Stability risks associated with household indebtedness

FI makes the assessment that the risks associated with household debt have not yet reached alarming levels. However, there are also macroeconomic risks associated with rising household indebtedness.

The total debt-to-income ratio is not a good indicator of any risks associated with household debt. Because debt has increased at approximately the same rate as assets, the interest-to-income ratio is low and the credit-to-GDP gap has slowed, there are indications that the risks associated with household debt are currently not at alarming levels.

However, the percentage of new mortgage holders who are taking on loans that exceed 50 percent of the value of the home, and the group of borrowers that is judged to be sensitive to changes in economic conditions, is rising. In the event of shocks, they may reduce their consumption and thus enhance an economic downturn.

Because this group of borrowers is growing, FI finds that the macroeconomic risks associated with household indebtedness are currently on the rise.

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