fear a housing crash due to people buying homes above asking prices with little equity. If prices drop, affordability and potential foreclosures may arise, worsened by future layoffs and rising living costs. I want to invest more than $300k, but I'm not sure on how to mitigate risk.
Consider reallocating from real estate to other reliable investments like stock, crypto or precious metals . Severe recessions offer market buying opportunities with caution, as volatility can yield short-term trading prospects. Not financial advice, but it may be wise to invest, as cash isn't ideal in this period.
Due to my demanding job, I lack the time to thoroughly assess my investments and analyze individual stocks. Consequently, for the past seven years, I have enlisted the services of a fiduciary who actively manages my portfolio to adapt to the current market conditions. This strategy has allowed me to navigate the financial landscape successfully, making informed decisions on when to buy and sell. Perhaps you should consider a similar approach.
Finding financial advisors like Melissa Terri Swayne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I just looked her up on the internet and found her webpage with her credentials. I wrote her a outlining my financial objectives and planned a call with her.
As long as the economy is relatively good, employment numbers are strong, and inflation is 2-3%, why would the Bank of Canada lower interest rates at all? It makes no sense to drop interest rates based on what we know today. I doubt they are going to drop at all this year.
Exactly. So raise or no raise, majority of ppl will be fine. In any economy, there are ppl that are not fine. Every year there are back failures. All part of the economy.
Dropping interest rates is like giving sugar to assuage your children. Sure it will shut them up in the short term and keep them from nagging you for sugar, but in the long run they will turn into freaks of nature bouncing off the walls driving you crazy. Sometimes you have to keep the sugar from the children. For their own good. And yours.
The problem is the headline numbers look much stronger on the surface. Many of the added jobs are part-time, you have people working multiple jobs to keep up with increasing prices. Others need more work because their hours are being cut back. Businesses are scared to lay workers off because it was so hard for them to find the workers when the labour market was super tight. They would rather keep them on the payroll and cut back hours instead. This inflates the strength of the labour market. We don't have the tight labour market problem anymore, labour will be plentiful. Weakening consumer spending = weakening corporate profits which = layoffs. now the issue becomes, with the recent population boom, you will have more people that are competing for fewer jobs, which pushes wages down and has already pushed shelter costs up.. This exacerbates the cost of living crisis and weakens living standards. As a result the government will now be paying out more welfare and social assistance which in turn brings down productivity. So expect high unemployment to be normal. The biggest issue is that the US consumers are nowhere near as leveraged as Canadians because they don't have a housing bubble and have 30 yr fixed mortgages, most under 4%. So it is the strength of the US labour market that will keep rates higher for longer in Canada. The bottom line is, Canada won't even have the luxury to cut when the labour market weakens because the US labour market will be much stronger than it is here. Canada is simply at the mercy of the US, that is why our landing is going to be very hard.
This situation is quite concerning. Allowing negatively amortized mortgages essentially undermines the monetary policy set forth by the Bank of Canada. It delays a softening of the economy and therefore rate drops. It also adds tons of risks in the financial system…
No it doesn't. Or else there would be no mechanism of rate transfer in the US, because their homeowners are not facing payment shock. If the payments are not increasing at all then yes you are correct, But in many cases the payments are increasing just not enough to keep the amortization going at the correct pace. So people are still healing higher rates and are having to come back discretionary spending elsewhere just not to the degree where they lose their homes. There's nothing in monetary policy that says it only works if people lose their homes. In fact that would just put further a pressure on the rental market and you would probably see it in increased CPI, Since rental costs and interest costs are in CPI but home prices aren't. Canada still has much stronger transfer of bank overnight rates to the economy than the US does, and we have a weeker economy and are tied to their rates because we would import inflation otherwise. In fact due to that our rates are higher than they should be for the strength of our economy and our inflation rate, by the Taylor rule they should be a little bit lower.
It was nice in 2020 when rates were dropping; our CIBC mortgage went from 27years amortization to 19years. The interest and principal payments flip flopped within a few months. Our Scotiabank mortgage just lowered the payments. The one thing in hindsight I would probably go back and change, is to break the Scotia mortgage at that point and lock in a fixed 5year rate. Decent price paid for that lesson. All the mortgages that are negatively amortized will get brought up to ratios when their mortgages renew. The majority of people will be fine.
What you are saying about the banks extending and pretending, makes sense to me because I cannot figure out how so many people can afford houses at these prices AND nice cars AND go on vacations. What upset me is WHEN the banks' balloon starts to pop, they will crawl to the gov't to help - which they will with our tax dollars and all the other dollars they print. This is nuts!!!!!!
There are so many people who look like 🤴 and 👸 with the borrowed money and 0 money in their real savings or retirement accounts. They live in the moment and dreams of a fantastic future where they win a lottery or their business takes off with millions in revenue, or the house doubles in price, and the party continues, until it doesn't. Many of those are influenced by the documentary / advertising " the secret." Financial education should be mandatory in elementary and high schools.
I spoke to a travel agent and she said she has never been busier. I went to BoosterJuice and they said they are looking for staff and are too busy. Yorkdale mall in Toronto is super busy. All restaurants are booked up! I’m not sure where people have so much money? Must be from working from home 🤷🏾♀️
This is quite the scary scenario if people are increasing their debt load all on the back of housing. You can see why the governments aren’t trying to make housing more affordable as it would blow up a lot of the bank’s books.
It's all starting to look a little bubblicious. With extend and pretend, mortgage fraud, and "investment" properties with deeply negative cashflow it's not looking good.
Bubblicious 😂😂. I spoke to someone in the UK and they still allow interest only mortgages for rental properties. You get positive cashfkow with only interest paid. Not a bad deal, if you keep generating income for 30 years without paying a penny in principal and then sell it at a higher price in 30 years. Why would you not do it ? As long as it is cashflow positive.
@@Inquisitive9 IF you could find a cash flow positive property... sure, kind of, but it's a super high risk move in terms of market volatility. I don't think you realize yet but in Canda, finding a cash flow positive property is not the norm, it's the outlier. So essentially, anyone doing this kind of crap loses money and is hoping for valuation increases... on a negative cash flow investment. Any actual investor looking at this finds theses speculators ridiculous. The fundamentals, that is your cash flow, is literally the only thing that matters to assess investment property values and somehow losing money would be worth more money? Questionable investments.
@Not.a.bird.Person Absolutely, I agree. Only once in my life did I buy a negative cashflow property, and regretted it. I agree with you. Increase in value is speculation, but so are the growth stocks. Most people are not economists and the historical performance of housing in Canada is very convincing. Today's generation X or millennial generation did not see late 80s losses ( about 40 years ago) , and since then, Canadian housing did not disappoint anyone who bought and held for 5 years or so. It's is hard to resist when agents say that values have only gone up in the last 30 plus years in the GTA and support it by fundamentals like population growth and lower interest rates ( compared to 80s).
The main people getting destroyed are first time buyers. Huge run up in prices, rates and rent - basically just working to pay off either the banks or investors. Its a very bleak time to be a young adult without a bank of mom and dad to bail you out.
😢 so true!! But the affordability is not around the corner and practically it will take a decade or more to significantly impact the pricing. So, young people need to keep adding pressure for more supply, and move or buy somewhere out of the main hubs. Sad, but true.
There is zero reason (family is the typical excuse) to stay in Canada if you have any current or potential marketable skill(s). USA if you have an “in person” skill and Eastern Europe or SEA if you make a living from a laptop.
That’s sucks cuz I bought my house cheap from a family member but it’s still not enough cuz interests rates are so high.. how are the people that got scammed from realtors into a bidding war over paying 200k going to do 😢
@@argeldelacruz9545It will get better. The rates will not stay here forever. Home purchasers who want to live in their house and spend their life there, should not be subject to crazy rate swings. We need special rates for mortgage borrowers, just like the US, competitive 30 years fixed rates. But, I don't blame the realtors. Buyers should not blame realtors for their own home purchase decisions. I am not a realtor. If you tell a realtor that I want to buy a house, do you expect the realtor to say, don't buy ever, or not for the next 10 years until the market crashes, or should they say, let me buy you a house in Winnipeg or Edmonton as it is cheap there? His or her job is to make it happen what you say I want to buy this house, if there are other bidders, you tell me what will beat them all.
many home owners and housing advocates argues that house prices will never come down and it will continue to go up. housing would have been crashed in 2023 if banks did not increased amortization to keep the payment same.
It would have been a blood bath as people would have been crushed. But, why the F di we have 5 year mortgages, when the US has 30 years mortgages which are barely 50 BPS more expensive than a 15 years one. They find our mortgages crazy. A person is always has a risk of losing their house in 5 years, unless the rates remain damn low, or the price goes up. Why does no one talk about it in Canada ?
Many stores and small businesses outlets are closing, stats canada data are fake and cooked by govt. Hard reality is if canada economy has to saved they need to keep interest rate higher. So you know now whey stats canada is coming with rosy picture. They are simply convincing people for keeping high interest rate. Mark my words if canada doesn't get over with oligipoly or dig natural resources for next year's, then we will be in great depression of our life time. Apart from this canada has nothing to offer to world to attract foreign investors. This real estate and high immigration things cannot be used more time to drive economic growth. Unless canada wants to be poor country .If canada lowers interest rate, I promise you canadian dollar will collapse
So glad that they not only offered ZIRP which was basically a wealth transfer from savers to speculators/borrowers, but then on top of even that, they allow for negative amortization constraining supply and staying the day of potential sale/default of people who are over leveraged thus keeping savers waiting for a deal out of the market again. Every dog supposedly has its day, but the patient and prudent ones seem to keep getting tossed aside.
Steve I've been selling real estate for 34 years, if i go back to the 2008 Financial Crisis the Real Estate market in our area got ugly fairly quickly however 2010/2011 is when it really went sideways.The lag affect happened then 2024/2025 falls into a similar time line since rates rapidly started increasing in February 2022. The manipulation by banks/government debt today kicking the can down the road will eventually come back and bit us in the ass. Great Video, if the jobs losses start look out, Technically home owners that have increased their amortizations 35 to 60 years or more in some cases to hold on, most likely would have gone into default....
Many companies are already laying off... a video game company - Electronic arts just announced layoffs. Your gut is right. The sheep are consuming their last hopium feast just as intended.
Principal-only payments: this happened around 15-17 years ago in the US. Guess what happened? They did NOT do negative mortgage amortization in the US; the bubble burst and the market went through foreclosures that cleared-out the bad debt and made housing affordable again (15 years ago). That saved the economy and set a supportive baseline for sustained economic growth over the next decade. Negative mortgage amortization means the "highly regulated" Canadian banks are taking on unprecedented amounts of debt to fuel the real estate bubble. CMHC buying mortgage bank bonds (collateralized debt packages), also means that the federal government (i.e. the Canadian taxpayer) is also taking on further debt to fuel the real estate bubble. I can only wonder what will happen here in Canada once this bull$hit-show of a false economy finally pops.
Yeah, we as tax payers thro CMHC are on the hook! That’s insane! All of this is keeping house prices high and moving higher. And very likely that’s to save the bank butts!
@jameswilliams3304 Yes you're correct; that's very true. But there was nothing rosy about any of it 15 years ago in the U.S. And it will be even less "rosy" when it eventually happens here in Canada.
@@kqh123 🤣🤘 (Verse 1) In the halls of debt, where shadows loom, Negative amortization, a financial doom. Borrowed dreams turn to nightmares bold, Interest rising, a tale untold. (Pre-Chorus) Numbers climbing, like a dark crescendo, Principal sinking, in this financial inferno. Pound of the gavel, echoes of despair, A metal symphony, in the lending lair. (Chorus) Negative amortization, a twisted ride, Drowning in interest, on this financial tide. Screams of payments, like thunder's roar, Debts unforgiving, forevermore. (Verse 2) In the ledger's abyss, where darkness breeds, Compound interest, a demon's deeds. Promises broken, like shattered glass, Negative amortization, a die is cast. (Bridge) Riffs of regret, shredding through the soul, Equity fading, an unyielding toll. Chains of compound, binding tight, In this metal ballad, the numbers fight. (Chorus) Negative amortization, a twisted ride, Drowning in interest, on this financial tide. Screams of payments, like thunder's roar, Debts unforgiving, forevermore. (Guitar Solo) (Verse 3) In the blackened ledger, where shadows play, Negative amortization, a relentless fray. Debtors weep, in a silent scream, A metal anthem, for a financial dream. (Outro) As the interest devours, and equity wanes, A heavy metal saga, in financial chains. Negative amortization, a haunting score, In the symphony of debt, forevermore.
Mortgage rates are currently at an all time high since 2000(24 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 redirect 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.
Finding financial advisors like Margaret Johnson Arndt who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I just looked her up on the internet and found her webpage with her credentials. I wrote her a outlining my financial objectives and planned a call with her.
That's what I always claim. Whenever someone's doing the calcs whether he should jump into shadows or not, always calculate with a 6% interest rate at min! Do not rely on the CURRENT trend, as it will come back to bite you in the arse.
As someone who does mortgages at one of the big 5 banks mentioned, I can add some context to the balance increase you mentioned around the 8 minute mark for the credit card guy. If somebody has a variable rate mortgage, they must bring their amortization back in line upon refinance. The person with the credit card therefore either had room available on the line of credit, or refinanced the mortgage and had their amortization reset. Nobody is allowing people to refinance their negatively amortizing mortgages without increasing the payment.
@alexgardner3125 what do you mean by bringing amortization back in line?" , does this mean 30 years max, but can be extended beyond the remaining amortization? Also, if a house is worth 1.2 M and the mortgage is only 500K ( any other number that leads to a ton of equity), as a bank, I would let them have a HELOC to get through this time.
@@Inquisitive9 if they renew only, then the amortization will be reset to the original amortization (25 or 30 years) minus the time that has passed. If they *refinance* then we can put the amortization back at 30 years. However, they will need to requalify with the current stress rate in order to successfully refinance. As you mentioned, sometimes we're getting around this by adding a line of credit *before* the mortgage comes due, so we can use the current payment instead of the full stress rate payment. Personally, I think this is bad, but it's not like we're approving 60% debt service ratios or anything. The max tdsr remains at 44% for the big 5, and if the clients have enough capital or a strong enough financial profile then there may be a *small* amount of wiggle room on this number. Long story short, everyone who is being approved for mortgages by the big 5 banks is doing so under current lending guidelines, and nobody is being approved for unbelievable amounts. That being said, anybody who gets approved at 44% tdsr is really going to need to cut back their other spending habits. Of course, that's the goal of the bank of Canada.
@@alexgardner3125Thank you for the explanation. So "getting around" means reducing the mortgage balance by paying down some principal using the HELOC? Of course the HELOC will be interest only and likely a smaller payment than if one has to pay both the P+I. Thank you for the details.
@@Inquisitive9 believe it or not, the interest only payments of the line right now are about the same as the principal and interest payments of the mortgages. Most lines are at 7.7% to 8.2% while most mortgages are coming due around 5.5% to 5.7%. If there's a difference in payment, it's not much, and it's not worth paying now principal. The "getting around it" is because you can refinance the line of credit side of a HELOC using the real payment while the mortgage is still at 2.5% or so. If you wait for the mortgage to come due, you'll have a higher payment on your debt service ratios. If you try to refinance the full mortgage, then you'd be using a 7.7% stress rate instead of a 2.5% real payment. Makes it so you can qualify for more. Then you'll just refinance the line over to the mortgage later.
Same with rental caps. If it werent for rental caps the roll over rent increases would not be that high. But if you are a landlord operating at a loss, you sure will try to have the roll over unit cover the losses incurred on the other rent capped units.
I suspect banks are now in the real estate speculation game. They are allowing negative amortization because they are speculating prices will continue to rise.
layoffs are already happening, AI is here to wipe out white collar jobs in every field - health, accounting, media, design etc... the news is telling you everything is fine, stocks are up, home sales are active, economy is fine.... till they are ready to tell you its not, then the flood of bad news will be all over the TV and panic will set in
It's already starting to happen. Industries across the board are either slowly letting go of their employees or cutting their hours. The ones in great dire like the IT industry has already done mass layoffs recently.
You are right rental market so bad that most tenants stop paying the high rents, now as I know most landlords can not evict the tenants. To discover reality of the market just go out there and talk to dozen tenants.
Great video and explanation about why the costs of houses remain high. With low inventory and high demand, we can expect the costs of houses to remain high and the extension of deffered mortgages as far as they can extend. However, as soon as job losses start because of low cash flow in the market we will all be screwed. The economy needs to hold strong for this to work. We are living on borrowed time.
Even if BcC cut's interest rates to 3 to 3.5% by end of next year, wouldn't 5 year bond yield be around 3% which in turn will result in close to 5% 5 year fixed variable (which we already have now). more pain ahead
But the variable right now is in low 6 to low 7%. It will still be a relief from what is happening now as people will start to build some equity. However, wouldn't that lead to much lower fixed rates? Whenever the news of the BOC rate drop gains some strength, the bond yields also start to drop.
In Toronto, you only get 40% turn over rents on 10 years old rent controlled leases, not on units that were leased a frw years ago. Rents are actually softening now a days everywhere.
Our bank actually encouraged us to roll in our $40k line of credit into our mortgage last fall. Our 1.8% mortgage comes for renewal one year from now. Banks are still in the business of borrowing. Devalutation is the worst thing that could happen because the system only works with appreciating home values. I think long term, the system is more stable if we maintain 5%, with stable mortgages. For those with money in the bank, earning 5% on your secure savings replaces speculative investments in housing markets, which in turn avoids many of these problems.
So how many house now have negative amortization? Are the numbers growing? Separately, CMHC recently stopped their first time buyer help to buy scheme. Is the government just protecting themselves from potential bubble market losses?
This is my fav post in long time cause it gets into exactly what I’m interested in. How the fuck isn’t markets crashing . Oh yeah it’s cause they let you extend extend . That’s where they want you. I’m buying bank stocks dude those guys win all day everyday and backed by government . Cannot lose
This negative amortization phenomenon is not different from the subprime situation in the 2008 crisis in the States. Borrowers (a lot of them are mostly overleveraged) are broke, but are still allowed to keep their home even though they can't even cover the interest portion of their loans. Meanwhile, it would be considered absurd to approach a bank and try to get a 40 year mortgage, let alone 70, 90 yrs amortization propelled by Variable Mortgage Fixed payment. Lets be frank here. Lets call it what it is: NEGATIVE AMORIZATION IS ANOTHER FANCY NAME FOR SHAWDOW DEFAULT. In a true capitalistic system, risk takers, overleveraged borrowers should be left to pay the consequence of their risk regardless of the outcome. In my view, Variable Mortgage with fixed payment product should be made illegal in Canada as the rate hike reveals how bad this product truly is.
The problem is that the banks figured out that it's more profitable to shadow default. Let's say you hike to 6% - now 15% of people are defaulting, while 85% can afford to pay it. That's BAD. If you foreclose and force sales, you get quite the downdraft in real estate pricing from all the selling. That's the asset backing your mortgages, by the way. The market will also reprice rates lower, so then you get 3% on your mortgages instead, halving your income, but your defaults do disappear. Now let's say that you hike to 6%, with 15% of people defaulting. You work with them to play with amortization and rates and get the 15% of people into the affordable range. Sure, 60 year amortizations suck, but what choice do they have? And since they're impoverished and would lose the home during a housing crisis, you even grant them a sweetheart rate. Maybe 4-4.5% 4.5% on 15% of people and 6% on 85% of people is a lot better for the bank's income than having rates come down due to a recession and housing crash. Bonus, no forced selling means the asset backing those mortgages stays "healthy" (AKA sky high.) Good for the balance sheet.
@@BikeHelmetMk2 This game the Banks are playing can only sustain short term. Should rate stay elevated long term which will be probably the case, there will be more borrowers falling into default and shadow default. Banks has provisions for loan loss, however, large scale loan losses is not something that Banks account in the loss provisions. Also, the more shelter cost remains elevated, the bigger the case for the BoC to keep rate elevated as shelter cost is a major component in the CPI mix. This situation is a very alarming one and the most likely outcome is a lose lose one for both borrowers and Banks. The most scary scenario is that many Canadian Tax payers will probably left holding the bags to cover insurance for loans covered by CMHC and through Banks bailout.
@@MrFanstar007 They can fudge the numbers on the balance sheet for a little bit. Every 5 years the balance sheet heals itself. If they adjust the mortgage to 4.5%, sure, it's worth less according to mark to market accounting... but that goes away on rollover. 5yr terms roll over on average every 2.5 years. Someone continuing to pay 4.5% is worth a lot more than an empty house that they need to foreclose upon and deal with. FYI, on a $1m home with an $800k mortgage... 2% mortgage = $3390/mo 6% mortgage = $5154/mo 4.5% mortgage with 60yr amortization = $3217/mo Magic! No defaults! (Yes, nearly everything is going to interest on that last one. On the first one a lot more goes to principal... almost $2.1k/mo.) The shadow default preserves some profit by preventing an actual default. In the future your bank will probably haggle with you as much as your ISP and cell carrier do. "How did you get an interest only 3.3%!? I only got 50yr amort 4.0% when I lost my job for 6 months..." Is this a good thing? I don't know. It just seems probable given recent observations.
@jameswilliams3304 What are you implying exactly? Do you imply that mortgage borrowers can simply go broke, get a free pass and get protected by the system? I hope not.
Steve, The 5 big banks think they are invincible. I know people are granted line of credit to be able to pay their mortgages. Worst-case scenario we'll bail them out!
@sharinglungs3226 Home Equity Lines of credit are not so expensive. They are usually anywhere between Prime and Prime plus 1. Mostly prime plus 0.5. Some variable mortgages are not that far below prime.
I am 28 years old and I've had a credit card since I was 18. I have only paid interest on it for 1 month back when I was 20. I have no clue how these people operate in their day-to-day lives.
Fake it until the jig is up. Lose your equity, and quietly go into the night. The BoC will declare nothing could have been done, so the victims of predatory mortgage brokers and realtors won't feel so bad because they did nothing wrong, and are definitely not alone in the misery. I have a vague suspicion this is not the way it will work out. take care rwmccoy
What really happened at renewal time. Let say you RBC extended your mortgage to 33 years. You have 30 years mortgage 5 years term. Now you have to renew the mortgage. Do the use 25 years left from the original mortgage. Or 33 years
Pretty sure we all trust that Steve is an honest and good person. 12,000 of us watch his videos one day after posting. Lets start beating it into him that he can change the system. So could we please all start talking about him getting a $10 million per year federal consultant contract to put together a panel of experts to figure out how to fix Canada's housing market? An unbiased committee, with no political influence, to create honest research and recommendations. The federal govt spends how many thousands of millions per year on consultants? 10 or 20 million per year for three years to solve this bs is peanuts. Please support
Im not too sure why you call us doomers when you proceed to make the case of just how fvcked the system is. All we ever said is the market is manipulated, and when the music stops its going to be a nightmare. Banks are betting on the market going up again, and if it doesnt they know they will get that sweet government money.
So what you are saying is you are right either the market crashes and when it didn't but should have it's just that "the market is manipulated" and the prediction is good for infinite time in the future.
Tiff lied to Canadians about rates going up. Why should anyone put any great trust if is said but wait they will come down really fast. My prediction is they stay higher longer than a lot of people think while inflation is sticky in large part because of what makes up inflation much of which is housing costs (up in part because of higher rates), still supply chain ripples, wage inflation (with the boomers retiring wages finally have room to grow), corporations are making massive profits often historically the highest in history and returning huge sums to shareholders. All this helps prop up more people/money chasing not enough products and services = continued inflation. The little guys out there mkt getting wage increases have a house already renewed or going to in the next 2 years is getting stretched in every direction, they are for sure going to be spending less in the economy. But a surprisingly significant portion of the population also did very well during and after the pandemic, both in terms of cost savings and wage growth. There's a lot of people waiting to buy but held back due to such low number of units on the market. Crap units with crazy prices being supported because there are way more re buyers than seller still.
@@RainCity3rd I would rather trust a crackhead with my financial future then a banker, anyone listening to any tier of banker needs this dose of reality.
@@donm2067 personally I would not trust either given neither even pretending to have my best interest in mind. Bankers don't, they have a business to run no different than the flower shop. Banks are not special isln some way they are neither out to get anyone as some ignorant people seem to think but neither are they there to help. You want someone to help, hire them with the express purpose and a fiduciary duty set in law. And even then ask questions and do your research about how they are paid and what incentives that creates or doesn't. Absolutely no one cares about your financial future more than YOU. But the great thing is there has never been more information and ease to learn and do it yourself and save a ton of money doing so. It's not hard to buy a few ETF's, consistently save in TFSA and RRSP and non registered and do well.
it's not surprising, the housing market takes a while to correct and crash. But here we are with rates higher for longer, which Steve didn't think would happen. Now its a waiting game. Go look at the cycles of a market, we are in the complacency stage where people think things could end up being ok.... next comes anxiety and then panic. Higher rates for longer is tapping into savings people have, along with higher costs of goods and living expenses. They are trying to hang on hoping for lowered rates agents promised them by spring. For some reason real estate agents think this time is different, we wont have a crash because supply shortage and immigration. Commercial real estate is a ticking time bomb that will affect banks and subsequently residential mortgages. We are in a recession but they wont tell you that with massaged data till we are deep in it. Job loss is already happening. People will be blindsided. Renting is better right now, your home is a liability. You can not sell it at the click of a button. Rents are half of what you would be paying if you bought. Pin this to mock me later when the housing market goes on to new all time highs.
Extended Amortization = a bank bailout at the expense of the middle class. Everyone pays via higher inflation for longer. Which results in higher rates for longer. How come? This is because it skirts around the BoC rate hikes which are meant to suck aggregate demand out of the economy. By making someone not have to pay more now, the banks are making everyone have to pay more later. This is because the longer inflation stays elevated, the more inflation will chip away at their purchasing power and standard of living. It also increases the odds of inflation becoming entrenched. The banks are protecting their asses by spreading the pain of a few overleveraged onto the whole. This helps to keep house prices propped up and inflation becomes more sticky as a result. The right thing would have been to sacrifice the few for the benefit of the majority. Since incomes have been stagnate, by keeping house prices elevated it will cannibalize future growth from the economy and we will likely have stagnant growth for an extended period of time. The banks are worried now because extending amortizations into a higher for longer interest rate environment is a recipe for disaster. In the short term rates could come off a bit, but what about the medium and long term? The timing couldn't be worse as we head into an environment where the trend of rates is upwards. Stagflation is how banks keeps asset prices sticky, they cushion the blow by passing on the damage to the middle class by lowering living standards. Banks won't come out unscathed either.
You make a very good argument, but it is based on the assumption that the mortgage payment on variable rates is the only way the interest rates affect the economy and inflation. If this is the entire reason, then how will the US control inflation, where the interest rates have almost 0 impact on the existing mortgage holders as mortgage rates are fixed for 30 years. The UK allows for interest only mortgages ( at least on investment properties), and their rates are lower than ours. I think the extended amortization on variable rates allows for a soft landing without destroying honest, hardworking Canadians. The inflation will still come down.
@@Inquisitive9 depends on what is considered a soft landing. What is a soft landing for the financial sector is not always a soft landing for mainstreet. In terms of GDP per capita, it already is a hard landing for the middle class, living standards are declining as earnings take a pay cut to inflation. The weakness is being masked by human stimulus via immigration and international students. As you pointed out in the US, they have the 30 year fixed rates and most are locked in at 4% or less. So that will definitely give the US consumers more strength to spend on goods + services. Their inflation will be more stubborn as a result. One thing I wonder though, is how much of an effect will the migrant crisis play in the US, and how much of inflationary effect will that have in comparison to Canada.
I am still optimistic that BOC can lower inflation without having to destroy the variable rate holders ( OSFI stopping extended amortization). The last inflation numbers at 2.9% weren't too bad, plus the rents have started to cool a little and the base year effect will likely tame the YOY inflation percentage. The US economy is partly more resistant to interest rates due to their fixed mortgages and the migrants bringing in additional demand.
@@Casey-qm1nd The per capita GDP is not the most reliable metric to declare recession. One way to look at it is that the new immigrants are the ones at the lower income and productivity rung. The rest of the people are still keeping aomost the same life style. However, since we divide by the whole population, the per capita goes down for everyone. Simply speaking if a country has two people who make 60K income/ GDP, it's 30k per capita, add a third new immigrant at zero income and productivity, and it's 20K per capita. No change for the existing two, but its the third one that is suffering.
Average price of homes in Canada By Province in 2024. Prices would be much lower if you exclude areas around Vancouver and Toronto. British Columbia $957,909 Ontario $821,624 Alberta $476,066 Quebec $455,547 Nova Scotia $428,539 Prince Edward Island $377,844 Manitoba $351,305 Newfoundland and Labrador $302,834 New Brunswick $296,977 Saskatchewan $284,926
Negative amortizations should be banned - maybe some exceptions for first-time buyers/primary-dwellers, but better yet a complete overhaul of this ridiculous real estate market and banking system that prohibits owners from borrowing even more off the equity in existing properties, and lower interest rates ONLY for first-time buyers/primary-dwellers. Negative amortizations are the main thing propping up this vulgar housing bubble and the only reason we haven't had a massive crash yet. Of course BoC are worried - our entire economy is reliant on this ridiculous, parasitic situation.
Also CIBC lets you pay the same and add to your total loan BUT they don’t update your numbers in the bank app. When I want to follow up on where I am and click on my mortgage account it tells me to call the bank. I only know where I am at because they sent me a letter letting me know my loan is now bigger because of interest. Pretty sure they try to sell me a fix 😅
The bank rate should of never been lower than 2.5% Zero rates have destroyed this economy as public debt to gdp has increased Japan's public debt is now close to 300% of gdp because of years of zero rates.
The banks are not stupid. They have huge scale in Canada - and they all charge very high fees and uncompetitive interest rates. So they will continue to be very profitable. I love the big banks as an investor - I make good money on their stocks and dividends. But I completely avoid all 5 of the big banks as a customer. If you are a customer of any of the big 5 banks - you are foolish.
People need to be educated as a bank client and shop around for financial services. Personally my “main bank” is RBC but I also do a lot of banking with Tangerine (Scotiabank subsidiary) and a bit with a local credit union. My home mortgage is through a mono line lender (Lendwise) my broker set me up with, my home and auto insurance are through another company, and I have some investments and a savings account with Wealthsimple. For someone that would like to minimize the number of financial institutions they deal with I would recommend a credit union over a “big bank” OR, for those comfortable with never going to a physical branch, an online bank.
People are going to have to suck it up with the mortgages and rents. No one is going to save money, no holidays, dining out, etc. even in rural areas the shelter cost is very high and goods and transportation is higher.
Steve- how are these banks maintaining their liquidity ratios if cash from mortgages is being pushed out into the future? Also are these mortgages insured+ packaged or uninsured? If insured and sold as an MBS- aren't they in technical default?
Our banks have LTV ratios extremely low. There's a lot of wiggle room with where housing equity is right now. Yes, most would be insured, except maybe in the big cities that have mortgages far larger than sanity should allow.
But honestly, some in the comments gave these exact explanations 18 months ago, and stated clearly that this is why inventory coming to market will be low. Further, it was explicitly stated about the whole reverse amortization scenario, and explained that this would keep home prices from crashing. It was even suggested that work around would be developed for those being hit by a much higher mortgage rates, and that re-financing would occur with more flexibility than expected. But what is missing from this current presentation is Princess Caroline’s public interview where she stated that they were surprised that home prices had not come down the way that they were expecting. That is an amazing statement. So, either she is lying, or she’s (and Tiff) are really not that smart. But again, the end goal is to create a class that is excessively indebted and who will work for a lot less. The excessively indebted class is being created and its not merely individuals but their entire families that are being effected. So, back to Caroline…. Maybe it was disingenuous. Let the band keep playing and let the excessively indebted numbers grow and that new “working class” created that can competitively build it “made in Canada” for the “made great again USA.”
They know exactly what they are doing. The reverse amortization is the final stuffing before the harvest. Commercial real estate is a ticking time bomb world wide that will cause systemic bank issues. Anyone saying canadian banks are healthy and fine is lying or delusional. A canadian pension fund just sold some CRE for $1.
"This is how you paper over and prevent large crises from happening." - No, not quite; this is how you turn many small crises into one tremendous crisis.
The only way out of this. Deleverge phase. And I am avoiding it. My condo I am leasing. He is locked in at 5% on mortgage for 4 more years. Since I moved in its lost $100k in value. So. He sells, breaks mortgage and takes $100k loss. Btw...my lease increased 0% this year. Why? Cause he needs a stable leaser
I am really looking forward to when my current five year mortgage comes up for renewal in 2025; unless something crazy happens with the stock market, I will cash out some investments and pay in full. I’ve been carrying a mortgage for over 20 years and refinanced several times to paper over money mistakes and an unsustainable lifestyle in my 30s. My 40s were more systematic and I educated myself about personal finance. I’m turning 50 in a month and look forward to being mortgage free at age 51. The mortgage scenarios caused by the rate hikes and bubble are very sobering. Good luck everyone!
Landlords are evicting tenants anyways, all has to do with making a piggybank or commodity of real estate outside of a place to live so as be able to raise a family and go to work. How about allowing sale of reverse lands if they wish to raise cash!?
Kicking the can down the road. Mortgage holders for life. How much do you want to bet that they pass a law at some point that allows banks to pass mortgages onto those that inherit the estate.
@@LifeWideOpen780I can't imagine a mortgage holder arguing to keep increasing the rates. $2 more for the bread or 5% more on a $1000 grocery bill, os still nothing compared to the 30% increase on a $2500 mortgage. Also, ot turns out the rest of the inflation is below 2% anyways when mortgage interest and rent is removed.
So the effect of these measures will be to squeeze the low-middle class to the max, many of these people will lose homes, and many will be growing their debt. But many of those who have more money, the upper-middle class, will possibly catch the moment to invest and grow their portfolios when the central bank changes interest rates. So the richer one is the better time to invest. The rich getting richer and the poor getting poorer.
Yes, and it's the right thing to do by the banks who want to renegotiate the rates every 5 years. Why don't they offer 30 years fixed competitive rates like the US? They experience a lower risk, and higher profits this way, and the risk is transferred to hardworking Canadians who just want to own a home.
The BOC has a stated goal of raising the unemployment rate to settle inflation back down to target. The extend and pretend is a temporary measure to extract as much as possible from home buyers until the rising unemployment hits enough of the homebuyers to bring more houses to market as stressed sales then supply goes up and prices come down and bank’s balance sheets go under water and that’s when the federal government steps in and bails out banks. Banks can’t lose in the end as they are backed by the government in practice as we’ve seen play out around the world over the years. A substantial recession is coming as China, the U.K., the Euro Zone, and many other important economic partners of Canada are already in recession and heading lower. Housing isn’t at a price point where it can be sustained over the long term by local incomes and as has been the case through all of history, housing will adjust back down to the norm of 3-4 times the local incomes. This is a slow moving train that takes years to play out but now that inflated housing is a political negative, government is incentivized to get out of the way to allow for downward price correction. The time where government was seen as good for allowing prices to rise has come and gone.
We've been hearing this same story for a decade now.. and yet housing prices continue tk go up and will continue to do so. You have record levels of immigration coupled with very limited supply.. so you're just not going to get any kind of housing price crash.
The average immigrant has less than $50,000 to their name when they arrive in Canada and take 10 years to earn local incomes. Immigrants are of ever lower economic quality. The wealthy have moved their capital years ago into Canada and now there’s slim pickings of wealthy immigrants left to bring in. Immigrants will continue to place more and more persons into one dwelling to be able to live in such high shelter costs as will many existing Canadians. There is an affordability ceiling due to math where the wealthy of the world moved their capital into rapidly appreciating assets during the abnormally low interest rate environment as the bubble was being pumped up. The wealthy know when to exit and it’s well before retail consumers get the hint that affordability is exhausted. The average local income is the long run driver of assets and speculators (the greedy) get holding the bag when an inflationary (bubble) cycle comes to an end. This has been true throughout history. Assets can only go to the moon if dollar devaluation is allowed to continue apace without intervention. The BOC has intervened by raising rates largely due to not wanting the Canadian dollar to become worthless. The asset bubble is slowly being deflated through defending the dollar through interest rates having been raised.
This mortgage scheme is a rolling ball they wont be able to stop. Debt growth like this contributes to sticky inflation, keeps rates high, increases debt growth, and on and on until the banks collapse.
You get as a renter you don't take capital losses right? So housing tanks another 50%....yes, and the homeowner loses the remaining "$700k" of equity. Equity falsely created by over bidding ($250k) and the rest loss of value. Btw, in February 2022. 85% of all transactions were over list. Amd more than HALF of the new mortgages taken out were over $650,000......over as in way more. Now-resetting
OMG wasn’t BOC raising rates to slow down things? When it’s not the goverments adding fuel to the fire, it’s the banks… or both! And it keeps ballooning. That explains why the price of houses have kept raising where I come from. And why bigger and bigger houses are builded around mine. That’s quite incredible what is going on. Very difficult to comprehend what they (BOC and govs) are trying to accomplish what all those shenanigans.
Yep, they like to time things. And guess what, NVIDIA and the stock market making new highs makes it appear everything is ok even though lay offs are happening and the big boys are selling their stock. This will all be timed to crash at once, stocks, housing etc from an unforseen event that will be used as blame. Cyber attack, power outage, localized migrant riots, banking issues due to commercial real estate.
Not really, in 2 to 3 years the rates could be lower and the prices a little higher. Hardworking people will be saved from losing their homes and being on the street with their kids. Why do we have variable and 5 years high penalty mortgages? Why can't we have 30 years, no penalty mortgages like the US at competitive rates.
The majority of mortgages are fixed rate. Variable has been popular with investors, but most people buying to live in it are risk averse. If 40% were variable and 60% were fixed rate, then 15% being effectively in default would be 37.5% of outstanding variable rate mortgages.
@@BikeHelmetMk2 Keep this statistic for later review.... Canadian Banks currently have ~450,000 Mortgage instruments Negatively Amortizing into renewals now thru Q4/26 Buckle up.... because we're not even into the top of the 2nd inning on this one.
We are going to have a bubble trash like the states in 2007 08 I sold my house in Saskatoon I thought I was gonna get $200,000 more for it but it was a multifamily dwelling RM three and no one of us buying high density rental property during the pandemic but I was falling behind a payments, and I had enough being a landlord so if you got $200,000 equity sell your place sit on the sidelines maybe go do some travelling out of your Toronto Vancouver area take a sabbatical say that $200,000 because you may never have equity again in your property
Can't cut rates because the data doesn't support it and because the US won't do it just yet. Keeping rates as is could lead to a bad recession next year when a lot of people's mortgage payments jump up and can't buy other goods /services. BOC stuck between a rock and a hard place, thanks to bad govt & central bank policy. Likely pain ahead.
The bears still in big denial. Thinking house prices going to come off 30-40%. Some markets like Calgary way higher. Fraser Valley where I live doubt my house is even down 5% from the very peak. Very few bought at the peak. Hardly anyone stressed yet. Now just wait when rates drop
You are right. Bad money management does this. Unfortunately, tons of people do this. Then they can never pay off their mortgages in a timely manner. Paying right into retirement
the 40% haricut is coming, if it doesnt, this means your dollar is losing value fast and your only hope of survvival is your assets appreciation due to depreciating CAD. Problem will be that your house is not cash, it is illiquid.
@@DJRS2178 I agree. And either way its still better to have capital invested in other areas. The real estate trap has already been sprung..people are stuck in their homes now and cant sell without a loss in many cases...will get worse from here... Canada is in for a rude awakening
As a renter I am getting 1500 a month interest from my savings that where destined for a down payment. So instead of being in a situation where I owe everyday more to a bank I am getting interest from the bank! With the interest my rent is in real terms half! Yes , I am glad I did not buy!
I have a friend who sold his house that he paid 1.2 million for in 2003 in 2022 for 5.4 million he was always mortgage free and he did about 500k in upgrades ovee the years. So less property taxes whivh were about another 380k over the 19 years so he was into the house for about 2 mill. The crazy thing is that the buyer was from China and he rented it back to him for 8500 a month so 102k per year. On the 5.3 million he is earning about 300k. So for him it makes more sense to rent. What i find puzzling is if the house is actually worth 5.3mill shoudnt the rent be more like 25k per month not 9500 per month? Why would the buyer have paid that for it when they get 3x that on a Treasury or GIC with no risk or headaches? So by my math and maybe im wrong but if the rent is 102k the house value should be more like 2,000,000 million with todays interest rates if the Cap Rate is 6 percent?
@jameswilliams3304 I am getting 5.25. Regardless of how much I am getting my debt is not growing on a monthly basis like most mortgages will in Canada! that is the point!
Steve, this doesn't sound good. Whatever happened to the principles of double entry bookkeeping? This kind of stuff is a madness, all to avoid what? A banking crisis? Housing price devaluations? Rent decreases? Sounds like we don't have a very flexible economy...
Nope. The only reason housing boomed was because of lending standards that were loosened based on trends. Debt servicing should be maximized at 30%, people having to pay 50-60% of there income on debt shouldn’t be allowed. Yet, here we are. No one can afford this, homelessness will continue to rise, reduced living standards will continue to rise until citizens lose control, and have to sell out to the large corporations. Oligarchies want to own everything and this will happen sooner than most think. Once inherited monies dry up from loss of productivity the dominoes will fall.
fear a housing crash due to people buying homes above asking prices with little equity. If prices drop, affordability and potential foreclosures may arise, worsened by future layoffs and rising living costs. I want to invest more than $300k, but I'm not sure on how to mitigate risk.
Consider reallocating from real estate to other reliable investments like stock, crypto or precious metals . Severe recessions offer market buying opportunities with caution, as volatility can yield short-term trading prospects. Not financial advice, but it may be wise to invest, as cash isn't ideal in this period.
Due to my demanding job, I lack the time to thoroughly assess my investments and analyze individual stocks. Consequently, for the past seven years, I have enlisted the services of a fiduciary who actively manages my portfolio to adapt to the current market conditions. This strategy has allowed me to navigate the financial landscape successfully, making informed decisions on when to buy and sell. Perhaps you should consider a similar approach.
nice! once you hit a big milestone, the next comes easier.. who is your advisor please, if you don't mind me asking?
Finding financial advisors like Melissa Terri Swayne who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I just looked her up on the internet and found her webpage with her credentials. I wrote her a outlining my financial objectives and planned a call with her.
As long as the economy is relatively good, employment numbers are strong, and inflation is 2-3%, why would the Bank of Canada lower interest rates at all? It makes no sense to drop interest rates based on what we know today. I doubt they are going to drop at all this year.
Exactly. So raise or no raise, majority of ppl will be fine. In any economy, there are ppl that are not fine. Every year there are back failures. All part of the economy.
Dropping interest rates is like giving sugar to assuage your children. Sure it will shut them up in the short term and keep them from nagging you for sugar, but in the long run they will turn into freaks of nature bouncing off the walls driving you crazy. Sometimes you have to keep the sugar from the children. For their own good. And yours.
Yea, I think they will only drop it once it goes below the 2% mark for an extended period of time
The problem is the headline numbers look much stronger on the surface. Many of the added jobs are part-time, you have people working multiple jobs to keep up with increasing prices. Others need more work because their hours are being cut back. Businesses are scared to lay workers off because it was so hard for them to find the workers when the labour market was super tight. They would rather keep them on the payroll and cut back hours instead. This inflates the strength of the labour market.
We don't have the tight labour market problem anymore, labour will be plentiful. Weakening consumer spending = weakening corporate profits which = layoffs.
now the issue becomes, with the recent population boom, you will have more people that are competing for fewer jobs, which pushes wages down and has already pushed shelter costs up.. This exacerbates the cost of living crisis and weakens living standards. As a result the government will now be paying out more welfare and social assistance which in turn brings down productivity. So expect high unemployment to be normal.
The biggest issue is that the US consumers are nowhere near as leveraged as Canadians because they don't have a housing bubble and have 30 yr fixed mortgages, most under 4%. So it is the strength of the US labour market that will keep rates higher for longer in Canada. The bottom line is, Canada won't even have the luxury to cut when the labour market weakens because the US labour market will be much stronger than it is here. Canada is simply at the mercy of the US, that is why our landing is going to be very hard.
That is a scary thought for a lot of people
This situation is quite concerning. Allowing negatively amortized mortgages essentially undermines the monetary policy set forth by the Bank of Canada. It delays a softening of the economy and therefore rate drops. It also adds tons of risks in the financial system…
No it doesn't. Or else there would be no mechanism of rate transfer in the US, because their homeowners are not facing payment shock.
If the payments are not increasing at all then yes you are correct, But in many cases the payments are increasing just not enough to keep the amortization going at the correct pace. So people are still healing higher rates and are having to come back discretionary spending elsewhere just not to the degree where they lose their homes. There's nothing in monetary policy that says it only works if people lose their homes. In fact that would just put further a pressure on the rental market and you would probably see it in increased CPI, Since rental costs and interest costs are in CPI but home prices aren't.
Canada still has much stronger transfer of bank overnight rates to the economy than the US does, and we have a weeker economy and are tied to their rates because we would import inflation otherwise. In fact due to that our rates are higher than they should be for the strength of our economy and our inflation rate, by the Taylor rule they should be a little bit lower.
@@stevecatpatrick8056US homeowners are not facing payment shock, but that just means a different party is. In their case, it's banks.
Thanks for the explanation, good points!
It was nice in 2020 when rates were dropping; our CIBC mortgage went from 27years amortization to 19years. The interest and principal payments flip flopped within a few months. Our Scotiabank mortgage just lowered the payments. The one thing in hindsight I would probably go back and change, is to break the Scotia mortgage at that point and lock in a fixed 5year rate. Decent price paid for that lesson.
All the mortgages that are negatively amortized will get brought up to ratios when their mortgages renew. The majority of people will be fine.
What you are saying about the banks extending and pretending, makes sense to me because I cannot figure out how so many people can afford houses at these prices AND nice cars AND go on vacations. What upset me is WHEN the banks' balloon starts to pop, they will crawl to the gov't to help - which they will with our tax dollars and all the other dollars they print. This is nuts!!!!!!
There are so many people who look like 🤴 and 👸 with the borrowed money and 0 money in their real savings or retirement accounts. They live in the moment and dreams of a fantastic future where they win a lottery or their business takes off with millions in revenue, or the house doubles in price, and the party continues, until it doesn't. Many of those are influenced by the documentary / advertising " the secret." Financial education should be mandatory in elementary and high schools.
I spoke to a travel agent and she said she has never been busier. I went to BoosterJuice and they said they are looking for staff and are too busy. Yorkdale mall in Toronto is super busy. All restaurants are booked up! I’m not sure where people have so much money? Must be from working from home 🤷🏾♀️
Just because you don’t have money doesn’t mean other don’t have a lot of it
Nah! Their parents will hand them some money or they will finally inherit
Bitcoin was created for this specific reason lol
This is quite the scary scenario if people are increasing their debt load all on the back of housing. You can see why the governments aren’t trying to make housing more affordable as it would blow up a lot of the bank’s books.
It's all starting to look a little bubblicious. With extend and pretend, mortgage fraud, and "investment" properties with deeply negative cashflow it's not looking good.
Starting?
Bubblicious 😂😂. I spoke to someone in the UK and they still allow interest only mortgages for rental properties. You get positive cashfkow with only interest paid. Not a bad deal, if you keep generating income for 30 years without paying a penny in principal and then sell it at a higher price in 30 years. Why would you not do it ? As long as it is cashflow positive.
@@Inquisitive9 IF you could find a cash flow positive property... sure, kind of, but it's a super high risk move in terms of market volatility. I don't think you realize yet but in Canda, finding a cash flow positive property is not the norm, it's the outlier. So essentially, anyone doing this kind of crap loses money and is hoping for valuation increases... on a negative cash flow investment. Any actual investor looking at this finds theses speculators ridiculous. The fundamentals, that is your cash flow, is literally the only thing that matters to assess investment property values and somehow losing money would be worth more money? Questionable investments.
@Not.a.bird.Person Absolutely, I agree. Only once in my life did I buy a negative cashflow property, and regretted it. I agree with you. Increase in value is speculation, but so are the growth stocks. Most people are not economists and the historical performance of housing in Canada is very convincing. Today's generation X or millennial generation did not see late 80s losses ( about 40 years ago) , and since then, Canadian housing did not disappoint anyone who bought and held for 5 years or so. It's is hard to resist when agents say that values have only gone up in the last 30 plus years in the GTA and support it by fundamentals like population growth and lower interest rates ( compared to 80s).
The main people getting destroyed are first time buyers. Huge run up in prices, rates and rent - basically just working to pay off either the banks or investors. Its a very bleak time to be a young adult without a bank of mom and dad to bail you out.
😢 so true!! But the affordability is not around the corner and practically it will take a decade or more to significantly impact the pricing. So, young people need to keep adding pressure for more supply, and move or buy somewhere out of the main hubs. Sad, but true.
There is zero reason (family is the typical excuse) to stay in Canada if you have any current or potential marketable skill(s). USA if you have an “in person” skill and Eastern Europe or SEA if you make a living from a laptop.
That’s sucks cuz I bought my house cheap from a family member but it’s still not enough cuz interests rates are so high.. how are the people that got scammed from realtors into a bidding war over paying 200k going to do 😢
@@argeldelacruz9545It will get better. The rates will not stay here forever. Home purchasers who want to live in their house and spend their life there, should not be subject to crazy rate swings. We need special rates for mortgage borrowers, just like the US, competitive 30 years fixed rates. But, I don't blame the realtors. Buyers should not blame realtors for their own home purchase decisions. I am not a realtor. If you tell a realtor that I want to buy a house, do you expect the realtor to say, don't buy ever, or not for the next 10 years until the market crashes, or should they say, let me buy you a house in Winnipeg or Edmonton as it is cheap there? His or her job is to make it happen what you say I want to buy this house, if there are other bidders, you tell me what will beat them all.
many home owners and housing advocates argues that house prices will never come down and it will continue to go up. housing would have been crashed in 2023 if banks did not increased amortization to keep the payment same.
It’s good business to increase amortization. Not saying it’s the right thing to do but it’s good business
It would have been a blood bath as people would have been crushed. But, why the F di we have 5 year mortgages, when the US has 30 years mortgages which are barely 50 BPS more expensive than a 15 years one. They find our mortgages crazy. A person is always has a risk of losing their house in 5 years, unless the rates remain damn low, or the price goes up. Why does no one talk about it in Canada ?
Many stores and small businesses outlets are closing, stats canada data are fake and cooked by govt. Hard reality is if canada economy has to saved they need to keep interest rate higher. So you know now whey stats canada is coming with rosy picture. They are simply convincing people for keeping high interest rate. Mark my words if canada doesn't get over with oligipoly or dig natural resources for next year's, then we will be in great depression of our life time. Apart from this canada has nothing to offer to world to attract foreign investors. This real estate and high immigration things cannot be used more time to drive economic growth. Unless canada wants to be poor country .If canada lowers interest rate, I promise you canadian dollar will collapse
It’s because the government/banks want higher house prices and higher interest cuz the are making trillions on us. Slowly killing is overtime.
The 5% bank rates needs to be maintained and allow all these bad debts to grind down
How about we all give back the stimulus that we didn’t even need. And make a law of no bidding wars to ruin the economy
So glad that they not only offered ZIRP which was basically a wealth transfer from savers to speculators/borrowers, but then on top of even that, they allow for negative amortization constraining supply and staying the day of potential sale/default of people who are over leveraged thus keeping savers waiting for a deal out of the market again. Every dog supposedly has its day, but the patient and prudent ones seem to keep getting tossed aside.
Steve I've been selling real estate for 34 years, if i go back to the 2008 Financial Crisis the Real Estate market in our area got ugly fairly quickly however 2010/2011 is when it really went sideways.The lag affect happened then 2024/2025 falls into a similar time line since rates rapidly started increasing in February 2022. The manipulation by banks/government debt today kicking the can down the road will eventually come back and bit us in the ass. Great Video, if the jobs losses start look out, Technically home owners that have increased their amortizations 35 to 60 years or more in some cases to hold on, most likely would have gone into default....
Quite possibly
Many companies are already laying off... a video game company - Electronic arts just announced layoffs. Your gut is right. The sheep are consuming their last hopium feast just as intended.
Principal-only payments: this happened around 15-17 years ago in the US. Guess what happened?
They did NOT do negative mortgage amortization in the US; the bubble burst and the market went through foreclosures that cleared-out the bad debt and made housing affordable again (15 years ago). That saved the economy and set a supportive baseline for sustained economic growth over the next decade.
Negative mortgage amortization means the "highly regulated" Canadian banks are taking on unprecedented amounts of debt to fuel the real estate bubble.
CMHC buying mortgage bank bonds (collateralized debt packages), also means that the federal government (i.e. the Canadian taxpayer) is also taking on further debt to fuel the real estate bubble.
I can only wonder what will happen here in Canada once this bull$hit-show of a false economy finally pops.
Yeah, we as tax payers thro CMHC are on the hook! That’s insane! All of this is keeping house prices high and moving higher. And very likely that’s to save the bank butts!
@jameswilliams3304 Yes you're correct; that's very true. But there was nothing rosy about any of it 15 years ago in the U.S. And it will be even less "rosy" when it eventually happens here in Canada.
@0:46 unscathed
@2:46 negative amortization
@6:28 extend and pretend
@8:18 Banks run the country
@9:18 collateral
@@kqh123 🤣🤘
(Verse 1) In the halls of debt, where shadows loom, Negative amortization, a financial doom. Borrowed dreams turn to nightmares bold, Interest rising, a tale untold.
(Pre-Chorus) Numbers climbing, like a dark crescendo, Principal sinking, in this financial inferno. Pound of the gavel, echoes of despair, A metal symphony, in the lending lair.
(Chorus) Negative amortization, a twisted ride, Drowning in interest, on this financial tide. Screams of payments, like thunder's roar, Debts unforgiving, forevermore.
(Verse 2) In the ledger's abyss, where darkness breeds, Compound interest, a demon's deeds. Promises broken, like shattered glass, Negative amortization, a die is cast.
(Bridge) Riffs of regret, shredding through the soul, Equity fading, an unyielding toll. Chains of compound, binding tight, In this metal ballad, the numbers fight.
(Chorus) Negative amortization, a twisted ride, Drowning in interest, on this financial tide. Screams of payments, like thunder's roar, Debts unforgiving, forevermore.
(Guitar Solo)
(Verse 3) In the blackened ledger, where shadows play, Negative amortization, a relentless fray. Debtors weep, in a silent scream, A metal anthem, for a financial dream.
(Outro) As the interest devours, and equity wanes, A heavy metal saga, in financial chains. Negative amortization, a haunting score, In the symphony of debt, forevermore.
Mortgage rates are currently at an all time high since 2000(24 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 redirect my focus to the equity market
The stock market is no different, to maintain profit, you need to have some in-depth knowledge on the 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.
Finding financial advisors like Margaret Johnson Arndt who can assist you shape your portfolio would be a very creative option. There will be difficult times ahead, and prudent personal money management will be essential to navigating them.
I just looked her up on the internet and found her webpage with her credentials. I wrote her a outlining my financial objectives and planned a call with her.
Keeping mortgage rates between 5-7% will keep the economy healthy and the housing market in check.
That's what I always claim. Whenever someone's doing the calcs whether he should jump into shadows or not, always calculate with a 6% interest rate at min! Do not rely on the CURRENT trend, as it will come back to bite you in the arse.
How about we all give back the stimulus that we didn’t even need. And make a law of no bidding wars to ruin the economy
As someone who does mortgages at one of the big 5 banks mentioned, I can add some context to the balance increase you mentioned around the 8 minute mark for the credit card guy. If somebody has a variable rate mortgage, they must bring their amortization back in line upon refinance. The person with the credit card therefore either had room available on the line of credit, or refinanced the mortgage and had their amortization reset. Nobody is allowing people to refinance their negatively amortizing mortgages without increasing the payment.
Approved alla Brampton
@alexgardner3125 what do you mean by bringing amortization back in line?" , does this mean 30 years max, but can be extended beyond the remaining amortization? Also, if a house is worth 1.2 M and the mortgage is only 500K ( any other number that leads to a ton of equity), as a bank, I would let them have a HELOC to get through this time.
@@Inquisitive9 if they renew only, then the amortization will be reset to the original amortization (25 or 30 years) minus the time that has passed. If they *refinance* then we can put the amortization back at 30 years. However, they will need to requalify with the current stress rate in order to successfully refinance. As you mentioned, sometimes we're getting around this by adding a line of credit *before* the mortgage comes due, so we can use the current payment instead of the full stress rate payment. Personally, I think this is bad, but it's not like we're approving 60% debt service ratios or anything. The max tdsr remains at 44% for the big 5, and if the clients have enough capital or a strong enough financial profile then there may be a *small* amount of wiggle room on this number.
Long story short, everyone who is being approved for mortgages by the big 5 banks is doing so under current lending guidelines, and nobody is being approved for unbelievable amounts.
That being said, anybody who gets approved at 44% tdsr is really going to need to cut back their other spending habits. Of course, that's the goal of the bank of Canada.
@@alexgardner3125Thank you for the explanation. So "getting around" means reducing the mortgage balance by paying down some principal using the HELOC? Of course the HELOC will be interest only and likely a smaller payment than if one has to pay both the P+I. Thank you for the details.
@@Inquisitive9 believe it or not, the interest only payments of the line right now are about the same as the principal and interest payments of the mortgages. Most lines are at 7.7% to 8.2% while most mortgages are coming due around 5.5% to 5.7%. If there's a difference in payment, it's not much, and it's not worth paying now principal.
The "getting around it" is because you can refinance the line of credit side of a HELOC using the real payment while the mortgage is still at 2.5% or so. If you wait for the mortgage to come due, you'll have a higher payment on your debt service ratios. If you try to refinance the full mortgage, then you'd be using a 7.7% stress rate instead of a 2.5% real payment. Makes it so you can qualify for more. Then you'll just refinance the line over to the mortgage later.
Banks are the Landlords with 100 year leases.
Same with rental caps. If it werent for rental caps the roll over rent increases would not be that high. But if you are a landlord operating at a loss, you sure will try to have the roll over unit cover the losses incurred on the other rent capped units.
I suspect banks are now in the real estate speculation game. They are allowing negative amortization because they are speculating prices will continue to rise.
Government has already promised the banks to not lose money. Thats why the banks allow negative amortizing mortgages.
Just pray there’s no mass layoffs. That will f**k everyone up even the ones not laid off
it will come.. just wait
layoffs are already happening, AI is here to wipe out white collar jobs in every field - health, accounting, media, design etc... the news is telling you everything is fine, stocks are up, home sales are active, economy is fine.... till they are ready to tell you its not, then the flood of bad news will be all over the TV and panic will set in
It's already starting to happen. Industries across the board are either slowly letting go of their employees or cutting their hours. The ones in great dire like the IT industry has already done mass layoffs recently.
the banks NEVRE LET this happen 25 yrs ago u lost your house period
You are right rental market so bad that most tenants stop paying the high rents, now as I know most landlords can not evict the tenants. To discover reality of the market just go out there and talk to dozen tenants.
I would absolutely agree Steve.
The reality is the BOC can not do anything until the FED does.
Great video and explanation about why the costs of houses remain high. With low inventory and high demand, we can expect the costs of houses to remain high and the extension of deffered mortgages as far as they can extend. However, as soon as job losses start because of low cash flow in the market we will all be screwed. The economy needs to hold strong for this to work. We are living on borrowed time.
This is the first time I am watching you. I'm subscribing for sure. Great knowledge. Thank you
Even if BcC cut's interest rates to 3 to 3.5% by end of next year, wouldn't 5 year bond yield be around 3% which in turn will result in close to 5% 5 year fixed variable (which we already have now). more pain ahead
But the variable right now is in low 6 to low 7%. It will still be a relief from what is happening now as people will start to build some equity. However, wouldn't that lead to much lower fixed rates? Whenever the news of the BOC rate drop gains some strength, the bond yields also start to drop.
In Toronto, you only get 40% turn over rents on 10 years old rent controlled leases, not on units that were leased a frw years ago. Rents are actually softening now a days everywhere.
Anyone have info on trajectory of 🇨🇦 household Credit Scores ? Are the Canaries beginning the “Inverted Perch” ? Thank you for sharing
Thank you ao much for the valuable information you give us every week.
Rational, logical, and objective updates for free ♥️
Our bank actually encouraged us to roll in our $40k line of credit into our mortgage last fall. Our 1.8% mortgage comes for renewal one year from now.
Banks are still in the business of borrowing.
Devalutation is the worst thing that could happen because the system only works with appreciating home values.
I think long term, the system is more stable if we maintain 5%, with stable mortgages.
For those with money in the bank, earning 5% on your secure savings replaces speculative investments in housing markets, which in turn avoids many of these problems.
So how many house now have negative amortization?
Are the numbers growing?
Separately, CMHC recently stopped their first time buyer help to buy scheme. Is the government just protecting themselves from potential bubble market losses?
This is my fav post in long time cause it gets into exactly what I’m interested in. How the fuck isn’t markets crashing . Oh yeah it’s cause they let you extend extend . That’s where they want you. I’m buying bank stocks dude those guys win all day everyday and backed by government . Cannot lose
The ponzi is clearly blowing up 😂
According to many housing bears a crash has been imminent since 2006. Lol
@@HaydonAshurstFamily Tell that to the realtors/investors who lost everything in Toronto 😆
Great video, very educational. Two weeks in a row, thank you
Thank you
This negative amortization phenomenon is not different from the subprime situation in the 2008 crisis in the States. Borrowers (a lot of them are mostly overleveraged) are broke, but are still allowed to keep their home even though they can't even cover the interest portion of their loans. Meanwhile, it would be considered absurd to approach a bank and try to get a 40 year mortgage, let alone 70, 90 yrs amortization propelled by Variable Mortgage Fixed payment. Lets be frank here. Lets call it what it is: NEGATIVE AMORIZATION IS ANOTHER FANCY NAME FOR SHAWDOW DEFAULT. In a true capitalistic system, risk takers, overleveraged borrowers should be left to pay the consequence of their risk regardless of the outcome. In my view, Variable Mortgage with fixed payment product should be made illegal in Canada as the rate hike reveals how bad this product truly is.
The problem is that the banks figured out that it's more profitable to shadow default.
Let's say you hike to 6% - now 15% of people are defaulting, while 85% can afford to pay it. That's BAD. If you foreclose and force sales, you get quite the downdraft in real estate pricing from all the selling. That's the asset backing your mortgages, by the way. The market will also reprice rates lower, so then you get 3% on your mortgages instead, halving your income, but your defaults do disappear.
Now let's say that you hike to 6%, with 15% of people defaulting. You work with them to play with amortization and rates and get the 15% of people into the affordable range. Sure, 60 year amortizations suck, but what choice do they have? And since they're impoverished and would lose the home during a housing crisis, you even grant them a sweetheart rate. Maybe 4-4.5% 4.5% on 15% of people and 6% on 85% of people is a lot better for the bank's income than having rates come down due to a recession and housing crash. Bonus, no forced selling means the asset backing those mortgages stays "healthy" (AKA sky high.) Good for the balance sheet.
@@BikeHelmetMk2 This game the Banks are playing can only sustain short term. Should rate stay elevated long term which will be probably the case, there will be more borrowers falling into default and shadow default. Banks has provisions for loan loss, however, large scale loan losses is not something that Banks account in the loss provisions. Also, the more shelter cost remains elevated, the bigger the case for the BoC to keep rate elevated as shelter cost is a major component in the CPI mix. This situation is a very alarming one and the most likely outcome is a lose lose one for both borrowers and Banks. The most scary scenario is that many Canadian Tax payers will probably left holding the bags to cover insurance for loans covered by CMHC and through Banks bailout.
@@MrFanstar007 They can fudge the numbers on the balance sheet for a little bit. Every 5 years the balance sheet heals itself. If they adjust the mortgage to 4.5%, sure, it's worth less according to mark to market accounting... but that goes away on rollover. 5yr terms roll over on average every 2.5 years. Someone continuing to pay 4.5% is worth a lot more than an empty house that they need to foreclose upon and deal with.
FYI, on a $1m home with an $800k mortgage...
2% mortgage = $3390/mo
6% mortgage = $5154/mo
4.5% mortgage with 60yr amortization = $3217/mo
Magic! No defaults! (Yes, nearly everything is going to interest on that last one. On the first one a lot more goes to principal... almost $2.1k/mo.)
The shadow default preserves some profit by preventing an actual default. In the future your bank will probably haggle with you as much as your ISP and cell carrier do. "How did you get an interest only 3.3%!? I only got 50yr amort 4.0% when I lost my job for 6 months..."
Is this a good thing? I don't know. It just seems probable given recent observations.
@jameswilliams3304 What are you implying exactly? Do you imply that mortgage borrowers can simply go broke, get a free pass and get protected by the system? I hope not.
Steve, The 5 big banks think they are invincible. I know people are granted line of credit to be able to pay their mortgages. Worst-case scenario we'll bail them out!
That’s insane as line of credit has significantly higher borrowing costs than a mortgage. Whoever is doing that is on a fast train to bankruptcy.
@sharinglungs3226 Home Equity Lines of credit are not so expensive. They are usually anywhere between Prime and Prime plus 1. Mostly prime plus 0.5. Some variable mortgages are not that far below prime.
@@sharinglungs3226 agreed. They are just kicking the can down the road!
@@Inquisitive9my home equity line of credit is 7.9%
My credit card is 8.9% (MBNA)
I am 28 years old and I've had a credit card since I was 18. I have only paid interest on it for 1 month back when I was 20. I have no clue how these people operate in their day-to-day lives.
Fake it until the jig is up. Lose your equity, and quietly go into the night. The BoC will declare nothing could have been done, so the victims of predatory mortgage brokers and realtors won't feel so bad because they did nothing wrong, and are definitely not alone in the misery. I have a vague suspicion this is not the way it will work out.
take care
rwmccoy
The banks must hate your channel Steve 😂. I really enjoy it, thank you.
What really happened at renewal time. Let say you RBC extended your mortgage to 33 years. You have 30 years mortgage 5 years term. Now you have to renew the mortgage. Do the use 25 years left from the original mortgage. Or 33 years
People are basically renting their homes and get old not being able to own it.
Pretty sure we all trust that Steve is an honest and good person. 12,000 of us watch his videos one day after posting. Lets start beating it into him that he can change the system. So could we please all start talking about him getting a $10 million per year federal consultant contract to put together a panel of experts to figure out how to fix Canada's housing market? An unbiased committee, with no political influence, to create honest research and recommendations. The federal govt spends how many thousands of millions per year on consultants? 10 or 20 million per year for three years to solve this bs is peanuts. Please support
Im not too sure why you call us doomers when you proceed to make the case of just how fvcked the system is.
All we ever said is the market is manipulated, and when the music stops its going to be a nightmare.
Banks are betting on the market going up again, and if it doesnt they know they will get that sweet government money.
So what you are saying is you are right either the market crashes and when it didn't but should have it's just that "the market is manipulated" and the prediction is good for infinite time in the future.
@@RainCity3rdRE "investor" or agent?
The market is manipulated, plain and simple.
Re is killing Canada whether you like it or not.
Tiff lied to Canadians about rates going up. Why should anyone put any great trust if is said but wait they will come down really fast. My prediction is they stay higher longer than a lot of people think while inflation is sticky in large part because of what makes up inflation much of which is housing costs (up in part because of higher rates), still supply chain ripples, wage inflation (with the boomers retiring wages finally have room to grow), corporations are making massive profits often historically the highest in history and returning huge sums to shareholders. All this helps prop up more people/money chasing not enough products and services = continued inflation. The little guys out there mkt getting wage increases have a house already renewed or going to in the next 2 years is getting stretched in every direction, they are for sure going to be spending less in the economy. But a surprisingly significant portion of the population also did very well during and after the pandemic, both in terms of cost savings and wage growth. There's a lot of people waiting to buy but held back due to such low number of units on the market. Crap units with crazy prices being supported because there are way more re buyers than seller still.
@@RainCity3rd I would rather trust a crackhead with my financial future then a banker, anyone listening to any tier of banker needs this dose of reality.
@@donm2067 personally I would not trust either given neither even pretending to have my best interest in mind. Bankers don't, they have a business to run no different than the flower shop. Banks are not special isln some way they are neither out to get anyone as some ignorant people seem to think but neither are they there to help. You want someone to help, hire them with the express purpose and a fiduciary duty set in law. And even then ask questions and do your research about how they are paid and what incentives that creates or doesn't. Absolutely no one cares about your financial future more than YOU. But the great thing is there has never been more information and ease to learn and do it yourself and save a ton of money doing so. It's not hard to buy a few ETF's, consistently save in TFSA and RRSP and non registered and do well.
it's not surprising, the housing market takes a while to correct and crash. But here we are with rates higher for longer, which Steve didn't think would happen. Now its a waiting game. Go look at the cycles of a market, we are in the complacency stage where people think things could end up being ok.... next comes anxiety and then panic.
Higher rates for longer is tapping into savings people have, along with higher costs of goods and living expenses. They are trying to hang on hoping for lowered rates agents promised them by spring. For some reason real estate agents think this time is different, we wont have a crash because supply shortage and immigration. Commercial real estate is a ticking time bomb that will affect banks and subsequently residential mortgages.
We are in a recession but they wont tell you that with massaged data till we are deep in it. Job loss is already happening. People will be blindsided. Renting is better right now, your home is a liability. You can not sell it at the click of a button. Rents are half of what you would be paying if you bought.
Pin this to mock me later when the housing market goes on to new all time highs.
Extended Amortization = a bank bailout at the expense of the middle class. Everyone pays via higher inflation for longer. Which results in higher rates for longer.
How come? This is because it skirts around the BoC rate hikes which are meant to suck aggregate demand out of the economy. By making someone not have to pay more now, the banks are making everyone have to pay more later. This is because the longer inflation stays elevated, the more inflation will chip away at their purchasing power and standard of living. It also increases the odds of inflation becoming entrenched.
The banks are protecting their asses by spreading the pain of a few overleveraged onto the whole. This helps to keep house prices propped up and inflation becomes more sticky as a result.
The right thing would have been to sacrifice the few for the benefit of the majority. Since incomes have been stagnate, by keeping house prices elevated it will cannibalize future growth from the economy and we will likely have stagnant growth for an extended period of time.
The banks are worried now because extending amortizations into a higher for longer interest rate environment is a recipe for disaster. In the short term rates could come off a bit, but what about the medium and long term? The timing couldn't be worse as we head into an environment where the trend of rates is upwards.
Stagflation is how banks keeps asset prices sticky, they cushion the blow by passing on the damage to the middle class by lowering living standards. Banks won't come out unscathed either.
You make a very good argument, but it is based on the assumption that the mortgage payment on variable rates is the only way the interest rates affect the economy and inflation. If this is the entire reason, then how will the US control inflation, where the interest rates have almost 0 impact on the existing mortgage holders as mortgage rates are fixed for 30 years. The UK allows for interest only mortgages ( at least on investment properties), and their rates are lower than ours. I think the extended amortization on variable rates allows for a soft landing without destroying honest, hardworking Canadians. The inflation will still come down.
@@Inquisitive9 depends on what is considered a soft landing. What is a soft landing for the financial sector is not always a soft landing for mainstreet. In terms of GDP per capita, it already is a hard landing for the middle class, living standards are declining as earnings take a pay cut to inflation. The weakness is being masked by human stimulus via immigration and international students.
As you pointed out in the US, they have the 30 year fixed rates and most are locked in at 4% or less. So that will definitely give the US consumers more strength to spend on goods + services. Their inflation will be more stubborn as a result.
One thing I wonder though, is how much of an effect will the migrant crisis play in the US, and how much of inflationary effect will that have in comparison to Canada.
I am still optimistic that BOC can lower inflation without having to destroy the variable rate holders ( OSFI stopping extended amortization). The last inflation numbers at 2.9% weren't too bad, plus the rents have started to cool a little and the base year effect will likely tame the YOY inflation percentage. The US economy is partly more resistant to interest rates due to their fixed mortgages and the migrants bringing in additional demand.
@@Casey-qm1nd The per capita GDP is not the most reliable metric to declare recession. One way to look at it is that the new immigrants are the ones at the lower income and productivity rung. The rest of the people are still keeping aomost the same life style. However, since we divide by the whole population, the per capita goes down for everyone. Simply speaking if a country has two people who make 60K income/ GDP, it's 30k per capita, add a third new immigrant at zero income and productivity, and it's 20K per capita. No change for the existing two, but its the third one that is suffering.
@@Inquisitive9tbh I hope there is a softer landing as well. These are calls I don't want to be right about.
Average price of homes in Canada By Province in 2024. Prices would be much lower if you exclude areas around Vancouver and Toronto.
British Columbia $957,909
Ontario $821,624
Alberta $476,066
Quebec $455,547
Nova Scotia $428,539
Prince Edward Island $377,844
Manitoba $351,305
Newfoundland and Labrador $302,834
New Brunswick $296,977
Saskatchewan $284,926
Negative amortizations should be banned - maybe some exceptions for first-time buyers/primary-dwellers, but better yet a complete overhaul of this ridiculous real estate market and banking system that prohibits owners from borrowing even more off the equity in existing properties, and lower interest rates ONLY for first-time buyers/primary-dwellers. Negative amortizations are the main thing propping up this vulgar housing bubble and the only reason we haven't had a massive crash yet. Of course BoC are worried - our entire economy is reliant on this ridiculous, parasitic situation.
When do you think will be the best time to buy ?
Very true higher interest rates = recession
Also CIBC lets you pay the same and add to your total loan BUT they don’t update your numbers in the bank app. When I want to follow up on where I am and click on my mortgage account it tells me to call the bank. I only know where I am at because they sent me a letter letting me know my loan is now bigger because of interest. Pretty sure they try to sell me a fix 😅
The bank rate should of never been lower than 2.5%
Zero rates have destroyed this economy as public debt to gdp has increased
Japan's public debt is now close to 300% of gdp because of years of zero rates.
The banks are not stupid. They have huge scale in Canada - and they all charge very high fees and uncompetitive interest rates. So they will continue to be very profitable. I love the big banks as an investor - I make good money on their stocks and dividends. But I completely avoid all 5 of the big banks as a customer. If you are a customer of any of the big 5 banks - you are foolish.
People need to be educated as a bank client and shop around for financial services. Personally my “main bank” is RBC but I also do a lot of banking with Tangerine (Scotiabank subsidiary) and a bit with a local credit union.
My home mortgage is through a mono line lender (Lendwise) my broker set me up with, my home and auto insurance are through another company, and I have some investments and a savings account with Wealthsimple.
For someone that would like to minimize the number of financial institutions they deal with I would recommend a credit union over a “big bank” OR, for those comfortable with never going to a physical branch, an online bank.
@jameswilliams3304 I buy US ETFs. I’ve got it covered.
We're now 2 years after rate increases. Same as 08. Gold and silver went on a good run then and will do so again
People are going to have to suck it up with the mortgages and rents. No one is going to save money, no holidays, dining out, etc. even in rural areas the shelter cost is very high and goods and transportation is higher.
Steve- how are these banks maintaining their liquidity ratios if cash from mortgages is being pushed out into the future? Also are these mortgages insured+ packaged or uninsured? If insured and sold as an MBS- aren't they in technical default?
Our banks have LTV ratios extremely low. There's a lot of wiggle room with where housing equity is right now. Yes, most would be insured, except maybe in the big cities that have mortgages far larger than sanity should allow.
But honestly, some in the comments gave these exact explanations 18 months ago, and stated clearly that this is why inventory coming to market will be low. Further, it was explicitly stated about the whole reverse amortization scenario, and explained that this would keep home prices from crashing. It was even suggested that work around would be developed for those being hit by a much higher mortgage rates, and that re-financing would occur with more flexibility than expected. But what is missing from this current presentation is Princess Caroline’s public interview where she stated that they were surprised that home prices had not come down the way that they were expecting. That is an amazing statement. So, either she is lying, or she’s (and Tiff) are really not that smart. But again, the end goal is to create a class that is excessively indebted and who will work for a lot less. The excessively indebted class is being created and its not merely individuals but their entire families that are being effected. So, back to Caroline…. Maybe it was disingenuous. Let the band keep playing and let the excessively indebted numbers grow and that new “working class” created that can competitively build it “made in Canada” for the “made great again USA.”
They know exactly what they are doing. The reverse amortization is the final stuffing before the harvest. Commercial real estate is a ticking time bomb world wide that will cause systemic bank issues. Anyone saying canadian banks are healthy and fine is lying or delusional. A canadian pension fund just sold some CRE for $1.
This is how things get exposed ! Over-leveraged !
Forever or infinity mortgages are a joke
There could be numerous future scenarios. I’m not buying house at present situation.
"This is how you paper over and prevent large crises from happening." - No, not quite; this is how you turn many small crises into one tremendous crisis.
The only way out of this. Deleverge phase. And I am avoiding it. My condo I am leasing. He is locked in at 5% on mortgage for 4 more years. Since I moved in its lost $100k in value. So. He sells, breaks mortgage and takes $100k loss. Btw...my lease increased 0% this year. Why? Cause he needs a stable leaser
So.... Do you think the mafia is going to let you borrow money at a low interest rate for very long??? Ahahahhaha
I am really looking forward to when my current five year mortgage comes up for renewal in 2025; unless something crazy happens with the stock market, I will cash out some investments and pay in full. I’ve been carrying a mortgage for over 20 years and refinanced several times to paper over money mistakes and an unsustainable lifestyle in my 30s. My 40s were more systematic and I educated myself about personal finance. I’m turning 50 in a month and look forward to being mortgage free at age 51. The mortgage scenarios caused by the rate hikes and bubble are very sobering. Good luck everyone!
Landlords are evicting tenants anyways, all has to do with making a piggybank or commodity of real estate outside of a place to live so as be able to raise a family and go to work. How about allowing sale of reverse lands if they wish to raise cash!?
Kicking the can down the road. Mortgage holders for life. How much do you want to bet that they pass a law at some point that allows banks to pass mortgages onto those that inherit the estate.
I think they gotta keep raising
😂 you don't own a house, I bet.
@Inquisitive9 I do and my morgage is coming due but inflation is out of control
@onecanadianpassportonehous9753 should I pin your reply for the future? Did you get out or never got in?
@@LifeWideOpen780I can't imagine a mortgage holder arguing to keep increasing the rates. $2 more for the bread or 5% more on a $1000 grocery bill, os still nothing compared to the 30% increase on a $2500 mortgage. Also, ot turns out the rest of the inflation is below 2% anyways when mortgage interest and rent is removed.
So the effect of these measures will be to squeeze the low-middle class to the max, many of these people will lose homes, and many will be growing their debt. But many of those who have more money, the upper-middle class, will possibly catch the moment to invest and grow their portfolios when the central bank changes interest rates. So the richer one is the better time to invest. The rich getting richer and the poor getting poorer.
The sub Prime crash in the usa comes to mind with this situation.
When will the $hit hit the fan? It seems like it's when not if
because you can get 30,000 cash in rent off social assistance with 1 property; that's better than 3 or 4% interest on $1,000,000
It takes a long time for rates to take effect once we get 2 years of 5% plus and everyone renews we will see pain
The US banks allowed people to stay in their homes in 07 by paying rent. This is the exaxt same thing just structured differently
Yes, and it's the right thing to do by the banks who want to renegotiate the rates every 5 years. Why don't they offer 30 years fixed competitive rates like the US? They experience a lower risk, and higher profits this way, and the risk is transferred to hardworking Canadians who just want to own a home.
@@Inquisitive9 They want to always keep us on edge here. No time to rest. Just work and pay tax.
It's not good but it might actually work in the sense that it'll buy home owners time until rates decrease and selling proces go up to a new high.
You assumed the landlord is in variable. Lol. Skipped right over the ones locked in. Taking a loss all the way down.
Thank god for the release valve (bitcoin). Great episode sir I look forward to working with you in the future on buying a sheet shack in Vanloozer.
Haha anytime
WRONG.....National Bank has a floating variable rate, my payment has gone up and I am paying on the mortgage.
It's time to buy shares of Canadian banks!
The number of negatively amortizing loans is slowly _decreasing_?
Surprised that’s not going the other direction
Especially after saying that 50% of mortgages are up for Renewal still at a new rate
The BOC has a stated goal of raising the unemployment rate to settle inflation back down to target. The extend and pretend is a temporary measure to extract as much as possible from home buyers until the rising unemployment hits enough of the homebuyers to bring more houses to market as stressed sales then supply goes up and prices come down and bank’s balance sheets go under water and that’s when the federal government steps in and bails out banks. Banks can’t lose in the end as they are backed by the government in practice as we’ve seen play out around the world over the years. A substantial recession is coming as China, the U.K., the Euro Zone, and many other important economic partners of Canada are already in recession and heading lower. Housing isn’t at a price point where it can be sustained over the long term by local incomes and as has been the case through all of history, housing will adjust back down to the norm of 3-4 times the local incomes. This is a slow moving train that takes years to play out but now that inflated housing is a political negative, government is incentivized to get out of the way to allow for downward price correction. The time where government was seen as good for allowing prices to rise has come and gone.
Very interesting analysis. Somewhat scary too.
We've been hearing this same story for a decade now.. and yet housing prices continue tk go up and will continue to do so. You have record levels of immigration coupled with very limited supply.. so you're just not going to get any kind of housing price crash.
The average immigrant has less than $50,000 to their name when they arrive in Canada and take 10 years to earn local incomes. Immigrants are of ever lower economic quality. The wealthy have moved their capital years ago into Canada and now there’s slim pickings of wealthy immigrants left to bring in. Immigrants will continue to place more and more persons into one dwelling to be able to live in such high shelter costs as will many existing Canadians. There is an affordability ceiling due to math where the wealthy of the world moved their capital into rapidly appreciating assets during the abnormally low interest rate environment as the bubble was being pumped up. The wealthy know when to exit and it’s well before retail consumers get the hint that affordability is exhausted.
The average local income is the long run driver of assets and speculators (the greedy) get holding the bag when an inflationary (bubble) cycle comes to an end. This has been true throughout history. Assets can only go to the moon if dollar devaluation is allowed to continue apace without intervention. The BOC has intervened by raising rates largely due to not wanting the Canadian dollar to become worthless. The asset bubble is slowly being deflated through defending the dollar through interest rates having been raised.
This mortgage scheme is a rolling ball they wont be able to stop. Debt growth like this contributes to sticky inflation, keeps rates high, increases debt growth, and on and on until the banks collapse.
Unsustainable.
Period.
Banks wont carry them forever
You get as a renter you don't take capital losses right? So housing tanks another 50%....yes, and the homeowner loses the remaining "$700k" of equity. Equity falsely created by over bidding ($250k) and the rest loss of value.
Btw, in February 2022. 85% of all transactions were over list. Amd more than HALF of the new mortgages taken out were over $650,000......over as in way more. Now-resetting
Let me know when a prime detached lot in the city of Vancouver falls 50%. I’ve been hearing that for a decade now
OMG wasn’t BOC raising rates to slow down things? When it’s not the goverments adding fuel to the fire, it’s the banks… or both! And it keeps ballooning. That explains why the price of houses have kept raising where I come from. And why bigger and bigger houses are builded around mine. That’s quite incredible what is going on. Very difficult to comprehend what they (BOC and govs) are trying to accomplish what all those shenanigans.
Negative amortizaton is just delaying a disaster
Not really. You don't lose your house and weather the storm caused by Trudeau
Yep, they like to time things. And guess what, NVIDIA and the stock market making new highs makes it appear everything is ok even though lay offs are happening and the big boys are selling their stock. This will all be timed to crash at once, stocks, housing etc from an unforseen event that will be used as blame. Cyber attack, power outage, localized migrant riots, banking issues due to commercial real estate.
@baseline6786 I would agree with your main argument, but you ruined it by adding T at the end.
Not really, in 2 to 3 years the rates could be lower and the prices a little higher. Hardworking people will be saved from losing their homes and being on the street with their kids. Why do we have variable and 5 years high penalty mortgages? Why can't we have 30 years, no penalty mortgages like the US at competitive rates.
BTW.... the Bank Negam percentages are much higher.... just 'fudging' numbers.
The majority of mortgages are fixed rate. Variable has been popular with investors, but most people buying to live in it are risk averse. If 40% were variable and 60% were fixed rate, then 15% being effectively in default would be 37.5% of outstanding variable rate mortgages.
@@BikeHelmetMk2
Keep this statistic for later review.... Canadian Banks currently have ~450,000 Mortgage instruments Negatively Amortizing into renewals now thru Q4/26
Buckle up.... because we're not even into the top of the 2nd inning on this one.
We are going to have a bubble trash like the states in 2007 08 I sold my house in Saskatoon I thought I was gonna get $200,000 more for it but it was a multifamily dwelling RM three and no one of us buying high density rental property during the pandemic but I was falling behind a payments, and I had enough being a landlord so if you got $200,000 equity sell your place sit on the sidelines maybe go do some travelling out of your Toronto Vancouver area take a sabbatical say that $200,000 because you may never have equity again in your property
That guys children will be indebted to his bank for most of their lives.
Better than his children in the hands of landlords
Can't cut rates because the data doesn't support it and because the US won't do it just yet. Keeping rates as is could lead to a bad recession next year when a lot of people's mortgage payments jump up and can't buy other goods /services. BOC stuck between a rock and a hard place, thanks to bad govt & central bank policy. Likely pain ahead.
The bears still in big denial. Thinking house prices going to come off 30-40%. Some markets like Calgary way higher. Fraser Valley where I live doubt my house is even down 5% from the very peak. Very few bought at the peak. Hardly anyone stressed yet. Now just wait when rates drop
Love it God bless the banks.
Transferring your credit card balance to your mortgage that you can't even pay is...just...insane. Wow.
You are right. Bad money management does this. Unfortunately, tons of people do this. Then they can never pay off their mortgages in a timely manner. Paying right into retirement
I'd still rather pay a higher rent for a couple of years than take a 40% hit to a 1.5 million dollar house !
better be preparing to buy once the 40% hit hits lol
the 40% haricut is coming, if it doesnt, this means your dollar is losing value fast and your only hope of survvival is your assets appreciation due to depreciating CAD. Problem will be that your house is not cash, it is illiquid.
@@DJRS2178 I agree. And either way its still better to have capital invested in other areas. The real estate trap has already been sprung..people are stuck in their homes now and cant sell without a loss in many cases...will get worse from here... Canada is in for a rude awakening
@@DummMoney-rr1fi😂😂👍
Very informative.
Good video Steve
well done Sir
There’s no solution for home prices,… but to - have a change in the fundamentals of our economy. Less government more resource development.
As a renter I am getting 1500 a month interest from my savings that where destined for a down payment. So instead of being in a situation where I owe everyday more to a bank I am getting interest from the bank! With the interest my rent is in real terms half! Yes , I am glad I did not buy!
My problem with you my friend is you are always biased and it is evident. Wish you could see it because it would make you a better realtor.
I have a friend who sold his house that he paid 1.2 million for in 2003 in 2022 for 5.4 million he was always mortgage free and he did about 500k in upgrades ovee the years. So less property taxes whivh were about another 380k over the 19 years so he was into the house for about 2 mill. The crazy thing is that the buyer was from China and he rented it back to him for 8500 a month so 102k per year. On the 5.3 million he is earning about 300k. So for him it makes more sense to rent. What i find puzzling is if the house is actually worth 5.3mill shoudnt the rent be more like 25k per month not 9500 per month? Why would the buyer have paid that for it when they get 3x that on a Treasury or GIC with no risk or headaches? So by my math and maybe im wrong but if the rent is 102k the house value should be more like 2,000,000 million with todays interest rates if the Cap Rate is 6 percent?
Sorry 8500 per month
@jameswilliams3304 I am getting 5.25. Regardless of how much I am getting my debt is not growing on a monthly basis like most mortgages will in Canada! that is the point!
Cdn problem is they have to follow the fed rate
Boc is not alone
Steve, this doesn't sound good. Whatever happened to the principles of double entry bookkeeping? This kind of stuff is a madness, all to avoid what? A banking crisis? Housing price devaluations? Rent decreases? Sounds like we don't have a very flexible economy...
If they LOWER Interest rates....ANY AMOUNT....THE ECONOMY BLOWS UP.....good luck with that...!!
If the BOC Lowers rates
Housing will go through the roof
Nope. The only reason housing boomed was because of lending standards that were loosened based on trends. Debt servicing should be maximized at 30%, people having to pay 50-60% of there income on debt shouldn’t be allowed. Yet, here we are. No one can afford this, homelessness will continue to rise, reduced living standards will continue to rise until citizens lose control, and have to sell out to the large corporations. Oligarchies want to own everything and this will happen sooner than most think. Once inherited monies dry up from loss of productivity the dominoes will fall.
Only one thing that's going to fix this beast but no one wants to admit it.
Yeah, gettint ride of thse clowns in Ottawa🙃