When it comes to debt, it turns out that it's not how much you have that affects your ability to repay it, but instead how comfortable you are with it and the overall concept of debt. That was one of the findings of the Genworth Financial International Mortgage Trends Report.
The report revealed that, among other things, members of developed countries are much more comfortable with accumulating debt (particularly mortgage debt), and as a result are more likely to pay it back. Case in point is Australia, where the country's homeowners spend 45% of their after-tax income on servicing debts (compared to 38% average of other countries). At the same time, Aussies are much more likely than any other country to make extra payments on their home loans with 45% making extra payments on their mortgages, compared to the average 26% of other countries (Canada, India, Ireland, Italy, Mexico, the UK and United States).
Canadians, on the other hand, are right up there when it comes to debt accumulation, spending 45% of their after-tax income on debt servicing. Positive attitudes regarding the country's strong economy (32%) and housing market (47%) seemed to fuel the accumulation of mortgage debt and increase Canadian's appetite for it. With costs of living increasing, 28% of Canadians said they were comfortable taking on an LTV greater than 80% compared to the 20% average.
The higher debt levels haven't seemed to affect Canadian's ability to repay, however, with 79% saying they either made prepayments or easily met their repayments, and 83% expecting to easily make repayments over the coming year. Canadians were the most optimistic about their ability to meet mortgage payments behind only India. Only 19% were actually exceeding their payments, however, compared to the eight-country average of 26%.
Low interest rates also seem to play a huge role in this sense of debt confidence. With Canada's target overnight rate set at 1%, compared to an average of 2.4% of other countries, Canadians are experiencing very low mortgage rates. Of the 47% who believed that now is a good time to buy a home, two thirds said it was due to low interest rates. Of those who said now wasn't a good time, 23% cited high property prices.
To view the whole report, click here.
No comments:
Post a Comment
Your comments are not only welcomed but encouraged. It is not expected that you will always agree with what I have to say. After all, it's an opinion.