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Canada Debt-Service Ratio Increases - Report


Blog by | October 12th, 2017


The International Monetary Fund (IMF - international organization of 189 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth) has warned in its latest Global Financial Stability report about Canada's high levels of debt (debt-service ratio) and our higher-than-average pressure on Canadian households' ability to pay down their debt. This results in an economy that is more sensitive to tighter financial conditions and weaker economic activity. They recommended a need for new financial sector policies to reduce the current imbalances. Australia, China and Canada has the highest ratio of household debt payments relative to disposable income. Reports like this are why the Canadian government is raising interest rates and implementing stress tests. But the problem is when you raise rates you attract more capital which will force banks to lend out more.

 

Here is the full report if you are up for a little light reading:

 

http://www.imf.org/en/Publications/GFSR/Issues/2017/09/27/global-financial-stability-report-october-2017