The report finds that emerging markets have considerable scope to increase personal wealth given their much lower ratio of net financial assets to income and a much lower debt-income ratio
than found in mature economies.
A maximum debt-income ratio
of less than 30 percent is required.
The debt-income ratio
rises in the short run but falls in the long run, because of higher output, inflation, and government revenue.
The lower your debt-income ratio
, the more house you can afford.
'It is possible to envisage circumstances where interest rates may need to rise considerably, but, in my personal view, the rise in the debt-income ratio
should make us more cautious about doing so.'
Between 1984 and 1987 the debt-income ratio increased more than 50 percentage points in Norway.
During this period the debt-income ratio fell by 26 and 3 6.5 percentage points, respectively, in Norway and Sweden.
These periods of low saving were certainly periods when the ratio of debt to income was high, and the rising saving rate after the war did occur when the debt-income ratio
However, due to the "convenience' use of credit cards, the increase in the debt-income ratio
may be overstated as a measure of borrowing capacity.
Given the gradual decline in residential property values and record debt-income ratios
, it is projected that households continue improving their balance sheets, though private consumption growth should remain solid.
Although household debt-income ratios
remain high, debt-service burdens have fallen appreciably, partly reflecting the refinancing of mortgages at lower interest rates.
In all leading OECD economies savings ratios were falling and debt-income ratios
rising as people were encouraged to borrow more in order to spend more.