I’m with Andy on the borrow borrow borrow. Ha one day all that weight is gona come crashing down on them. In reality, in my opinion, people don’t really need personal loans. For cars, school and houses sure but for an aquarium and fun toys, it really shouldn’t be accessible the way it is.

The one positive Canada has is that there is an abundance of natural resources that the world currently needs.

Hello from Calgary
There is a lot of stuff like this currently .The article is interesting and concerning.I would like to add a little information that I think is important .The tactics and intentions of the decision makers in revealing these debt/income ratios is clear. An article written by Deidre McMurdy and was on MSN Money site really took a run at the tactics of the authors of these articles.In a nutshell what she said was” be carefull what you wish for”.If the unanticipated result of the deluge of scary statistics is that you drive the consumer out of the market and into saving mode commerce grinds slowly to a halt.(a bit extreme I admit but definitely creating a slowing trend).The part of her article that really got me stirred up however was a comment that she attributed to Douglas Porter ,chief economist for BMO.He is not as concerned as you might think.The reason is in the debt/income ratio calculation.Typically calculation of net worth excludes capital gains as well as returns on tax sheltered vehicles like RSP’s and TFSA .WHAT!!! How can you trot out a debt/income ratio of 148.1%, apply it to the Canadian population and not include the above sources of income in the calculation. Especially when you consider the demographics of our Canadian population and the number of seniors living off these income sources.I am not advocating a spending spree but I sure would like the decision makers to make all the facts available instead of manipulating the information for their desired outcome. By the way the article I am referring to was written by Deidre McMurdy and was titled “Is there truth in recent debt warnings?

I love reading stuff like this…it’s so hilarious. $200,000 house… PFffffft! I nearly shot my coffee out of my nose when I read that. A HOUSE? For two hundred? Is it currently on fire and the land is about to slide off a cliff?

You can’t get a house for less than a million dollars. Everyone knows that.

For example, let’s assume I have a job making $100,000 per year, and I have a $50,000 down payment, so I buy a $200,000 house, with a $150,000 mortgage. Let’s assume that my mortgage payment will be about $800 per month, which is less than I will pay in rent. Is this mortgage “healthy debt”?

If I keep my job, and if house prices increase, than most would agree that this is healthy debt; my wealth will increase because of the leverage I get from owning a house.

However, what happens if I lose my job, and have trouble making the mortgage payments? What happens if I bought my house at the peak of the housing market in many places in Canada in early 2008, and I was forced to sell my house when housing prices were depressed in many areas in 2009 and 2010? If I can only sell my house for $180,000, and with real estate commissions and legal fees I may only net $170,000, which means I have lost $30,000 of my original $50,000 down payment.

In that case it would be hard to argue that the mortgage was “healthy debt”. In hindsight, I would have been better off putting my $50,000 in GICs, and renting.

And that’s the problem with any kind of analysis of “healthy debt”: you need hindsight to know which decision is correct. If you bought a house in 2000, and sold it in 2007, you made a lot of money, so owning and paying a mortgage was obviously better than renting. If you bought a house in 1988, when mortgage interest rates were over 13%, it took until 1995, or later, in many parts of the country for you to break even. During those years renting may have been a better option.

So, my advice is this: if you are taking on debt, for a mortgage, or a car loan, or anything else, ask yourself these questions: “If I lose my job, or if my income is reduced, can I still pay the debt?” “If the house drops in value, am I prepared for the loss?” We don’t know the future, but if you anticipate all possible outcomes, you can be prepared. This analysis may encourage you to buy a slightly smaller house than the maximum house you can afford, or perhaps to rent for an extra year or two to build up a larger down payment, which in the long run may be prudent. For more thoughts on this, you can read my article on why A house is not an investment.

I ask these questions not because I know the answer, but because I would expect an article like this to explore these very important facits of this topic. What is a healthy debt ratio? and how do I calculate mine to see if it is healthy. As well what is realistic? the graphs indicate $40,000/per person of debt is high, yet I challenge you to find a house in Tornonto, Calgary, Edmonton, or Vancouver for under $200,000. it is just not possible. and in many cases the number can be as high as $300-400,000. even when we divide that number by 2 income earners that number is still 5x what you consider to be high. so although 40,000 is high in terms of an average, What is Realistic?
I also ask is it possible that because interest rates are so low in canada for mortgages, that many of the older generation that have typically had their mortgages paid are re-mortgaging to invest the money in more profitable enterprises? do they have assets that significantly out weigh this debt.
As well have attitudes in older generations simply changed. Their are not that many people left in canada that weathered the great depression. the attitudes of our grand parents, of saving everything you have on the off chance depression strikes, simply does not exist any more. I also ask is that attitude really healthy for the economy? were the 2001 numbers low to an unhealthy degree? are older people taking out small, “reverse life insurance” mortgates, freeing up a small portionb if their equity in their homes to do the things they want to do in life now. And in doing so is this secure? as long as the majority of the equity is still in the home.

This article points out a lot of facts. But there is little or no information that indicates the reall nitty gritty substance of the situation for canadians. I think mortgages are a good thing. and I don;t feel it is unrealistic for a 2 income family making $60-70k/ year to have a $150-250k mortgage. As housing values go up and the total mortgage goes down eventually this will prove to be a much better investement than moving into an appartement, where after 10 years of having slightly lower payments, all you have to show for it is a shoebox full of rent reciepts, instead of $60-70,000 in equity on a home.