What does the gross debt service (GDS) ratio indicate?

The gross debt service (GDS) ratio is a critical metric used in assessing a borrower's ability to manage housing costs in relation to their income. It specifically indicates the percentage of a borrower's gross income that is allocated towards housing-related payments. These payments typically include the mortgage payment, property taxes, and heating costs, but exclude other debts or expenses.

By focusing on this ratio, lenders can evaluate whether a borrower can comfortably afford their housing expenses without overextending themselves financially. A lower GDS ratio generally signifies that the borrower has sufficient income to manage their housing costs, making them a less risky candidate for mortgage approval.

The other choices involve different financial metrics that do not pertain directly to the GDS ratio. For example, the total debt obligations of the borrower encompass all forms of debt, not just housing costs. Similarly, the borrower's total monthly expenses reflect a broader view of their financial obligations beyond just housing, and the credit utilization rate relates to how much available credit a borrower is using, which does not specifically inform about housing costs in relation to income.