Category Archives: rates

Reckless Canadian Banks not so Reckless

There’s an interesting opinion piece over at the Tyee:

Canada’s Reckless Banks Inflate House Price Bubble

The story suggesting house prices were overvalue by just 20 per cent was based on a report from Fitch ratings — a company which rates mortgage backed securities. A less sanguine and more objective estimate of the overvaluation comes from a report by The Economist, which says the figure is 78 per cent as against rents (the highest in the OECD) and 34 per cent (second only to France) as against income. The U.S. is undervalued by seven per cent and 20 per cent respectively, which gives you an idea of how bad things can get when a bubble bursts, or even if a balloon deflates — the favourite analogy of the wishful thinkers.

Writer Murray Dobbin calls the banks ‘reckless’ for pulling in buyers with rock bottom interest rates, but they aren’t being reckless at all. It would be reckless to leave taxpayers money on the table when the government is so eager to give it to them via the CMHC.

He does wrap up the piece with a very clear statement of who is to blame for the mess we now find ourselves in:

Responsibility for the intractable mortgage dilemma can be laid decisively at the feet of Flaherty and his own recklessness back in 2007. That’s when he opened up the CMHC’s mortgage business to U.S. competition. We soon had the same lunacy here as they did south of the border: no down payment, 40-year sub-prime loans. That year-and-a-half experiment (Flaherty finally got scared smart and started to rein it in) is what spurred the irrational drive by so many Canadians to own a home.

Read the full article over at the Tyee.

Flaherty thanks banks for not competing.

It’s not April 1st yet is it?

Because this article in the Globe and Mail reads like some sort of weird parody.

Canada’s Finance Minister has taken his battle against a housing bubble an extraordinary step further, issuing rare praise for the country’s banks for not matching Bank of Montreal’s cut-rate mortgages


Ottawa is growing concerned the banks could end up causing the housing market to overheat, especially after Mr. Flaherty has gone to great lengths to cool the market over the past year.

Could overheat? What brand of rear-view mirror are they using? Maybe if you didn’t use taxpayer money to ensure that they make money from mortgage business but take not risk of loss thanks to the CMHC that would help cool the market a smidge?

Mr. Flaherty and Bank of Canada Governor Mark Carney have waged an all-out war against the massive build-up in consumer debt to record levels. Along with Mr. Flaherty’s restrictions – which reduced the maximum amortization on mortgages last year to 25 years, down from 30 – the central bank went so far as to warn it could raise interest rates to tame the borrowing binge.

All out war?!? This gets better and better! They reduced amorts to 25 years but who jacked them up to 30 in the first place? And warning that rates could go up? Boy, that’s tough!

Battling a housing bubble by undoing the things you did to fuel it is a bit like thinking that getting rid of your slingshot should be enough to un-break all those windows you shot out.

“I encourage responsible lending,” Mr. Flaherty said Friday. “I think that the financial institutions of course are major players in the residential mortgage market and it forms a major part of their asset portfolios and the Government of Canada has a lot to say about it, not only because we’re concerned about the economic fiscal health of the country, but also we have CMHC [the federal mortgage insurer] and many of those mortgages held by the private sector financial institutions are insured with Canada Mortgage and Housing Corp.”

Maybe via the CMHC you’re encouraging too much lending, responsible and not.

And here’s the punchline:

Mr. Flaherty’s praise of BMO’s rivals may be somewhat off target, though, since most of the lending sector is quietly offering the same rates as BMO, mortgage professionals say

Phew. Is that enough stupid for your monday morning?

Yes We Have No Bubble Trouble.

For all of you worried about a ‘housing bubble’ just stop and read this article:

No Housing Bubble Trouble.

At the national level, what could possibly kick national home prices downstairs? There is nothing to suggest massive job loss ahead or a huge oversupply of new homes. That leaves only the dubious assumption of a big increase in mortgage interest rates as the trigger for any nationwide decline in home prices. But national housing prices did not fall in the past when mortgage rates rose to twice their current level.

Oh, wait.. Sorry that’s from the Washington Times in 2005 and refers to the US market.

This is the one I meant to point to:

No Bubble, No Trouble.

A housing slowdown in Toronto and Vancouver could affect consumer confidence in regions with strong economic fundamentals like Calgary, Edmonton and Halifax, adds Don Campbell, best-selling author of Real Investing in Canada. But rather than a sharp decline, you’re more likely to see slower rates of price appreciation and home sales, says McKellar. “Overall the economy of Canada compared to other countries is still doing very well,” he says. “Housing markets are a function of the economy. Not the other way around.”

Hat-tip to Patriotz and Many Franks for the article links.



2013: Everything costs more

Well, maybe not everything…

You can probably pay less for a computer or a house, but many of the day-to-day expenses of living are going up around here.

As the new year rolled over there was a spate of announcement for rising taxes, user fees, premiums and fares in BC.

In Vancouver, homeowners will pay about three per cent more in 2013 on their property taxes and utility bills.

The cost of health care premiums is set to rise in the province, from $128 to $133 per month for a family, adding up to $60 per year, according to the Canadian Taxpayers Federation.

“Most of us would say, ‘OK, we can squeeze out five dollars a month somewhere,’ ” said spokesman Jordan Bateman.

But, he added, this is the fourth January premiums have increased and “it’s really starting to weigh down taxpayers.”

Federally, Employment Insurance and Canada Pension premiums will also increase.

Workers who make over $47,400 will pay $891, up $51 from last year, and employers will pay $1,247 in EI premiums, up $72. Workers and employers will both pay an extra $49 in CPP premiums, with workers paying $2,356 in 2013.

The cost of getting around is also going up.

Yep, Translink fares are going up too – a one zone fare goes from $2.50 to $2.75.  Also Tolls and BC Ferry fare.

For the whole list check out the original article in the Vancouver Sun.