Canadians love debt that gets sunk into ever rising property prices and banks and other lenders have been happy to provide. As long as rates only go down this is a pretty good situation, but what if rates were to go the other way one day?
Financial companies have been more-than-willing lenders. But there are several reasons why Canadians have been such enthusiastic borrowers.
Last week, new figures showed that consumer lending now totals more than $2 trillion, a new record. As we reported last week, for every dollar of Canadians’ disposable income, they owe almost $1.67.
From the point of view of Canadians, money has never been so cheap. But the rising cost of housing, especially in the country’s biggest cities, has also drawn people into taking on more debt.
… Continue reading Debt addicts face painful withdrawal
Dave sent in the following opinion, in which he throws up his hands in despair at the state of politics in BC and its role in the housing bubble.
If there was ever an election to vote for None of the Above, this would be it.
I no longer believe that any of the three major parties represent the interests of the average British Columbian. Each have sold themselves out to Special Interest groups of one type or another.
I’ll first start with the BC Liberals because they are looking for a fifth term. I have been a party member, volunteer and voter for the BC Liberals each of the last four elections. I am also a small business owner and employer and I generate a healthy income. In theory, I’m the easiest vote the Liberals should ever get. But they aren’t getting my vote this time.
Continue reading And now a political message from Dave
Southseacompany pointed out this article in Canadian Business about how the banks have become complicit in the housing bubble, which strikes us as a bit unfair since any bank would be foolish to not take part in the low risk high profit business of mortgages.
As long as government is willing to take on the majority of risk and encourage high debt loads, why should a single bank step back from that money?
In a rational world, the banks could be counted on to help contain the housing mania that has put Canada in this perilous situation. Before the early 1950s, Canada’s biggest lenders had little interest in real estate, according to Charles Calomiris and Stephen Haber, the authors of Fragile by Design, a highly praised international history of the interplay between politics and banking.
That changed after William Lyon Mackenzie King created the Canada Mortgage and Housing Corp. at the end of the Second World War to backstop the construction of new homes for returning soldiers. Nothing stirs a banker like risk-free lending. By 1954, the banks had convinced the government to change their charters so they could join the post-War building boom. In 1992, they were cleared to buy the trusts that were the initial beneficiaries of CMHC’s backstop, triggering the consolidation that cemented today’s oligopoly.
In November 2015, the average monthly holdings of mortgages at Canada’s chartered banks exceeded $1 trillion for the first time. The figure continues to climb, reaching $1.07 trillion in December, according to the Bank of Canada’s most recent statistics. That’s more than double what the chartered banks commit to business lending.
Read the full article here.
Recent tweaks to housing rules are cutting into mortgage brokers business. They are asking lawmakers to relax existing rules and put the brakes on new rules:
While Ottawa considers what to include in the budget, the mortgage group is urging the government to avoid taking any drastic and unnecessary action because of isolated pockets of danger.
The new rules “disproportionately affect competitive positions of small and mid-sized lenders,” Kerzner said. “There’s a real and growing sentiment that activity in Toronto and Vancouver is negatively impacting those in the rest of the country.”
Read the full article over at the CBC.
southseacompany pointed out this article in the financial post:
Canada’s banks are pushing back against taking on more mortgage risk
“Canada’s financial industry is urging the federal government to consider alternatives to proposals that could require them to take on a greater share of mortgage defaults through a deductible — calling it one of the biggest shakeups to hit housing finance in 50 years.”
Read the full article here.