How much mortgage is too much?

You’ve probably heard over and over again that household debt in Canada is climbing to record levels.

And it’s probably not a surprise to you that mortgages due to the high cost of housing holds some blame there.

But did you know that the total amount of mortgage debt in Canada has nearly doubled in the last four years?

According to CAAMP the total national mortgage debt in 2008 was $664 billion. It now stands at a total of $1.2 trillion.

Over in the Vancouver Sun Barbara Yaffe sees this stat and seems to blame the little transaction fees for the high cost of housing.

But there’s a little four letter acronym conspicuously missing from her article: CMHC.

That would be the Canadian Mortgage and Housing Corporation, which has been flooding the market with insured mortgage money at a time of low interest rates.

So here’s the real question: Is Canadian mortgage debt so high because of our house prices, or are our house prices so high because of that mortgage debt?

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[…] “Don’t cry ‘high debt loads” said the Canadians, “when there’s no interest rate increases!” They went grumbling back down the hill and signed up for some more mortgages. […]

bubbly
Member
bubbly

The bubble started way before Conservatives came to power.
Conservatives just added a lot of fuel into the already massive FIRE. I doubt that the other big parties would have done otherwise.

Devore
Member
Devore

“Are you seriously suggesting that making “everyone feel good about the economy and their personal finances” is a uniquely Harper, or more broadly, a Conservative political trait? Really? Time to remove the blinders.”

Is someone saying or implying this? Time to stop being so defensive.

Melba
Guest
Melba

….Harper bought the 99% vote by pumping housing to make everyone feel good about the economy and their personal finances….

Are you seriously suggesting that making “everyone feel good about the economy and their personal finances” is a uniquely Harper, or more broadly, a Conservative political trait? Really? Time to remove the blinders.

registered
Member
registered

@28 Melba Says: “Let me see…. So the Conservatives managed to “buy” the “1%” vote?”

Congratulations on getting it 99% backwards. The 1% reaped the real benefits, they didn’t need to vote. Harper bought the 99% vote by pumping housing to make everyone feel good about the economy and their personal finances, translating a minority into a majority. The tightening started after they won, as did acknowledging the 2008 financial meltdown. Their denials beforehand are well down the memory hole.

emmi
Guest
emmi

natcho, and to crush their children with debt

emmi
Guest
emmi

I love charts,

pretty sure CAAMP does one thing to get data, they survey people/ mortgage holders to ask them about their mortgages. If they estimated the total mortgage debt from that then it would not have been wrong due to securitization as customers don’t know anything about what their bank did with the mortgage.

From their site: “CAAMP produces reports based on statistical data collected from a survey of Canadian consumers and industry participants. The reports contain industry data including consumers’ expectations of the Canadian housing market, profiles of mortgage holders, regional breakdowns of survey responses, and additional insight into challenges for mortgage holders in Canada. ”

Hm, so maybe the industry participants are the question here. The report doesn’t make it clear where the info comes from for that section of the report.

Natcho
Guest
Natcho

Melba, I think you misunderstand. The economic miracle that is a housing bubble buys not only the votes of those who know they profit from it, but also all those debtors that think they profit from it.

Rather a nice trick buying someone’s votes with their own money and leaving them with the bill.

People seem ill equiped to get past the good feeling of rising home values to realize the only way to really profit from it is to cash out and leave.

Melba
Guest
Melba

….The Conservatives pulled off an impressive win-win for themselves by profiting their financial industry patrons and buying votes with one swoop…

Let me see…. So the Conservatives managed to “buy” the “1%” vote? That must be really effective in getting them elected. Thanks for the report from Area 51.

registered
Member
registered

@10 Randy Randerson Says: “…the Conservative govt for pandering to the house horny public.”

Follow the money. Who profits the most from historically unprecedented debt loads? The lenders of course. The Conservatives pulled off an impressive win-win for themselves by profiting their financial industry patrons and buying votes with one swoop. When the whole thing inevitably comes down taxpayers take the blame and foot the bill for the mess, the financial industries again protected, and collections enforced, by the government. Seed the ground in advance of the disaster with inter-generational frictional about debt loads and they set the stage to dismantle the social safety net, turning Canada into ALEC North.
Machiavellian is the only adequate term.

crabman
Guest
crabman

CAAMP or Yaffe need to do a better job of checking the numbers. It took me all of 5 minutes.

Total Mortgage Credit in Canada
Nov 2004: $599B
Jul 2013: $1,197B

Mortgage debt doubled over the last 8 years and 8 months.

http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=1760069&pattern=&csid=

jesse
Member

“whether the drug (access to easy credit) or the addiction (debt) comes first”

If I try alcohol I cannot guarantee I won’t become addicted, but from what I see most can stop any time they want.

George
Guest
George

My job is on the line. My boss prefers to hire people with vehicles and this proves to him transit is unreliable. Still stick on the train.

George
Guest
George

Now tranlink is calling it “major damage” to the track and it will take a “substantial amount of time”. They are setting up buses for people.

George
Guest
George

Translink is now saying the track is damaged between main and broadway. Maybe the trains scraping against the side of the guideway damaged it.

George
Guest
George

Translink is telling us there are track problems in two different areas– main street and patterson. What are the chances of track problems in two totally different areas happening at the same time? This is a broken transit system!

George
Guest
George

I was on a skytrain a few days ago and the train was scraping against the sides of the guideway the whole trip. The train was not aligned on the track properly. In 25 years of riding skytrain I have never experienced that. That can’t be good for the train or the guideway

George
Guest
George

Sitting on an un-moving train due to “system-wide delays” on skytrain this morning. The boss is not going to be happy that I will be late. Its problems every other day with transit now whether it be bus or skytrain. I am so sick of this overstreched overpriced transit system. Why is skytrain constantly breaking down this year? I suspect Translink is cutting corners on maintenance.

patriotz
Member

@10: “The classic problem of whether the chicken or the egg come first.”

No it’s the problem of whether the drug (access to easy credit) or the addiction (debt) comes first.

Which is such a simple question it’s not even a problem.

ILoveCharts
Guest
ILoveCharts

Hi Betty,

I think that you have provided a fair assessment of the best case scenario.

But let’s remember:
– There is no guarantee that the CAAMP numbers weren’t corrected. I haven’t seen the source but it might already be corrected.
– Do you have any source on the $100 billion that people took out in a HELOC and invested in equities? Are you sure they didn’t invest it in vacations and countertops?
– I haven’t done the math on the inflation numbers but my gut says that it can’t erase $100 billion.

Betty
Guest
Betty

Also RBC said,

“Credit trends supportive of Bank of Canada standing
pat near-term.”

===> means no Bank of Canada rate hikes over the next few years. Mortgage growth has been reduced to the 3% annualized range. Just a bit higher than population growth. If prices hold, then a soft landing will have been achieved. When fuel may be needed in the future, maybe extend amortizations again? comments?

This is good for Canada. I am proud.

Betty
Guest
Betty

I Love Charts:

Thanks for that bit of info. So in real terms, it was 664+250= $914 Billion in 2008. Now it is $1,200 Billion.

I can also tell you that people refinanced (homeowner Helocs) to the tune of approx. $100 Billion in 2009 when they thought the world was coming to an end. They started to pull equity out of their homes. When they saw it wasn’t most reinvested the money in equities.

So that $914 Billion is really a little over $1,000 Billion.

So 2008-2013 —> $200 Billion increase.

Anyone want to calculate what inflation takes out. Final number could only be $100 Billion increase in real terms. Amazing!

Barb Rennie
Guest
Barb Rennie

Car sales are a great indicator of consumer spending. People don’t trade in their cars if they are drowning in mortgage payments, credit card payments and taxes. Getting a car loan you can’t possibly afford on top of everything else would be the last straw. HELOC’s run out and buying a new car will have to wait until their piggy banks (otherwise known as their 5% down homes) appreciate in value.

2.79% 5 yr. NEVER AGAIN
Guest
2.79% 5 yr. NEVER AGAIN

“short position Bank of Nova Scotia, BNS
Sept 30, 19,430,870
Oct 15, 24,352,579
Increase: 4,921,709”

Ya so what? They are all down 5% (the amount of most down payments)

“am putting 20k down payment and he nearly fall from the chair. he said he did not have anybody with that kind of down payment for at least a year!!!”

Really? I paid cash for my car last year.

ILoveCharts
Guest
ILoveCharts

I’m a bear but I want to point out that there has been some confusion about the stats related to total mortgage debt in Canada.

See this article:
http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2013/09/half-baked-mortgage-news.html
“In 2011 banks had to adopt International Financial Reporting Standards (IFRS). That required them to “reclassify” existing securitized mortgages and reflect them on their balance sheets. Prior to November 2011, banks held these same mortgages “off balance sheet.”

If you look at page S17 of this Bank of Canada document cited by Huffington Post, you’ll see a $259 billion jump in mortgages on bank balance sheets in November 2011. Roughly $250 billion of that was due merely to this accounting rule change.”

Does this same accounting issue apply to the numbers in this VancouverCondo.info post?
“According to CAAMP the total national mortgage debt in 2008 was $664 billion. It now stands at a total of $1.2 trillion.”