House­hold debt isn’t overblown

The Guardian (Charlottetown) - - EDITORIAL -

Re­cently, Livio Di Mat­teo, wrote a guest opin­ion to The Guardian en­ti­tled, “Con­cerns over house­hold debt are overblown.” He stated that 66 per cent of in­creased debt since 1990 un­til 2016 is for mort­gages. The other 34 per cent is for con­sumer loans and credit. The 66 per cent noted now equals 170 per cent of house­hold dis­pos­able in­come.

Mr. Di Mat­teo shows how house­hold net worth has in­creased sub­stan­tially and is pos­i­tive. He states fur­ther that in­ter­est rate in­creases and job losses are the great­est risks to man­ag­ing house­hold debt. Well put.

I be­lieve that an anal­y­sis of bankrupt­cies should have been part of his re­view. In Canada in 1987, (pop. of 26.5 mil­lion), there were 33,000 in­sol­ven­cies. In 2012, there were 124,000 in­sol­ven­cies with a pop. 33.5 mil­lion. That’s a 26 per cent pop­u­la­tion in­crease and a 275 per cent in­crease in in­sol­ven­cies. The av­er­age debt per con­sumer in­sol­vency in Canada in­creased by 600 per cent. In 2011, P.E.I. had 620 bankrupt­cies and pro­pos­als. In 2014, there were 72. That’s a 16 per cent rise.

If you sell a house in a larger market you can re­al­ize a large profit only if you move away from that market.

Sell a house in Char­lot­te­town for the av­er­age ($180,000) you have to hope you don’t live much more than 12 years be­yond that sale date in a rental equiv­a­lent.

The rea­son for many bankrupt­cies is the fact that an im­por­tant course in sim­ple house­hold bud­get­ing is not taught to stu­dents.

I don’t be­lieve con­cerns over house­hold debt are overblown at all.

David C. Camp­bell, Char­lot­te­town

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.