Fiscal consolidation in preparation for this 'debt brake' has seen debt-service ratios
This final step in setting up the credit bureau will bring transparency, making sure that borrowers stay within their means, living within proper debt-service ratios
. And for financial institutions, having a full accounting of liabilities will improve communication, assist with full and accurate fiscal records and give ample warning if or when potential problems arise with individuals.
In addition, the agency expects that its debt-service ratios
will remain moderate despite the anticipated debt growth.
Loan-to-value ratios on housing debt are generally quite manageable and debt-service ratios have actually fallen among lower-income households, who traditionally have high debt-service ratios (both in absolute terms and relative to other income groups).
Second, the credit quality of mortgage loans issued recently could have deteriorated in more subtle ways than are revealed by loan-to-value and debt-service ratios. For example, increases in second-lien mortgages or mortgages with non-traditional amortisation schedules (eg interest-only loans) can signal greater credit risk for a given level of gearing.
(13.) Debt-service ratios for homeowners and renters are distributed differently across loan types.
In the United States, the United Kingdom, France and Italy, the debt-service ratio has recently started to rise slightly while in Spain, this ratio has been increasing continuously over the past decade.
While the average interest rate is expected to be positively related to debt-service ratios, the average maturity period of loans is expected to be inversely related.
Terms of borrowings and growth rate of GDP do not appear to have any significant impact on the variations in the debt-service ratios. The efficiency of the economy, measured by incremental capital output ratio, and external stocks have been the main factors influencing debt servicing in Pakistan.
Debt denominated in foreign currency is more risky than local-currency debt as exchange rate depreciation raises debt and debt-service ratios
of sovereigns, households or corporates that lack foreign exchange incomes or assets.
Debt and debt-service ratios
continue to rise, making households and the financial sector vulnerable to a housing market correction.
The proportion of households with debt-service ratios
between 30% and 40% is now much smaller than it was in 2008.