Read the full article here.
The new BC first time buyer program is proving to be popular with over 1000 applicants who will hopefully vote for the current government in the next election.
“The B.C. Liberal government has received more than 1,000 applications from first-time home buyers who have been lured by new incentives under a program designed to improve housing affordability.”
“Critics, however, say the program is adding fuel to an already heated market for condos, notably in the Vancouver region.”
““Ottawa has been saying let’s have fewer highly leveraged buyers, but the province is saying we have to help the risky, leveraged first-time buyers get into the market,” Prof. Davidoff said in an interview Sunday. “The province has sweetened the pot.””
Read the full article in the Globe and Mail.
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.
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.