Category Archives: debt

The growing popularity of payday loans.

How do normal people afford to live in Vancouver?

That’s easy – Payday loans!

The cost of payday loans in B.C. can work out to the equivalent of an annual interest rate of more than 500 per cent, the FCAC report notes. And payday loan use has “grown especially rapidly” in B.C., according to a January report from Vancity, with British Columbians “using payday loans at an increasingly higher per capita rate than residents of other provinces.”

Read the full article over in the Vancouver Sun.

Interest Rates, Price Plunge & CMHC Losses

Southseacompany linked to this article in the Globe and Mail that talks about the CMHCs vulnerability to rising interest rates:

The most dramatic scenario involved a severe and prolonged global economic depression that sent unemployment soaring to 13.5 per cent and triggered a 25-per-cent drop in national home prices.

In that case CMHC said its mortgage insurance business could lose more than $3.1-billion over five years. However CMHC said it would have more than 200 per cent of its required minimum capital, even after accounting for stricter capital requirements that OSFI is expected to introduce in January. Insurance companies are required to stop writing new insurance business if their capital ratio falls below 100 per cent of its required minimum level and are insolvent when their capital levels hit zero.

CMHC’s stress testing comes amid heightened concerns over the health of the Canadian housing market. Last month, the housing agency issued its first “red” warning for Canada’s housing market as a whole, saying it now sees “strong evidence of problematic conditions” in six of the country’s largest housing markets.

In yet another scenario the Crown corporation said its insurance business would lose more than $2-billion if Canada experienced a “U.S.-style” housing correction, where home prices drop by 30 per cent and the unemployment rate rises to 12 per cent.

Read the full article here.

Uh-oh Canada: Record debt threatens stability

Canadian debt is now almost triple the size of the national economy. How did we get here? A decade long housing boom!

While Canada boasts the lowest government debt load among Group-of-Seven countries, household debt is the highest of its peers, the Basel, Switzerland-based BIS said last month in its quarterly report. In September, Statistics Canada reported household liabilities rose to 100.5 percent of GDP, exceeding the size of its economy for the first time.

Canada was the only developed country showing early signs of stress in its domestic banking system amid “unusually high” credit growth relative to GDP, the BIS said.

“This debt overhang represents one thing and one thing only: a pervasive constraint on Canada’s economic growth potential,” David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates Inc. said by phone from Toronto. “When you get to levels on total debt that makes even the Italians blush, you know you’re in a straitjacket.”

Read the full article over at Bloomberg.

Four major changes to Canadian housing rules

Vancouver home sales have plunged by about a third in the last month or so, this been largely blamed on the foreign buyer tax.

But that tax focused on the city of Vancouver isn’t the only change to the real estate market, new rules and changes have the potential to affect the wider region and the nation as a whole.  Southseacompany posted this summary from a Globe and Mail article  in the comments:

“Four major changes to Canada’s housing rules”, Globe & Mail
http://www.theglobeandmail.com/real-estate/four-major-changes-to-canadas-housing-rules/article32223470/

1. Expanding a mortgage rate stress test to all insured mortgages.

2. As of Nov. 30, the government will impose new restrictions on when it will provide insurance for low-ratio mortgages.

3. New reporting rules for the primary residence capital gains exemption.

4. The government is launching consultations on lender risk sharing.

As Canadian Mortgage Trends puts it, is this the last nail in the coffin?


NOTE: disagreements are fine, but repetitive personal attacks and insults to other posters will get you an IP ban.

Will dropping house values help affordability?

According to RBC, Vancouver just saw the biggest back to back deterioration in housing affordability in 26 years of record keeping. So for those thinking they might want to be able to afford property, they might like to hear that the Vancouver market is apparently ‘softening’ according to TD:

A new study suggests the two hottest real estate markets in Canada appear to be headed in different directions, as Vancouver softens and Toronto looks to maintain its momentum.

In a report published Tuesday, TD Bank said Vancouver has started what is expected to be a modest correction, which will be reinforced by the recent implementation of the land transfer tax on non-residents.

“Home prices are projected to decline by about 10 per cent in the region by mid-2017, before stabilizing later in the year,” TD said.

Of course even with that predicted price decline, it’s not exactly going to bring Vancouver house prices into the really ‘affordable’ range.  Read the full article here.