The Mortgage Radar: Excessive Consumer Debt, Pay Down Your Mortgage Vs. Contribute to Rrsp, the Economics of Seinfeld, Growing Up Digital

December 13, 2010


Leading the headline news today is a warning from the Bank Of Canada about the levels of Canadian household debt. According to the their report the average debt per household, including mortgage and credit card debt, hit a high this year of $96,100, as the debt-to-income ratio climbed to a record 146 per cent. That would mean that for every dollar earned, $1.46 is owed to your creditors. The headlines are sensational and slightly patronizing especially when coming from Bank CEOs. My experience is that most borrowers are very responsible and conservative when it comes to their mortgage decisions. Just 8 months ago new rules were introduced to the mortgage market to control maximum loan amounts and debt to service ratios etc… now they are talking about introducing new rules again. How about introducing rules for credit card companies limiting how much damaging consumer credit they can offer to borrowers who display signs of financial distress?
Now lets set up a hypothetical situation, after reading the Bank of Canada’s warning about consumer debt levels lets suppose that I give you $5,000 to either A) pay down your mortgage or B) invest and contribute to your RRSP. What would you do? You might think that paying down your mortgage is the obvious answer right? After all we are carrying excessive debt loads. We are in danger…etc. Wrong. Reading sound bites from the media can make your head spin! As an aside, there is a difference between consumer debt and mortgage debt. Every effort should be made to pay off consumer debt.
I studied Economics at University and was introduced to many highbrow economic concepts from expensive voluminous text books and tweed jacketed professors. This week I stumbled upon The Economics of Seinfeld where fundamental concepts are explained using snippets of Seinfeld episodes. Yup you read that correctly – Sienfeld. I was never an avid watcher of the show but I am a big fan of the site and content. I wish my education was as enlightening.
Lastly, if I managed to hold your attention until the end of this post then I truly appreciate you humouring me. The way we receive our information has changed drastically over the past [insert unit of time]….its impossible to measure in a standard unit some would measure in months, years or other decades. We can agree that the amount of information we receive is overwhelming and we are flooded at any given time making it a challenge to stay on task. This article from the New York Times discusses the challenges of Growing Up Digital. Particularly interesting if you are concerned about our children and the impact digital media will have on them.
That wraps up The Mortgage Radar for this week. If you have any questions or would like to contact me to have me work with you on your mortgage please don’t hesitate to get in touch. Keep in mind that the services of a mortgage broker like myself don’t cost you anything as I get compensated by the lender.


Christopher Molder

Mortgage Broker

Christopher is a mortgage broker based in Toronto, Canada. And a son of a broker too. He’s a second generation mortgage broker. Following in his father’s steps he joined the family mortgage business straight out of university.