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Alarming levels of debt

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A report released yesterday is warning of very high levels of personal household debt in Canada:

Canadian families are increasingly using credit to cover day-to-day living expenses, pushing national household debt to $1.3-trillion, according to the Certified General Accountants Association of Canada.

CGA-Canada warned Tuesday that many individuals are unaware of how the economic downturn has hit their financial situation, and they continue to load up their credit cards and lines of credit while skimping on savings.

According to the association’s report, a consumer survey in November indicated 85 per cent of households had outstanding debt on a credit card.

And 21 per cent of Canadians who were in debt said they could no longer manage their debt load.

I can’t imagine this will be improving quickly with the jump in EI beneficiaries.  Of course Canadian families aren’t the only ones having trouble making a budget and sticking to it.  The government of Canada announced yesterday that the deficit would be ‘substantially more’ than predicted four months ago, but has not yet said how much more.  A few hours later the BC government commented that they will likely be unable to stay under the $495 million deficit limit they promised during the election.

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Denialisrampant

sorry that should 'ICBC NOT rolling over and paying out money

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Denialisrampant

Anonymous: #90 Anon, one small point on ICBC. The ICBC lawyers were dreging up personal information on the members of the jury and threatening them with anything they could find in an obvious attempt to subvert justice. They were roundly and publicly chastised for doing so by the judge. This was ICBC rolling over and paying out large sums of money. On multicultiralism , it was never meant to do anything but subvert the Canadian election results by the LIberal party of canada by creating new constiuencies and then dumping huge numbers of new immigrants into these 'ghettos' so that the scared beholden immigrants would see that there existence in Canada was dependant on Liberal party largesse. Perfect examples are the 300,000 Tamils in Toronto, Sikhs in South Vancouver. In fact studies show that by isolating these people in this… Read more »

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Anonymous

Denialisrampant I am not a denier. I posted what I liked and disliked about the city. But let me go over what you posted. Not sure what this has to do with real estate but here it goes. 1. I hate the term denier. Its meant to silence critism and descent without debate, so please don't use. 2. The economist is not unbiased, its not even honest about what it is. It claims to be conservative but resembles a lighter version of neoconservatism. Very anglo centric magazine. 3. The bard on the beach director is not vancouver. And being ethnic I even agree with him. I hate mulitculturalism because it really means no culture. I won't get into this as it doesn't belong on this forum. Attacking mulitculturalism an ideology and not liking minorities are not the same thing. 4.… Read more »

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observer

Just to add some more aspects to the question, I've heard before that variable rate mortgages are influenced more by overnight lending rate, unlike fixed rate mortgages which are affected by the bond market, presumably because the loan money is coming from money markets. There seem to be other factors affecting variable rate as well : for instance, we have seen banks go from prime minus discount to prime plus premium since the credit crisis hit.

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Denialisrampant

I raised the hackels of quite a few brianwashed deniers with my post about how Vancouver is in fact just a shithole from a normal persons POV. Most of the respondant deniers insisted that they had all lived in 19 foriegn capitals and 'just knew' that Vancouver was # 1. I guess the truth is where you find it. OK…… ya, I'm believin' it all. But sheesh, I just watched Global TV news and heres a snippet of whats important today in the "Shitty of Denial". 1) ICBC uses Gestapo tactics to intimidate jurors who sit against them during lawsuits by victims 2) Buisness Owneres Association says that business owners living in a culture of fear. I assume that the COV is so assholish that they are preparing to kill the golden goose to pay for their childish foibles 3)… Read more »

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ReductiMat

Reductions are in the air!

I just negotiated 11% off of my rent.

Good times.

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patriotz

Vansanity:

I think where I am still confused is the connection between bond and mortgage rates.

A mortgage is a bond – one which is secured by RE. The mortgage borrower sells the bond to the mortgage lender, and the mortgage can be resold like any other bond. The term of the mortgage is the same as the term of any bond.

Mortgages are part of the bond market, and therefore the rates on mortgages track the rates on other bonds.

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observer

http://www.professionalreferrals.ca/2004/04/how-t…

How the Bond Market Affects Mortgage Rates

Don't quite understand all the intricacies myself but here is an article explaining some of connection. Basically, if bonds yields are high, money will flow there instead of funding mortgage loans to eager fools so mortgage rates rise because of the shortage of credit for mortgage loans.

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Raggedy Renter

bank borrow money from the bond market to lend you your mortgage money.

so the interest rate that you pay on your mortgage is really the cost of the bank getting the financing on the bond market + profit.

At least I think that's how it works.

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Vansanity

oneangryslav:

Thanks for taking a crack at it angryslav! BTW – Everyone knows the meaning of life is to own vancouver real estate, I mean come on! 🙂

All I learned of bonds through school was: when interest rates go down, bond prices go up, as long as the bond rate was/is more attractive, and vice versa.

I think where I am still confused is the connection between bond and mortgage rates. Maybe, I just misunderstood what hombre was saying.

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oneangryslav

Vansanity: Vansanity, it would be easier trying to explain the meaning of life! 🙂 Here's a non-expert's crack at explaining the bond market: The way I see it, the price of bonds is based fundamentally on three things: 1) The amount of money that bond issuers–governments, corporations–need to borrow, and are expected to need to borrow in the future. [This is the supply part of the market.] 2) How creditworthy are the issuers of the bond. In other words, if you lend 100,000 dollars to the Canadian government at a 5-year term, how certain are you that not only will the Canadian government be able to pay your interest owed, but also pay back your principal when your bond matures in five years time. (Of course, if it seems unlikely that the Canadian government will be able to keep its… Read more »

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Vansanity

hombre:

I know I'll sound stupid here, but could you give me some details on how the bond rates are set, impact mortgages etc… I don't pretend to understand how that all works. Hopefully some of the more enlightened on here can take a moment to explain it to a layman like me. I appreciate it.

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kansai_92

Ahhh Neuman indeed.

50" Panasonic G10 coming this weekend!

Meanwhile my property-owning friends are fighting because the wife wants to go on holidays but the husband says no because they r essentially paycheck to paycheck. Borrowed money from mom&pop to top up their downpayment plus havent found a renter for their "mortgage" helper.

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cashisking

kansai_92

Ahhh Neuman!

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West End Bargain

I just rented a 1 bedroom place right downtown near Burrard and Thurlow for $780 a month. Granted, it's a semi basement suite in a 3 storey walk up building, but a few months ago, you couldn't even find a one bedroom in East Van for that price! Why buy when you can find deals like that. 🙂

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Anonymous

My landlord didn't drop the rent on our coal harbour 1+den.

But she didn't raise it and replaced the 10 year old washer and dryer with a high end front loading set and gave me the rebate coupons!

To be fair we were paying 10-20% below the "market" rent for the last 2 years so I wouldn't ask for a reduction. I would balk at an increase though.

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kansai_92

Hey cashisking

Beat you by 1%. Got a rent reduction of 6% buddy!

Just got my tax refund the other day as well.

Going shopping for a new plasma TV now. Renting is sweet.

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kersplatt

And they said green shoots were growing Bwahahahahah!!! 12 out of every homeowner in the US is either delinquent or in foreclosure with the crest in bad paper not expected to crest until late next year. "NEW YORK – A record 12 percent of homeowners with a mortgage are behind on their payments or in foreclosure as the housing crisis spreads to borrowers with good credit. And the wave of foreclosures isn't expected to crest until the end of next year, the Mortgage Bankers Association said Thursday. The foreclosure rate on prime fixed-rate loans doubled in the last year, and now represents the largest share of new foreclosures. Nearly 6 percent of fixed-rate mortgages to borrowers with good credit were in the foreclosure process. At the same time, almost half of all adjustable-rate loans made to borrowers with shaky credit… Read more »

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oink

The BC-BS train just keeps rolling along. The BC tourism people announce a paltry 6.3% drop in warm bodies? Why is this so at odds with the numbers from every other major tourism center in N.AM and Internationally? Most other reporting agencies are quoting figures of 20% and more, even the bigs like Los Angeles, New York and Hawaii. London says 13%, Spain 40% etc etc. I smell some stinky accounting at BC Tourism. Is it because they've been ordered to sell 'optimism and confidence? Is it because like the EI stats they report the numbers from 3 months ago and not the current numbers? EI is still reporting March numbers, it's June for christs sake, where is April and May. In the states they info WEEKLY! Are they telling us thet we can't handle the truth? http://www.vancouversun.com/Travel/tourism+indust… Now heres… Read more »

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patriotz

Snake eyes! Las Vegas joins Phoenix in the 50% off club.

http://seattlebubble.com/blog/2009/05/26/case-shi…

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cashisking

rent saga … just got a 5% reduction … Damn … purchase cost equiv just got reduced

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patriotz

other ted:

In B.C., house prices will fall to $403,700 in the current year compared to a pinnacle valuation of $454,599 in 2008, the CMHC report says.

Vancouver (and I would think the rest of BC) house prices are already down 12.5% from peak, and that's including the recent uptick.

So are these savants predicting the rest of the year will be flat? Fat chance.

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other ted

some dire forecasts from chmc

http://www.cbc.ca/canada/edmonton/story/2009/05/1…

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Renta

other ted Says:

"I just read about the lawsuit by the cambie merchant. $600,000 for lost business. The article was short on details but I find it hard to believe she lost that much."

Actually I can believe it. I heard she took out a 2nd mortgage on her (depreciating)house to pay off the creditors for lack of sales at her business. HELOCs are painful at the best of times, then add in a drop in property values and suddenly… you're subprime!

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Renta

Last October 'the Canadian economy was fundamentally sound. In January the projected deficit was to be $34B. Four months later a mistake has been made and the projected deficit has been increased to $50B. Oops!! Do you remember someone saying "If Canada was going to be in recession, it would have happened by now?" and "My watch doesn't run on deficit time?" The government is so far behind the curve it's scary. The effects of this recession have not yet even begun to be felt in Canada. And to think that people are STILL buying over-inflated, risky assets like real estate in these uncertain times.

final thought…I can't help but think that Harpo and Festis are our own Canadian version of Thelma and Louise. What a gong show.

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