The looming threat of Canada's mortgage renewal crunch
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- เผยแพร่เมื่อ 25 ก.ค. 2024
- Dylan Smith, senior economist at Rosenberg Research, talks with Financial Post's Larysa Harapyn about how the looming mortgage renewal crunch may force the Bank of Canada to cut sooner rather than later.
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Regrettably, banks are still facing challenges, while mortgage rates are climbing amid increased imports and decreased exports. Despite this, the Federal Reserve intends to reduce costs. So, the question arises: where can we secure and grow our money in this scenario? Continuously raising interest rates and implementing quantitative tightening might eventually lead to a breaking point.
ideally, you should consider financial planning to get the best results with your money, notwithstanding economy situation
Well agreed, I'm quite lucky exposed to finance at early age, started job at 19, purchased first home at 28, got married shortly afterwards to raise kids early. Going forward, got laid-off at 40 amid covid '19 outbreak, immediately consulted with an advisor in order to stay afloat and after subsequent investments, I'm barely 25% short of $1m ballpark goal as of today.
That's fascinating. How can I contact your Asset-coach as my portfolio is dwindling?
My Financial adviser is ‘’Stacie Lynn Winson’’ she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
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Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirecting my focus to the equity market.
True, I mostly just buy and hold stocks, but my portfolio has been mostly in the red for quite awhile now. Unfortunately to be able to make good gains, you'll need to be consistent and restructure your portfolio frequently.
in my opinion, it was much easier investing back in the 60s but it's a lot trickier now, those making consistent profit in these times are professionals reason I've been using an advisor for the past 5 years to consistently build my portfolio in preparations for retirement.
@@hasede-lg9hj my partner's been considering going the same route, could you share more info please on the advisor that guides you.
my partner's been considering going the same route, could you share more info please on the advisor that guides you.
In fact, I'm not sure whether I'm permitted to say this, but I'd suggest searching for Vivian Carol Gioia as she gained a lot of attention in 2020. She is both my coach and the manager of my portfolio.
Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
Home prices will come down eventually, but for now; get your money (as much as you can) out of the housing market and get into the financial markets or gold. The new mortgage rates are crazy, add to that the recession and the fact that mortgage guidelines are getting more difficult. Home prices will need to fall by a minimum of 40% (more like 50%) before the market normalizes.If you are in cross roads or need sincere advise on the best moves to take now its best you seek an independent advisor who knows about the financial markets.
I will be happy getting assistance and glad to get the help of one, but just how can one spot a reputable one?
There are advisors in cities around you but I needed services of one who can guide me irrespective of location. Natalie Lynn Fisk comes highly recommended especially in times like this. I am hedging and haven't lost much to the recession. I found her in 2020 when the market was at an all time low. Look her up and thank me later.
I am on her site doing my due diligence. She seems proficient. I wrote her an email and scheduled a phone call. Thanks for sharing
5 year term mortgages is a Canadian specific issue. This has been a structural issue that the banks have pushed for and the government has been complicit in.
Yes I agree, it's garbage. The US has it right, you can even write off your mortgage interest. Canada continues to be a rip off
Reducing rates, absent of the US Fed teducing rates, would cause inflation to spiral out of control like in Argentina !
Not when they tighten lending to the extreme
@@treaty8631
They have to pretty much keep pace with the US Fed, or else things start to go out of whack
We have a far left socialist government. They love inflation.
Nope nope nope. High interest rates should absolutely NOT come down to save reckless and predator investors who made Canada’s housing market unaffordable.
There are people who worked hard to buy a property to live in, so you are just full of resentment and want to throw under the bus other people.
“People should have known not to buy” is a stupid take, since people were told for decades that there will be a crush and you can’t just wait all your life and pay 3k for a rent.
Help me answer this question: What happens to an investment that does not go down? Ie. the risk is 0%. Does that increase or decrease the asset price? Also, how does that impact the demand for that asset? Let me know quick, im waiting.@@aleksandrzaviriukha5809
@aleksandrzaviriukha5809 never FOMO buy an overpriced asset.
In many cases renting is now the cheaper option. Speculators are burning cash to subsidize renters.
Purchasing property for conumption and not for investment is the issue. It is folks who are taking on extra debt just to buy multiple homes that are the issue. There are banking institutions here that are also responsible for hawkish lending to greedy folks and encouraging them to take on more debt when they know the assumptions are highly unrealistic.
Look at a map of Airbnb locations they're everywhere....no wonder there is no housing for people...yes investors have ruined the market to a great degree.
40% of Canadians are directly impacted by high mortgage rates (40% rent and another 20% own outright) while 100% of Canadians are directly impacted by high inflation. High rates are needed to reduce consumption and encourage savings. Interest and mortgage rates should be raised even higher.
EXPECT interest rates in the mid teens by 2028-2029
Agreed
These interest rates are not high. These are historically normal. These guy has no idea what he is saying. We need a correction......prices are insane and need a reset.
This is what happens when you normalize almost 2 decades of almost free money at just over 1% interest. It was set up for failure. 5% interest is not bad. The lenders are to blame for giving out such HUGE amounts of credit(debit) due to the present GDS & TDS limits used in mortgages. Within the next 10-20yrs generational mortgages will be here in Canada, it's already beginning in the U.S.
Inter-generational mortgages is a completely ridiculous idea.
Yup I believe intergenerational mortgages will be here...90 yr ammatirization...I can see it
The fiscally responsible have been crushed with low interest rates.
A 90-year mortgage doesn’t reduce the monthly payment much below a 30-year mortgage payment. You save about 12% per month, but end up paying vastly more over the life of the loan (almost 4x in interest, which means around 5-6 times the purchase price gets charged in interest!). It’s ridiculous to even think of such a thing. Also, the lower payments would fuel higher house prices at first as people realize they can “afford more.”
Debt addiction
Policy makers kicked the housing can down the road for far too long. What we’re seeing now are the implications of blowing the largest housing bubble in the world based on local incomes. House prices could implode by 50% and still be unaffordable to the majority of Canadian’s wage earners. The whole system needs a massive reset.
haha 80% drop coming.
I heard prices will drop by 10,000%. Because, you know, since we're all just making up numbers anyway... 😅
So we need to bail out all the speculators and irresponsible reckless borrowers out there? Give me a freakin break!!! Last time I looked the Bank of Canadas mandate isn’t bailing out reckless mortgage borrowers. Insane.
No, it's about keeping our big banks solvent. Always has been. If they can't get lower rates, they will get the government to throw money at the economy in reckless ways so that mortgage holders can keep paying.
BoC has stated they don't care/not responsible for real estate. Primary role is price stability
Reckless borrowers are insured by CMHC. 😂😂
@@TheTruthAlways not all them. 20% down payment for a DT condo funded by a HELOC. 80% funded by variable loan. Sounds like 100% financing to me. Welcome to Canada subprime.
@@jeffotoole4509 In that scenario they have 2 properties to take.
Leaving the interest rates low and the affordable housing problem will only get worse. Low interest means people will pay a lot more for houses driving prices ever higher.
Why don't Canadians chose to have 30 year fixed rate mortgages like here in the U.S.
Banks don't offer that as a loan. To much risk that it simply won't reflect reality for too long.
@@JeremyMacDonald1973 Thanks, but why does it work in America.
@@eddie-xi6lswell. That had the 08 crash. But also they build homes we don't. People don't see the risk ahead so the government makes it more risky 😂
@@eddie-xi6ls A lot of this is simply history. The advent of new style home loans comes out of the New Deal. Banks are regulated and the government stepped in with regulation that began to force the issue.
Even that did not immediately lead to 30 year mortgages what ultimately did was Fannie Mae and Freddie Mac. When the government pushed them to offer 30 year mortgages they where so huge that essentially the rest of the American banks had no choice but to follow. These days if a bank does not offer that then the customer will simply go down the street to a bank that will.
American banks would probably not offer this if they had a choice because it is risky and can lead to the bank collecting very low interest for a long period in a potentially high interest and high inflation environment. It is good for the consumer however as if the reverse situation takes place an individual can sell their home and buy a new one with a cheaper interest rate.
US mortgages are backed by the feds@@eddie-xi6ls
So the insured mortgage people who only put 20% down and were crazy careless.
And the ones who put a lot down 50% and don’t need insurance get no break.
I am not sure those numbers are correct. I beleive any mortgage 20% down or greater requires no insurance from CMHC.
@@jb-vz4wb yes exactly is what I said and the new rules the banks will help are for insured mortgages. I believe unless I understood wrong.
It is the low interest rates that got us where we are
America going off the gold standard caused this worldwide housing fiasco and debt crises. It's also responsible for the decimation of the UK banking system.
Funny, I have a variable and have seen my mortgage payment double, I live in Vancouver. Funny how though the Government wasn’t worried about it hurting my household, but now that there will be a large number of households having their payment double, NOW they’re worried about it hurting Canadians
Should have locked in for 10yrs . Your fault,now live with it..
@@mikebowers7719 nice! We were given advice to hold the line and ride the wave from our mortgage broker. I guess we just aren’t as smart as you! Sure hope you don’t have to feel the pain of renewing in these rates
You gotta run with the herd to reduce risk.
@@mikebowers7719your maximum renewal time in Canada is 5 years
@@kelsea16this is completely 100% your fault. Who promised you rates would stay low forever. This isn’t a government problem, it’s a you problem.
Has Mr. Smith factored in the absolutely massive 'hit' to CPI Inflation Canadians would face ...
as a result any significant BoC interest rate deviation lower from US Federal Reserve rates ?
I for one do NOT relish attempting Groceries/Fuel nor Prices for just about everything else the 68 cent Loonie a BoC rate deviation from US Fed Rate Policy may entail ?
A rate cut would lower the mortgage interest component of the CPI but that would be offset by sharply higher rents as home prices rise.
Hey, if home owners can't afford payments in the future, that's their problem...not mine. A crash in housing prices would be a very good thing. Stay tuned.
Once your boss can't get his expansion loans because banks are cutting funding.. it will become your problem. You can't think one dimensionally like that.
Great content and coverage.
Desmarais' Boosted 3.0 probably read your report. You could try plugging in synthetic data in advance to quantify the effects of Central Bank actions. I'd try the tank gunners approach: Long shot. Short shot. Next one on the money. So you'd plug in the timing and extent of Central Bank action IN ADVANCE, as synthetic data, and Boosted 3.0 would do the math. Approach business developer or Desmarais, aka Mr. Fintech!
My 2021 mortgage is up in 2026. I have increased my payments as much as I can to get the mortgage as low as possible when I renew at about double the rate.
Rates should put in a bottom around the beginning of 2026.
If you didn’t buy at the peak of the housing and put a big chunk down , you’ll be fine
Every “analyst” is also forgetting the ticking time that is the CEBA deadline. The majority or loan holders are not able to repay this loan come January 1st 2024. That’s $40,000.00 minimum per loan holder. What does this mean for those people at that point?
An increase in mortgage rates also means landlords who have mortgages on rental properties will be raising their rents. Making housing even more out of reach for renters.
We should have mortgages that are 15,10,7,5, and 3 years maturity . 5 years is too short …
An alternative is to extend the due date to 25 or 30 years.
He speaks the truth. BoC take note
Banks are so busy doing financial gymnastics in Canada you need about three weeks to get an appointment at td
7:28 "..I have lots of sympathy for central bankers" LOL, please spare the bankers.. keep them in your prayers everyone.
😂yup you said it right
Sadly, banks continue to stumble, mortgage rates is on the rise with higher imports and lower exports, yet the FED is to lessen cost. So, where do we grow and safeguard our money now? something will eventually break if they keep raising interests and quantitative tightening.
ideally, you should consider financial planning to get the best results with your money, notwithstanding economy situation
Well agreed, I'm quite lucky exposed to finance at early age, started job at 19, purchased first home at 28, got married shortly afterwards to raise kids early. Going forward, got laid-off at 40 amid covid '19 outbreak, immediately consulted with an advisor in order to stay afloat and after subsequent investments, I'm barely 25% short of $1m ballpark goal as of today.
That's fascinating. How can I contact your Asset-coach as my portfolio is dwindling?
My Financial adviser is ‘’Stacie Lynn Winson’’ she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
Thank you for this tip. It was easy to find your coach. Did my due diligence on her before scheduling a phone call with her. She seems proficient considering her resume.
Last time Albertans went to Arizona for golf and bought golf houses for $25,000. This time Americans can come to Canada and buy ski condos for $25,000? Love your neighbor$.
Great commentary. GDP will tank as these mortgages renew. BOC will be under pressure to avert a deep recession and rates will fall by spring if not before.
If that's true, then why are two year GIC rates so attractive? The banks are not seeing rates going down drastically in the near future.
I live in Markham and home prices keep rising as months of inventory keeps falling, Rate cuts will mean home prices double then rents will double after that.
They’re going to temporarily allow 40 or 50 year amortization periods. They’ll allow this to continue so things don’t crash as badly. I read an article today saying in 18 months time the poop begins to hit the fan. Many will have to renew their mortgage. In the next three years, 3 million must renew at these higher rates. It will take time but it will crash.
Does it mean that the 💩 Canadian dollar will be come even more 💩? Yes, please save the home owners; the rest of us are ready to pay for it :)
But if there are default, values will decline rapidly and reset prices to a more reasonable level. Debt repayment costs will never drive fed decisions. The tail does not and must not wag the dog. The country will be Better if owners and investors default.
I wonder how many more Canadians will become homeless after this?
Better get a second job instead of whining about it..
This guy is just advocating reinflating the bubble and kicking the can down the road. That is terrible advice.
What will happen is the Bank of Canada will cut rates and the Chinese will buy every last home that's for sale in Canada. That's what will happen.
Ottawa must introduce a form of mortgage interest deductibility to soften the blow of reset interest rates. Any interest paid over a base of 2% would be deductible from federal (and provincial) income tax with a mortgage ceiling of $1 million across the country and $2 million in the Toronto and Vancouver regions. It’s insane to only focus on subsidizing the building of new homes when a wave of foreclosures in existing housing stock releases unaffordable units and adds to higher demand for rental units(raising those prices) and possible homelessness.
The problem is that the government doesn't let markets correct because they're petrified of just telling people "yeah, you bought too much house. If you can't afford your payments, downsize". We need to go through a recession. The government needs to let the market work this out. Please do not lower interest rates, please make people take responsibility for their choices and actions for once in their lives. The people that make the right choices will be fine, the people that made the wrong choices will go through a bit of pain. That's how it should be. You can't always just cover up for everyone's stupidity. Sorry, when interest rates were low and you bought the biggest house you possibly could in the most expensive area of Toronto that you could upgrade to, you F*cked up. You deserve to pay a price. Not just have the government back down and decrease interest rates to where you can afford it again. That transfers all of the consequence of your bad choice to everyone else. Everyone else who made better choices faces inflation because the government gave easy money and hand-outs to the people that f*cked up. If the government would stop handing out the easy money and stop making money grow on trees, inflation would grind to a halt, and the people that played the game properly would come out ahead and the people that f*cked up would go through some pain. That's the way it should be, that is fair.
Well said
Moralistic argument is bad argument. The purpose of monetary policy is to blunt both peaks and valleys. So, sure, it won't be good times all the time, but it doesnt mean pain in equal measure is required either.
You also presume a lot when you say "please make people take responsibility" in service of a request for higher rates. Just because people are caught out doesn't mean they were behaving irresponsibly. In fact, they may have been acting in the most rational way and still found themselves in a terrible position. Meanwhile, people who didn't act sensibly may have no issue with affordability now.
As a taxpayer, homeowner, who didn't participate in the real estate frenzy of the last few years, I will have a bitter taste in my mouth if the BOC steps away from there mandate to save the few.
I lived through the 80s.
Govt did nothing for us.
Back then, we never even considered the govt stepping in, we just knew we were on our own and took our lumps.
It is what it is.
@@user-vi8ci2bi6b The government (well, central banks) were aggressively involved in the economy in the 80s... that's why rates were so high in the early part of the decade. Also, the argument made in the video had nothing to do with "saving the few"... it was about an impending risk to the economy as a whole.
@@Hyperpandas
They didn't move rates for real estate, we followed the US.
I remember it vividly.
My Dad worked for RBC
Keep the rates where they are until 2026😂 i went variable in 2021 😂 i want everyone to join the fun 🎉
Crisis brings opportunity, also i dont care about the over leveraged
This guy wants to lower interest rates and cause higher inflation?? Doesn't he realize low rates for the last 15 years has caused these high house prices?? Numbchuck!
Ill offer .5 XRP for any property. XRP transcends fiqt currency, has no counterparty risk, finite in quantity, able to transfer anything of value for anything of value with perfect property rights, without middle men creating any friction. It also allows you to be your own bank.
His mic is too echoy. Can’t hear anything with his accent.
Let it crash.. y’all been drunk off the cool aid for a very long time.. time for a reality check 😂
Don't Blame BANK OF CANADA.
Go After Big Banks and Private Banks - WHY they are lending BIG Mortgage Loans (to the lower incomes).
Do your research ???
Go ask Governments for AUDIT.
Blame the Trudeau government for all there debt spending. Scotiabank stated the interest rates are 2% higher than they should be because of it
only 1/3 of Canadians have mortgages. SO who cares?
The 1/3rd who have mortgages.
Correct. And that 1/3 also needs to assume accountability for their debt.
If people with mortgages suffer loss it will feed into clear title homes by reducing their value. Most
Average people have their wealth in their personal homes. It will create a spiral down for all homeowners as it is today
@@geraldbrowne Good. Housing has doubled in like 8 years. It needs to go down so young people and newcomers have a chance.
@@alanj9978 It will. But it will be regional.
Lol goodluck dropping rates . Inflation will skyrocket. Who cares if homes in gvrd drop 50% . 1.5 mil dropping to 750k is a good thing. Still alot of money. Boc doesnt care if your home drops brw
The quadrupling carbon tax will undermine efforts made to strengthen the economy.
Not should but must pay more attention
You can't completely paint the consumer with such a broad brush. For a large segment of the population that own homes, it would just mean that they can't accumulate as much wealth. Yes there will be a section of the population that will have to cut back on spending because they're up to their eyeballs in debt, but just because rates go up doesn't mean spending is going to drop significantly and you also have to factor in how many people don't actually own homes and aren't going to be impacted by this.
It will affect all homeowners . As the homeowners age out in their paid for homes they will need substantial cash to fund their health care into their 60s , 70s, 80s. Fixed income retirement will see their purchasing power eroded. The decline in house values will ill hit everyone and every part of your budget. Food , heat, transport.
@@geraldbrownethey grew up during the golden age of prosperity. Any boomer that isn't rich, its their own fault. If they can't make it during easy times, they won't make it when times get tough. No sympathy.
@@Casey-qm1nd There are many reason why people do not succeed financially. Lifetime of experience would show that. Too general to state all should be rich or successful.
Bank of Canada must take the high interest payments paid to the rich and apply it to the mortgage rates