Tag Archives: banks

BC, Budget, debt, economy

BC has the highest personal debt loads

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We’re number 1!

The province of British Columbia has the highest level of personal debt anywhere in Canada and it’s still growing.

With incomes low and house prices high, it’s not an entirely unexpected result.  But even if you remove house debt we have very high levels.  Not including mortgage debt, simple consumer debt averages $37,879 in BC.

And that of course has led to a rising number of bankruptcies. In the last four years bankruptcy rates across Canada have gone up 11%, here in BC the number is up 42%.

That Province article also talks about the ‘elation’ of declaring bankruptcy, but that usually only occurs after some one has used up all their other options and burnt up money they could have kept:

“People often come to see a trustee as a last resort, when credit is turned off and they can no longer borrow from one card to pay another,” Mantin says. “They come in and say ‘I regret that I didn’t know about these options sooner. All I’ve done over the last two years is tread water.'”

Frantic people make decisions that will compromise their future, Mantin says. One of the worst is cashing in RRSPs.

For one thing, only the last 12 months of RRSP contributions need be surrendered in a bankruptcy. And those who sacrifice an RRSP without learning to live within a budget are not facing the underlying issue, Mantin says.

“Unless they’re forced to make a behavioural change, I often find they’re in the same position a year or two later,” he says. “They’ve dealt with the short-term debt but haven’t solved the budget problem so they run their debts up again.”

Read the full article here.

BC, Canada, data, debt, economy, opinion, predictions

Housing crash implications for banks

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If you haven’t seen it yet, you should really check out this post by Ben Rabidoux over at The Economic Analyst.

This report was put together mid-June and things haven’t gotten any better since then.

It’s a lot of stuff you already know, but some data you may not have seen and it’s jam packed with beautiful charts.

Check out the how the BC economy has grown in construction, but flatlined outside:

And there’s this little data point as well:

Before diving into the data, consider this fun anecdote: There are currently over 5,000 homes in Vancouver metro area for sale for over $1 million according to MLS.ca.  In comparison, the NAR reports that in April, just over 7,000 homes sold in the entire US were sold for over $1 million.  And this despite the fact that the US population is 135X greater than the metro Vancouver market, the average personal disposable income in the US is 20% higher than the Vancouver average ($37,100 vs. $30,800) while US per capita GDP is higher than the average for all of BC.

Do yourself a favour and read the full post over at The Economic Analyst if you haven’t already.

 

 

 

 

Canada, debt, mortgage, Open Topic, predictions, USA

Big banks facing home credit risk

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A new report issued by US ratings agency Fitch says that fast-rising home prices and record levels of household debt pose a threat to the credit portfolios of Canadian banks.

The agency examined the exposure of Canada’s six largest banks to mortgage risk and found that household debt fuelled by mortgage credit expansion in Canada is the largest threat to credit profiles.

“These are quite high levels of debt for households and the movement in house prices, we don’t think this is sustainable in the long term,” said report author Fabrice Toka, senior director at Fitch.

The six banks have a combined $730-billion in mortgage exposure and an additional $182-billion in home equity loan exposure, the report noted.

High unemployment or interest rate shock “could aversely affect the ability of leveraged homeowners to meet their mortgage obligations,” the report said.

The risk testing scenario looked at drops of 1 to 10% and sees CIBC and RBC as the most exposed to mortgage value risks. The debt-to-income ratio in Canada is currently higher than it was in pre-recession US, but Fitch points out that there are structural differences in our housing market.

Here’s the full article in the Financial Post.

BC, debt, hype, prices, supply, west side

West Side housing boom loses its sizzle

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The Globe and Mail has a suprising headline: Sky-high housing prices in Vancouvers west side short lived.

Both sales and prices are down at the top end even more markedly than in the rest of the region, which has also seen a general slowdown this spring.

A house on the 3000 block of West 24th Anenue, first listed at near $4.5-million six months ago, sold on April 15 for $3.35-million.

Fresh statistics from the Greater Vancouver Real Estate Board show the number of sales on the west side is down by nearly 40 per cent for the first four months of the year. Only a third of the nearly 400 homes listed in April have sold – one of the lowest rates in the region.

Realtors say the slowdown appears to have resulted from a combination of tighter lending practices by local banks, which now want proof of income to service large mortgages, more restrictions on how much capital can be taken out of China, and fewer immigrants.

“Banks are now requiring borrowers to disclose incomes and assets before mortgages are approved, as of the last six weeks,” said west-side realtor Marty Pospischil, who specializes in selling single-family homes owned by long-term residents. Last year, he says 90 per cent of his 100 house sales were to “offshore buyers” – people not living here yet, who flew in to buy. This year, it’s less than a tenth of that. “We’re now seeing a 50-per-cent collapse rate in deals, when it’s usually more like 5 per cent,” he said.

Read the full article here.

Canada, economy, opinion

The ‘secret’ Canadian bank bailout

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You’ve probably noticed lots of eye rolling around here anytime someone mentions how Canadian banks are so different from US banks.  The Canadian Centre for Policy Alternatives is now pointing out in a report that Canadian banks actually received a multibillion dollar bailout from October 2008 to July 2010.  The government is being accused of offering ‘liquidity support’ that is much higher than originally reported.

All told, the study counts $114 billion worth of guarantees and financial aid for Canada’s big banks from government agencies such as the Bank of Canada and the Canada Mortgage and Housing Corp.

MacDonald combed through financial reports from government institutions as well as quarterly reports from the banks themselves.

He says the government has been obfuscating the true cost of supporting the banks.

“A healthy and resilient banking sector cannot operate under a shroud of secrecy. Details of the massive taxpayer support Canadian banks received should be released in the name of transparency and accountability,” MacDonald said.

They also point out that the heads of Canada’s big banks received large raises during the time this ‘liquidity support’ was offered.