Were Warnings About Canadian Hosehold Debt Overblown?

Excerpted from Toronto Sun:
We've read about several warnings about Canadian household debt being at a critical stage. This article suggests that homeowners who took money from the equity of their house to buy appreciating assets such as rental condo apartments or townhomes may have done the right thing. More so it was the correct move with low interest rates.

Canadian household debt warnings overblown: Report

POSTMEDIA NETWORK

First posted: Tuesday, July 18, 2017 07:27 AM EDT | Updated: Tuesday, July 18, 2017 07:41 AM EDT

A real estate sold sign hangs in front of a west-end Toronto property, Friday, Nov. 4, 2016. (THE CANADIAN PRESS)

Recent warnings of Canadians running their household debt to record levels are blown out of proportion, according to a new study.
While household debt continues to climb, most Canadians are using it to invest in appreciating assets, according to the Fraser Institute.
“Despite alarmist headlines, concerns about Canadian household debt levels can be overblown,” said Livio Di Matteo, author of the Fraser Institute report and professor of economics at Lakehead University.
“When looking at debt levels it’s important to consider the degree to which Canadians are also using it to increase their net worth.”
While Canadian household debt is at a record high $2 trillion, up from $357 billion in 1990, household assets have increased from $2.2 trillion to $12.3 trillion over the same period, the study found.
The bulk of Canadian household debt was on mortgages (65.5%), followed by consumer credit (29%) and other loans (5%).
The study also said taking on more debt was a “rational response” to falling interest rates.
While interest rates in 1990 was nothing like the whopping 18% in the 1980s, it was still considerably high - at nearly 13% - compared to 0.75% at the end of last year.
The low rates reduced the burden on debt payments for Canadians, while making it less attractive to set aside savings in the bank.
While the study paints a positive picture for Canadians carrying debt, the same cannot be said about government debt.
“Governments across Canada have been racking up debt, particularly since 2007, but the net worth of governments in Canada has actually decreased,”Di Matteo said.
“It’s somewhat hypocritical for governments to warn Canadians about rising household debt levels given the state of their own finances,” Di Matteo said.