The European crisis and rising Canadian interest rates have remained a central focus in the news and many have taken the chance to reflect on the consequences of the high debt to income ratios in Canadian households. CBC News released an article yesterday which states that Canadians actually have the worst debt to income ratio among 20 advanced countries in the Organization for Economic Co-operation and Development.
A large number of consumers decided to take advantage of the rock bottom interest rates which were offered during the recession in order to stimulate the economy. However, the problem is that people have continued to borrow money and have, often unnecessarily, taken advantage of all the extra credit they have been offered by lenders.
Consumers need to take a step back and determine how the increase in Canadian interest rates will affect them in the long run. Many people assume that because they can handle their current debt, with the low interest rates, that they will be able to sustain that in the future. The Canadian Association of Accredited Mortgage Professionals recently released a study which emphasizes that interest rates are at historic lows and many Canadians will not be able to afford their mortgages once these rates increase.
As a result of high household debt it is so important for people to be paying close attention to financial planning and for them to begin saving money while decreasing their current expenses. A step in the right direction might be to consider consolidating debt that runs a high interest rate so interest expenses are lower.