Saturday, February 25, 2012

This Is the Whole Problem in a Nutshell

Debt-service ratio of 7.5 per cent suggests crisis talk overblown
Since mortgages account for the lion’s share of Canadian debt, it makes sense to assess risk based on whether homeowners’ earn enough money to comfortably carry their mortgage debt.
Allowing mortgage debt to surge upward to the limits of carrying cost completely negates the stimulative effect of low interest rates, which would much better be used to reduce debt load, setting the consumer up for a decade of plenty. As a policy course this free wheeling debt issue is a stunningly shortsighted, take the bank profits and run, scheme. The middle class consumer IS the economy in Canada, and thanks to the mentality exemplified in this quote, it has just been burdened the with half an adult lifetime of debt servitude. Congratulations.

And these rates aren't fixed for the life of the loan! There is no mincing words on this. These people are crazy-dangerous.

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