs.
Their self - destructive real estate bubble has loaded down their labor force with
high debt service and housing costs, whilst their giveaway of public infrastructure to insiders (with no price regulation) has led to high basic living costs.
Total Consumer Debt as % of Discretionary Income (Send me email for the chart) The problem with the «consumer debt as percentage of discretionary income» measure (the above chart) is that it ignores the true cost of debt since higher debt levels in a low - interest - rate environment may not result in
a high debt service burden (interest and principal payments) on the consumer.
Traditional lenders, including commercial banks and insurance companies, have become strict in their underwriting criteria, demanding recourse,
high debt service coverage ratios and equity contributions of at least 35 percent.
Not exact matches
But he points to a report from the Parliamentary Budget Officer released earlier this year showing that, since 2009, the
debt service ratio — a measure of income spent to pay
debt — has remained steady at around 14 per cent, not much
higher than the long - term average.
This will set off a vicious cycle of
higher deficits that lead to
higher debt, which in turn will mean
higher interest costs and less funding available for healthcare, education and other provincial
services.
Generally, this strategy is appropriate for
high - net - worth individuals who can afford to
service debt.
But the same PBO report projects the
debt service ratio will rise to an all - time
high of 16.3 per cent by the end of 2021.
Take that funding away and the market settles back into something more closely aligned with the underlying reality — the one of
high unemployment / underemployment,
high oil prices, stagnant middle - and lower - class incomes, unprecedented wealth concentration in the upper class, demolished savers, under - investment in capital, and an ongoing transition to a low - wage
service economy hard - pressed to
service debt.
The country also has a
high level of
debt servicing ratio, which made its banking system more vulnerable.
«Much of the welfare state concept was always an illusion, one financed by lavish amounts of
debt for which present and future taxpayers will pay in the form of
higher taxes and reduced
services during their lifetimes,» writes University of Calgary lecturer Mark Milke in a recent article.
«The process of lowering interest rates causing
higher levels of
debt,
debt service and spending, I think is coming to an end.»
This would not only mean
high, long - term
debt -
servicing - costs, it could also challenge the U.S.'s credit worthiness.
As Scotiabank mentioned in a note last week: «
Higher interest rates are going to make the burden of refinancing the
debt considerably heavier, and as more money goes into
servicing the
debt, it means less money is available to spend on other things, which could lead to less infrastructure spending and increased austerity.»
Debt service costs have risen to 15 percent of GDP — just short of record
highs — according to CLSA.
The cost of borrowing in China has been cut aggressively since the autumn of 2014 in response to the slowdown in the economy and the distress caused to property owners, local government and corporations by
high debt -
servicing costs.
«We are very concerned that Remington will be unable to refinance
debt that comes due in April 2019 given its weak operating performance and
high financial leverage,» Kevin Cassidy, a Moody's Investors
Service Inc analyst, wrote in a research note last month.
What passed for Soviet Marxism lacked an understanding of how economic rents and the ensuing
high labor costs affected international prices, or how
debt service and capital flight affected the currency's exchange rate.
The ratings agency Moody's maintained the US's top - notch «Aaa» credit rating Thursday, saying, «The diversity, dynamism, and competitiveness of the US economy, along with the US dollar's status as the preeminent international reserve currency and very large size and depth of the US Treasury market, offset rising fiscal pressures stemming from aging - related entitlement spending,
higher debt -
service payments, and recent policy actions that will likely reduce future revenues and increase expenditures.»
That will mean around $ 1 billion per year from Albertans»
higher fuel and heating bills going toward schools, health and
debt servicing / deficit limiting.
The combination of very
high levels of
debt and excess manufacturing capacity can lock an economy into a self - reinforcing deflationary process in which growth stagnates and
debt rises faster than
debt servicing capacity.
In a low - inflation environment, nominal interest rates are also low, and households are able to
service much
higher levels of
debt than they could in the past.
How can U.S. labor compete with foreign labor when employees and their employers are obliged to pay such
high mortgage
debt for its housing, such
high student
debt for its education, such
high medical insurance and Social Security (FICA withholding), such
high credit - card
debt — all this even before spending on goods and
services?
As the gap widens, it creates rising uncertainty about how excess
debt servicing costs will ultimately be allocated, and at the point at which this uncertainty is
high enough to alter materially the behavior of economic agents, and so lower the net asset value of the economic entity, the borrowing country has «excessive»
debt.
I have explained elsewhere some of the reasons that determine whether a country's
debt is «excessively
high», and I hope formally to list these reasons more fully in my next book, but the key is the gap that is created between projected
debt -
servicing costs and the projected revenues earmarked to
service the
debt when an economic entity suffers an unexpected surge in
debt or an unexpected decline in growth.
Donald expects the
debt -
service ratio to continue moving
higher over the coming quarters.
As documented in Milesi - Ferreti (2009) and Bernake et al (2011) while total holdings of US
debt services on the eve of the crisis were
high in China and Japan, holdings of privately issued mortgage backed securities were concentrated in advanced economies and offshore centers.
Debt levels in this model are specifically associated with different GDP growth levels, so that this model allows us to acknowledge that a country can safely service and refinance higher debt levels if it is believed to have greater growth potent
Debt levels in this model are specifically associated with different GDP growth levels, so that this model allows us to acknowledge that a country can safely
service and refinance
higher debt levels if it is believed to have greater growth potent
debt levels if it is believed to have greater growth potential.
Higher borrowing costs would discourage business investment and raise the cost of
servicing government
debt to unhealthy levels.
Detroit has more than $ 18 billion in
debt and unfunded liabilities and doesn't have the revenues to meet those obligations and provide an adequate level of
services to its people, who pay the
highest taxes per capita in Michigan.
Relatively
high debt loads as featured on pretty much every junk - rated issuer's balance sheet must be
serviced with cash.
All of this doesn't even begin to account for the potential for
higher taxes to
service and repay the substantial run up in federal
debt that has taken place already and that is planned for the future.
In addition, indicators of financial stress — such as loan arrears — remain low, suggesting that the
high debt -
servicing burden is not yet imposing a significant constraint on consumer spending.
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debt offerings and all forms of advisory
services.
Lenders and
services offer consolidation loans to borrowers with multiple revolving and installment
debts but the rate can be
higher if you have tarnished credit.
The bulk of household
debt in Australia tends to be owed by those with the
highest incomes who are most able to
service their loans (Graph 11).
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The Bloomberg Barclays Long - Term Government / Corporate Bond Index is an unmanaged index that includes fixed - rate
debt issues rated investment grade or
higher by Moody's Investors
Services, Standard & Poor's Corporation, or Fitch Investor's
Service, in order.
Higher U.S. interest rates will make
servicing debt tougher for developing country governments and businesses, especially those who have borrowed in dollars.
The state took a big hit during the most recent economic troubles, and many Hawaii residents are now carrying a great deal of
debt serviced by multiple different lenders, with some of the
highest credit utilization in the country.
As a striking example, and noting the total B.C. Budget is approximately $ 50 billion per year,
servicing B.C.'s
debt using Ontario's credit rating (and resulting
higher interest rates) would cost B.C.'s taxpayers an extra $ 2.3 billion every year.
The revised data including the financial intermediation
service charge suggest a slightly
higher debt -
servicing ratio over recent years than that indicated by the RBA's earlier estimates, with the revised ratio averaging 1/4 — 1/2 of a percentage point
higher over recent quarters.
«Most discussions of how company balance sheets will react to
higher yields assume an instantaneous jump in
debt -
servicing costs — but borrowing is fixed - rate for several years,» Barclays says.
In other words, are households that can afford to meet their
debt -
servicing requirement likely to change their behaviour in other ways now that they have a
higher debt level than formerly?
Even if we judge that the incidence of this extreme reaction will still be relatively low, are there other forms of behaviour which are likely to have changed as a result of the
higher debt -
servicing ratio and
higher gearing among indebted households?
Further,
servicing costs of those households with
debt are considerably
higher than indicated by the average experience across the household sector, and have risen a good deal over the past ten years.