K96.3 FM Radio Spot

BOM analysts saying that Bank of Canada Governor Carney is going too hard on the debt message.
They say that Canadians are saving again…and that what they care calling the ‘green line’ is up – that is assets as a percentage of debt has gone form 417% to 610% - asset value over debt – and they say that must be factored in as a function of wealth …

I would tend to agree with BMO. About a month ago we talked about Canadian mortgage debt is $1 trillion, highest ever. Canadian Mortgage association says Cdn homeowners on solid footing, not overextended. Canadians with debt have an average of $150,000 or 50% equity so it can represent a good chunk of your net worth. Compare that with the US where poeple have a negative equity position and I think we are in better shape than our neighbours. Where it can be a problem is if interest rates rise. Today a 5 year mortgage rate is less than 4%, amortized over 25 years, a $100,000 mortgage payment is $526 per month. If we run the numbers. For every 2% increase in rates your payment jumps by approxiamately $100per month. Provided you can withstand a rate increase in the future I think it's okay to have some debt. In financial planning it's maintaining a reasonable balance when you are trying to increase your net worth and it's a good thing if your asset to debt ratio is high and increasing.