Tag Archives: interest rates

BC, Budget, debt, Open Topic

Magical Thinking, with Budgets

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138 Comments

A relocation company has some Vancouver resident budget “case studies” to help people get over the idea that Vancouver may be too expensive to live in. Among their suggestions:

  • $1225/month rent is not out of line for a $36,000/year salary.
  • a single female can get a month’s groceries in Kits for $170
  • interest rates never go up
  • unexpected expenses only hit those who plan for them
  • nobody has existing debt that needs servicing outside a mortgage

They’re like Peter Pan; if they just wish hard enough, Vancouver will be a great place for lower-middle class people to live.

CMHC, debt, foreclosure, mortgage, opinion, predictions, prices

Mortgage brokers warn about new rules

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78 Comments

Canadian mortgage brokers are freaking out about new refinancing rules proposed by the OSFI which has taken over responsibility for the CMHC. Reasonably enough, they’re asking for clarification about proposals to require banks to check income and current house value before refinancing.

Currently, when mortgages come up for renewal, banks tend to focus on the borrower’s payment history. They rarely appraise the property again and not all banks will check the borrower’s updated income level, Mr. Murphy said.

“CAAMP strongly recommends that this concept be clarified so that mortgages continue to be renewed at maturity without requalification,” the industry association said in a submission to the Office of the Superintendent of Financial Institutions (OSFI).

“If not, homeowners who have been in compliance may no longer qualify. This would result in a number of properties hitting the market at the same time and thereby driving down prices.”

Such a phenomenon could add further fuel to a real estate downturn if lower house prices and higher unemployment caused more people to lose their homes upon renewal, Mr. Murphy suggested.

Read the full article in the Globe and Mail.

mortgage, Open Topic

What, Me Worry?

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56 Comments

Are you worried about the effects of rising mortgage rates? Apparently 48% of British Columbians surveyed say yes:

As concerns over the state of the Canadian real estate market abound, a new survey says nearly half of Canadians are unsure about their ability to afford their homes if rates rise by as little as two percentage points.

The survey commissioned by the Bank of Montreal study finds 43 per cent believe an interest hike would either hamper their ability to pay or leave them on unsure footing.

Regionally, residents of Alberta were the least concerned, with 73 per cent saying that rising rates would not affect their ability to afford their homes, while residents of British Columbia were the most concerned. Just 48 per cent B.C. residents are comfortable in their ability to handle higher rates.

Yet interest rates, after bouts of rising and falling, seem low and could remain low for some time to come. Is Canada living in a bistable rift, capable of maintaining high prices with low rates ad infinitum, or should we look to the experiences of the USA and Japan, countries where low rates have not lead to a reconstitution of house price appreciation, for more chilling portents?