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DBRS Releases Commentary on Household Vulnerability to Interest Rate and Wage Stress PDF Print E-mail
Wednesday, 28 February 2018
DBRS Ratings Limited has released a commentary on “Household Vulnerability to Interest Rate and Wage Stress.” This commentary is the first in a series that aims to explore the financial position of households around the world.    

In DBRS’s view, aggregate household balance sheets of selected DBRS-rated advanced economies are strong, but cash flow vulnerabilities are increasing.

In the decade since the global financial crisis, aggregate wealth accumulation has exceeded the growth in household debt. This has strengthened aggregate household net worth. In most advanced countries in the DBRS-ratings geography, the aggregate net worth of households is three to six times aggregate disposable income. The ample wealth stock may in many countries reviewed in this study conceal the risks associated with high household debt burdens.

DBRS has organized countries into three groups according to selected debt characteristics:

Group 1: high and rising household debt mostly linked to house prices - including Australia, Canada, the Netherlands, the Nordics and Switzerland.
Group 2: de-leveraging households, but still high debt burden - including Ireland, Portugal, Spain, the U.K. and the U.S. Households in the U.K. and the U.S. have been more reluctant to take on mortgage debt, but there has been a considerable increase in the growth of consumer credit.
Group 3: moderate household debt burden - such as Belgium, France, Germany, Greece, Italy and Japan, in some countries reflecting relatively lower home ownership.
Though strong household balance sheets reflect the rise in the equity and property markets, downturns in these markets would reduce the gross wealth buffer. Moreover, wealth is unevenly distributed across households.

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