@@steveshutt6409 People are greedy and they take too much in mortgage debt, hoping their houses will appreciated more than than what they paid for their house. And they are shocked when the borrowing interest goes up.
No, this is the consequence of financially illiterate people making choices they (to be frank) shouldn't have been allowed to make. Rates were historically low, inflation was on the rise.. the central bank was going to have to do something,.. if you bought in that situation without having the finances to manage.. you messed up...
It is far worse than renting. You're paying on 100% interest each month, while piling unpaid interest into future principal, that is also subject to interest! Kind of like digging a hole with a big shovel, while simultaneously filling the same hole with a slightly smaller one. You also can't really just walk away, because then the bank forecloses on your property and you lose 100% of the deposit you put down on your home, which in today's market (20 to 25%) would probably be well over $100k. With renting, you don't continually increase your debt so long as you keep paying, and you can walk away once your lease is over.
Yes, as in zero principal, all interest, plus some more interest that you don’t have to pay today..you have the rest of your life to be a debt slave. That’s the definition of negative amortisation.
Houses are over priced and banks are doing thier part to hold the prices. Second largest contry with no land shortage, with lumber in backward and the prices are like in manhattan island. A concrete basement, stick frame , vinyl siding, insulation and drywall, plumbing, electrical, Hvac , asphalt shingles should not cost this much. Millions of hard working Canadians are sucked into this bubble.
@@djayjpThat's a part of the issue. We are a massive country but much of Canada is inhospitable. Most of where people live are where we grow our food. Roughly 11% of Canada is farmable, and that includes the most bare minimum of hardy crops. Less than 1% of that 11 is very productive, most of which is in either Southern Ontario or the Okanagan in BC (only places you can viable grow peaches in Canada for example).
I know in Edmonton area, cost of the lot is around 40% of the final house price. Its unlimited plain prairie land which is around $5000 an acre, jacked up to millions before annexed to city and hard working Canadians have to pay the diffrence for 25-30years. The city has to buy up land where it wants to expand 25 years earlier to stop this mess.
Inflation is part of life, if you don't find a way to invest whether it's 10$ a month or 100$ a month then the power of your spending will continue to decrease yearly unless your salary goes up to match.
We have about 25% of mtgs renewing every year. So far 25% of people are paying a higher rate. This coming year another 25% and even if they slowly Stat cutting rates well have let's say another 25%. Standard of living will crater in the next 3 years.
They are raising rates to discipline labor. They've even said "hot labor market," that means the EMPLOYMENT rate is too high. Too many people have jobs. We have too many workers! But also, we don't have enough workers. And at the same time, too many. In reality, they are hoping to raise rates enough until it gets to the point where enough people can't afford basic goods that the corporations decide they had better make a hair less profits and lower their prices because no one can afford to buy them. And that's bad for business.
@@rochester3 Please re-read what I wrote, you are not understanding. Recessions cause prices to drop, this is what the BOC is hoping to cause with their rate hikes.
@@BigBore525x to boc i say good luck that because interest rates go up with most debts a canadian has, so even if prices were to drop in retail they end up paying more interest on their mortgage,line of credit,car loan etc..
@@rochester3 No, they lose their home to the bank, their car gets repossessed, they default on their line of credit during a recession. The Government should have implemented a tax on the profits of these corporations and imposed price controls on goods. See Nixon when price controls were lifted in 1971. This lifting of price controls resulted in a rapid increase in prices. Price freezes were re-established five months later.
This sounds like what some say about student loans.. they've made all payments and the amount goes up (not confirmed). True the best way is to make up the difference in principal, but not all can afford it. Payments on a $200K 30-year loan at 4% are $955/mo, at 6% they're $1199, and 8% $1468. I don't know about Canadian interest rates, but it REALLY would have been good to lock in below 5% for 30-year fixed - I don't know how much could have been saved with a lower variable rate. I hope they get it sorted out for people. I'm glad I got my first house in 1986 ($132K w/20% down = $105K at 7% fixed.. payments $700..though I just checked what that is in today's dollars.. is $1961, which I couldn't afford).
Unfortunately in Canada we don’t have 30 year mortgages. So even if you locked in at a fixed rate, in about 5 years, you will have to renew to the higher rate
Home Prices (Asset/Debt Bubbles) MUST be DEFLATED by at least 50% to 75% (an average of 66%) to ease the Inflation, Affordability, Cost-of-Living, and Housing crises in Canada, If home prices do NOT go down significantly, there will be SERIOUS and DEVASTATING Social, Economic, Political, and Security Challenges for Canada in the years ahead. "Home" is a "Life's basic Necessity" and not an "Investment Commodity". Investing in real estate should be banned once and for all. Criminal gangs, Organized crimes, Mafias, International Drug Cartels, and Money Launderers have heavily invested in Canadian Real Estate and infiltrated the CREA, mortgage brokerage firms, the Cities and Towns Councils, Provincial entities (BCLC, BC Casinos, BC Assessment, and Green Belt scandal in Ontario) to buy favors.
@@chineseRATFACE rates are not going down, even if they go down they will pushed back up again to MUCH HIGHER rates YOU will SEE how the REAL ESTATE CASINO will collapse in Canada.
@@chineseRATFACE I agree, too many renters/house flippers. The house flippers know how to circumvent any rules to pay the taxes. They rent for a while and once the house has passed the time period to be considered a flip, they sell it. Laws are so poorly written that there are 1000's of loopholes. Those very loopholes were put by someone that wanted to take advantage of it and share it with others (Conservatives and Liberals). Time to reunite Canada by getting rid of what divide's us, Political parties! We should be able to elect a PM and the MP of our choice. Not have a PM selected because he's the leader of a party that get's the most seats!
Low interest rate is what got us into this hole in the first place. 4-5% mortgage rate should be the norm and a housing correction is imminent. Don’t think housing price will correct just look at US housing correction in 2008 / 2009. This reporting of 20% of negative mortgage is just the BEGINNING. More mortgages will need renewing in the coming year or two and interest rate may not come down that much. Definitely not 2% mortgage rate. That’s unhealthy
We have one of these fixed payment variable rate mortgages. At least with our bank it comes with a trigger rate. Which will readjust your rate if our payments are digressing too far from the amortization schedule. We've been fortunate enough to be able to pay enough to lump sum upfront, which knocks down our principal earlier and actually accelerate our amortization. But for those who aren't doing that... the shock will come when they renew. But yes... variable rate was definitely a regret.
Why did you take a variable rate in the first place? Why didn't you go for a fixed interest rate at the time, wouldn't that have been the safer and smarter thing to have done? What was it that made the variable more attractive to you than a fixed?
@@ClearOutSamskaras at almost every point in time a variable rate mortgage is cheaper. theres research out there on that, sure the last few years a fixed is a safer way to go, but general rule of thumb, over the life of a mortgage, variable will be cheaper in the long run.
@@666dynomaxI'm asking markuswong why he chose to take a variable. I'm not asking you why markuswong chose to take a variable. Since you're such a fan of research you'll understand the difference between these two types of questions, the one that I actually asked vs. the one that your charming verbal diarrhea fevered self would like to believe I asked. I realize that most of humanity is always eager to hear what you have to say about any topic you're generous enough to speak on, but I'm not one of those of those billions who cares to hear from you on any topic (crazy, I know). Again, it's markuswong that I'm addressing, so if it's alright with you Your Eminence let's give him a chance to reply about _his own_ decision even though you are convinced that you are better informed about and better able to answer as to his motivations than he is.
Variable rates become the holders problem, fixed are the banks. Still with the 5 year system everyone is basically variable rate. Wish I’d just paid the exit fees during the massive interest rate drop and locked in for 10 years. Not sure what I was thinking that things would get lower than 2%.
I have BMO (in America) for a car loan and a credit card. It is the most F'd up backwards bank I have ever dealt with... Their phone app is horrible and does NOT SHOW LATE payments (car loan is for my daughter on her car) NOR does it APPLY PAYMENTS (whether done on app as bank to bank transfer OR from my savings AT BMO until the next "Mon-Fri" business day... so if it's made Saturday morning or even Friday night after banking hours, it's not applied until Monday. 😡😡😡 I've gone into local branches to find out what's going on, and have had to spend 30-45 minutes as they had to call multiple other places to figure out what is going on. That is NOT how a bank should be run!
Two things: Variable rate mortgages can be a trap. They are great when inflation and interest rates are stable or declining. In a rising inflation and/or interest rate environment, what seemed like a good idea can turn on you with a vengeance. The best solution is to increase your mortgage payment (if you can) to cover the interest gap and ride it out. You won't be building any equity, but you won't be getting deeper in debt either. This is not a new phenomenon. In 1985 we had a short period of steep interest rate increases (can't recall what the reason was) but mortgage rates hit 22%. What the smart banks did at the time was limit the mortgage payments to interest only. That lasted for about 6 months while the financial markets sorted themselves out. Rates eventually declined to normal. The problem we're facing is the reshoring of a lot of US industry that migrated to Asia (China being the biggie) in the 90s and 2000s. COVID severely disrupted the complex and extended supply chains for these industries and coupled with the rise in labour costs in China gave them a serious wake-up call to the risks they faced. Shortening the supply chain and reliable, stable labour is now a critical driver. But reshoring is EXPENSIVE (capital intensive) which drives up the demand for capital and thus interest rates. Add to that a tight US labour market = wage inflation and we have a big chunk of what's driving the inflation in the NA economies and the drive by the Fed to supress inflation. The problem is that the reshoring process is going to take years to complete (there's a lot of industrial infrastructure the needs to be built from scratch) so we have at least another two to three year of this interest and inflation volatility to live with. We'll se how effective the Fed is at getting inflation under control, and KEEPING it under control ... the jury's still out on that one.
When someone extends their amortizations, they do the rest of Canadian's a disservice by keeping inflation higher and interest rates higher. Thanks. Banks love it though, a bailout at the expense of the middle class.
20% is way, way too high and the new rules will favour lenders and will lead to even more Canadians, sounds like at least 20%, being disqualified from owning a home. It's disgusting.
@@Loverofnumber to clarify, if the payer go's into negative amortization rates then the bank would have to apply $125 to pay down the principle. If interest rates go down in the future, then regular amounts applied to the principle would be so applied.
Why $125? What difference does that really make if you have a $600k mortgage, which is pretty normal these days (lol). People were willing to sign on the line for things they could not pay for if fundamentals changes - and the change of rates going up, was 100%! People got suckered.
This is what happen when lalaland replace common sense. I will not be surprised if most of those folks are people who over leveraged themselves. A classic 2008 style mortgage meltdown. But no one wants to admit it. Negative amortization is a fancy word for default. Not sure how long those 3 banks will be able to maintain those loans in parallel with the high rate environment. This is very scary stuff for the economy.
Hey look, a boomer! Or a business owner, or some other privileged individual who gets their jollies off of calling out hard working Canadians who were set up to fail. "over leveraged" = a short sighted dim view by those who have no sympathy or understanding of the realities of current culture in this country. Only thing that seems to concern you is how many bags of money you can rack up before it cracks, another fine example of the leeches who created this problem in the first place.
Doesn't the USA allow it's people to 'write-off' the interest payment on there mortgage in income tax? If you switch banks to get a better mortgage rate, then your amortization period is back up to 30 years again. There should be a better way to borrow on a house. This amortization band scheme is a constant nightmare for home owners for most of their lives. Try to move your mortgage and you pay thousands of dollars in a penalty.
Since MOST mortgages in US are fixed rate LONG term loans (15/30 yrs), with historically low interest rates (as low as 2.75% for 30 yr loans) coupled with increase in standard deduction, # of people who will benefit by itemizing deduction for mortgage interest deduction have decreased significantly. Also, you don't "write-off" interest payment in income tax, just the amount is reduced from your income. so, if you make $100k in income and have 18% tax rate (simple calculation) and have $10k interest, simply, your tax will be reduced from $18k, to $16.2k ( (100k-10k) * .18), so $1800 less in taxes. Unfortunately, with USUAL "fixed" rate term of only 5 yrs in Canadian mortgage, the interest rate hike will be soon felt by a LOT of people when their new term comes in.
There is more than one way to pay your mortgage. Pay additional payments against the mortgage. most mortgage allow you to pay at least 20% of the total amount annually of a lump sum amount.
@vies You are dense. It's not about the methods of paying their mortgage, it's about where these people are going to come up with the money to pay their ever increasing mortgage payments.
@@cgasucks that's Mr. Dense to you, thanks. If you live your life beyond your means yes it will be hard. Want is the most expensive word in the English language and many people buy more stuff than they need. Internet as is you tube is a want not a need.
When the economy is strong, more companies want to borrow from investors to expand their business. So, a mortgage provider has to pay a higher interest rate to get investors to lend to it. And when the economy is weak, the reverse is true. Shorter length mortgage terms are negotiated throughout the amortization period and range from 6 months to 10 years. At the end of each term, a new term length and interest rate are negotiated. This allows providers to make more money. It's what the system is designed around. The rights of monied interests out way yours.
@@amunkhufu capitalism should allow me to offer a mortgage to you that is a better rate than the banks. THAT is what is called a FREE MARKET. The government setting rules to prevent me from selling my own financial products is totalitarianism. If I have a personal lending licence I should be able to offer what I want. That's like forcing a paint store to only sell red paint.
BMO is the place I had good and bad experiences. Recently rather very bad. Canadian banks do not need to compete for customers, it is actually opposite, the customers and clients beg Canadian banks for services. No wonder it is like that, since five big cats devided the whole country into their territories and do not need to compete. Somethind unimaginable in Europe or in US
I have 0 sympathy for the people that this is happening to. Taking a variable is a gamble no matter what. 1 out of 5 shows how many thought that taking the lowest interest rates was a sure bet and they lost. Yes, I do have a mortgage and renewed shortly before the rates started shooting sky high. I also heard stories of mortgages at rates of 13.5% (very early in my lifetime). Getting a mortgage is easy, getting the right one is something else. Banks love when you mess up and chose the wrong one where they can cash in. You folks are blaming Trudeau for it, but not pointing fingers at he poor products that were sold to you. Nor that these people blame themselves for not having shopped around to get a product that would fit their needs and capacity. No, easier to blame the PM who, tried to help people.
@@josephkeith6954 So you are asking the government to fix your mistakes again? And last I've checked, seeing 8% mortgages in the US. Don't think you want to be locked for a 30 years at 8% do you? And what most people that are part of the 1 out of 5 took a variable rate with a fixed payment. They had the option for a fixed rate or a variable rate with variable payments. Now tell me who chose the variable rates over the fixed ones? Was it the government?
@@wreckzc curious out of the two “parts” of my comment, you choose to focus on “really?” I don’t mean to disrespect the top post, just writing my response a bit too quick :)
We had supply chain issues that, if anything, required investment to sort the mess out. Instead, we stupidly applied high interest rates and now have an actual recession.
Great news. keep hiking rates ..!!! Best way people to learn debt slavery. Don't borrow more than you can pay...!!! It's not a trap dude. It's being NOT financially being responsible ...!!!! something is going to hit the fan..!!!!
Most people don’t buy their homes with cash. They loan majority of it with mortgage. In 2005ish 5-6% mortgage rate is acceptable due to much lower price. The low 2% interest rate environment play a parts in bidding up the price - FOMO, investors with multiple homes (i am talking about you boomers) all played a role.
All of these economists and analysts always forget about inflation. My mortgage was $200,000 two years ago and the last two year has seen a total of about 10 % inflation. This means my mortgage is effectively only $180,000 , in 2021 dollars. I have had inflation reduce my mortgage but $20,000. Even at 2% inflation , if you are getting wage increases, to keep up with inflation , it is decreasing your mortgage every year. At 2% my mortgage would be decreasing about $4,000 per year , even if I did not pay of a cent of it in nominal terms.
Is short term better for the banks than foreclosure I guess. But I mean people, you got to start selling! Give it up, you can't drive it up forever. Sell!
The main reason people over invest in properties is they believe massive immigrants will make the property prices and rents always go up. So who is the culprit for this?
Government is at fault because they are in a position that can actually do something. Something gotta change. Since when highest household debt among G7 not a red flag? Sad to say but a housing correction needs to happen- just like any investment vehicles - stocks, us Financial crisis 08-09 etc. no bail out please.
Cut up credit cards folks. The stress from the debt and interest is not worth it. Making the minimum payment will get you nowhere just more interest debt.
Here’s the deal, the banks themselves in the formulation should be looked at by the government, and by that I mean a real government, and made, where does the equitable for the banks, as well as the homeowner, instead of being only equitable for the banks.
Yes interest rates were at all time lows. What did they think rates was gonna go even lower? They should of locked in at the lowest rate at that time. Not gambling on their future by living the high life. With surpluses cash to spend. When rates were low they should have made extra money on mortgage. I had a 30 yr mortgage when I bought in April 2014 now it’s down to 12 yrs left. I should be mortgage free by April 2026.
Didn’t know that Canadian banks are so risk tolerant. Variable rates with capped payments? That’s a suicidal loan product. Obviously, that mortgage client needs to double his monthly payments to keep making progress. Meanwhile, time to short some Canadian banks. They are going to be absolutely crushed in the coming year.
still cheaper then rent for now. unfortunately a lot of people will get crushed this time around. I will probably be upside down 100k but still better then renting and would just drive some used cars for 3-4 years and get it back into balance.
Well wait for more rate hikes to come I heard 5 reductions this year made me laugh that 2.9 inflation rate was highly manipulated by reduction in air travel down 13.5%
These are defaults people. Affordability is beyond the Red Alert zone. Why is media talking this issue down as though it's just a new normal?? This is the END
This happens when you buy real estate properties as investment in a way more than your paycheck can afford & colorful marketing by Realtors. 😢 As Warrent Buffet says, Buy only what you need the most ! A beautiful home where you can live in peace is much better than owning 3-4 investment properties.
@@JayandSarah lol, that is probably true... and so many sub prime borrowers not understanding car loans either..anyone can get approved at the same rate as a creditcard... those people really need to not drive or pay cash for a 15 year old civic..
@@666dynomax canadian auto loan repo's are trending way up. 1 in 5 mortgages is reverse amortization at major canadian banks. The situation is shaping up for what it should do... and that is capitulate borrowers and reset asset prices to normal levels. Not this nonsense pricing we have now. Some areas in Ontario have seen very large price drops in the last 60 days. From ask to sell, from $900k down to $700k, 200 under asking to move a home if you have to. About time.Contagion will spread.
Debt slavery - The new normal.
Whose fault is that?
@@steveshutt6409 People are greedy and they take too much in mortgage debt, hoping their houses will appreciated more than than what they paid for their house. And they are shocked when the borrowing interest goes up.
@@steveshutt64091. Banks. 2. A system that works to discipline labor and benefit the rich.
No, this is the consequence of financially illiterate people making choices they (to be frank) shouldn't have been allowed to make.
Rates were historically low, inflation was on the rise.. the central bank was going to have to do something,.. if you bought in that situation without having the finances to manage.. you messed up...
@@elcristoph7380 exactly.
I think they just described renting.
It is far worse than renting. You're paying on 100% interest each month, while piling unpaid interest into future principal, that is also subject to interest! Kind of like digging a hole with a big shovel, while simultaneously filling the same hole with a slightly smaller one. You also can't really just walk away, because then the bank forecloses on your property and you lose 100% of the deposit you put down on your home, which in today's market (20 to 25%) would probably be well over $100k. With renting, you don't continually increase your debt so long as you keep paying, and you can walk away once your lease is over.
Yes, as in zero principal, all interest, plus some more interest that you don’t have to pay today..you have the rest of your life to be a debt slave. That’s the definition of negative amortisation.
@@markb8360 I'm lucky I bought in 2007.
Houses are over priced and banks are doing thier part to hold the prices. Second largest contry with no land shortage, with lumber in backward and the prices are like in manhattan island. A concrete basement, stick frame , vinyl siding, insulation and drywall, plumbing, electrical, Hvac , asphalt shingles should not cost this much. Millions of
hard working Canadians are sucked into this bubble.
yeah, it’s insane. There aren’t good buys anywhere in the country.
To be fair there are large portions of the country no one wants to live in lol
@@djayjpThat's a part of the issue. We are a massive country but much of Canada is inhospitable. Most of where people live are where we grow our food. Roughly 11% of Canada is farmable, and that includes the most bare minimum of hardy crops. Less than 1% of that 11 is very productive, most of which is in either Southern Ontario or the Okanagan in BC (only places you can viable grow peaches in Canada for example).
I know in Edmonton area, cost of the lot is around 40% of the final house price. Its unlimited plain prairie land which is around $5000 an acre, jacked up to millions before annexed to city and hard working Canadians have to pay the diffrence for 25-30years. The city has to buy up land where it wants to expand 25 years earlier to stop this mess.
@@TimothyCHenderson Hmm very interesting stats! Makes sense
Negative amortization = technical default. So the default rate is actually a lot higher than reported.
Housing is a scam in Canada. its cheaper to build your own house.
Same on car dealership.. in the car showroom, old car prices are doubled than new car ( new car wait above 2 years).
A classic 2008 style mortgage meltdown in Canada. No one wants to admit it. Very scary!
@@momofighter3211on what land
@@kylepasta Earth
investors and banks are the only winner in Canada rest of the Canadians have always suffered
That is capitalism. Monied interests out way yours.
Inflation is part of life, if you don't find a way to invest whether it's 10$ a month or 100$ a month then the power of your spending will continue to decrease yearly unless your salary goes up to match.
@@icheatz1 Delusional crypto bro nonsense.
@@BigBore525x capitalism, in other words, making good financial choices..
@@elcristoph7380 Is that what you think Capitalism is/means? How would you define it?
isn't negative mortgage just another way of saying you're in default?
You are in default when you stop paying the bank. If you keep paying them, even if your debt is rising, you are not in default.
Don’t worry, the Mortage will balance itself
Banks: no one can do worse than the subprime mortgage crisis.
Also banks: hold my beer....
It's called Rent from the Bank
This is the debt society we’ve built and encouraged
Not everyone though. Only those that bought in late. We have created a larger divides between the haves and have nots at a much larger scale.
defaults in disguise
It is basic math ..why this people dont get it?... you picked the wrong mortgage type..if you cant pay sell while prices are high and downgrade
Right on the money...!!! Well said..!!!
We have about 25% of mtgs renewing every year. So far 25% of people are paying a higher rate. This coming year another 25% and even if they slowly Stat cutting rates well have let's say another 25%. Standard of living will crater in the next 3 years.
That’s not it
And what do you do when there is nothing to rent or buy for what you received for payment of the roof you've just given away, smart guy?
So lemme get this straight. First they raise rates to fight inflation, and now they will lower rates to fight inflation?
They are raising rates to discipline labor. They've even said "hot labor market," that means the EMPLOYMENT rate is too high. Too many people have jobs. We have too many workers! But also, we don't have enough workers. And at the same time, too many. In reality, they are hoping to raise rates enough until it gets to the point where enough people can't afford basic goods that the corporations decide they had better make a hair less profits and lower their prices because no one can afford to buy them. And that's bad for business.
@@BigBore525x prices will always go up no matter what lower inflation rates wont stop prices going up, it will only make them go up more slowly
@@rochester3 Please re-read what I wrote, you are not understanding. Recessions cause prices to drop, this is what the BOC is hoping to cause with their rate hikes.
@@BigBore525x to boc i say good luck that because interest rates go up with most debts a canadian has, so even if prices were to drop in retail they end up paying more interest on their mortgage,line of credit,car loan etc..
@@rochester3 No, they lose their home to the bank, their car gets repossessed, they default on their line of credit during a recession. The Government should have implemented a tax on the profits of these corporations and imposed price controls on goods. See Nixon when price controls were lifted in 1971. This lifting of price controls resulted in a rapid increase in prices. Price freezes were re-established five months later.
This sounds like what some say about student loans.. they've made all payments and the amount goes up (not confirmed). True the best way is to make up the difference in principal, but not all can afford it. Payments on a $200K 30-year loan at 4% are $955/mo, at 6% they're $1199, and 8% $1468. I don't know about Canadian interest rates, but it REALLY would have been good to lock in below 5% for 30-year fixed - I don't know how much could have been saved with a lower variable rate. I hope they get it sorted out for people. I'm glad I got my first house in 1986 ($132K w/20% down = $105K at 7% fixed.. payments $700..though I just checked what that is in today's dollars.. is $1961, which I couldn't afford).
Unfortunately in Canada we don’t have 30 year mortgages. So even if you locked in at a fixed rate, in about 5 years, you will have to renew to the higher rate
Whatever happened to homes as opposed to houses.
Great lyric from a great song.
CBC news, Thank you for not censoring your funders this time by disabling comments. Sincerely, Canadian Public
Sounds to me like banks gave loans they shouldnt have. Thats what it sounds like. Blame the banks not the consumers.
Home Prices (Asset/Debt Bubbles) MUST be DEFLATED by at least 50% to 75% (an average of 66%) to ease the Inflation, Affordability, Cost-of-Living, and Housing crises in Canada,
If home prices do NOT go down significantly, there will be SERIOUS and DEVASTATING Social, Economic, Political, and Security Challenges for Canada in the years ahead.
"Home" is a "Life's basic Necessity" and not an "Investment Commodity".
Investing in real estate should be banned once and for all.
Criminal gangs, Organized crimes, Mafias, International Drug Cartels, and Money Launderers have heavily invested in Canadian Real Estate and infiltrated the CREA, mortgage brokerage firms, the Cities and Towns Councils, Provincial entities (BCLC, BC Casinos, BC Assessment, and Green Belt scandal in Ontario) to buy favors.
I mean one of your sentences/pronouncements there seems totally crazy lol
@@chineseRATFACE rates are not going down, even if they go down they will pushed back up again to MUCH HIGHER rates
YOU will SEE how the REAL ESTATE CASINO will collapse in Canada.
Interest rates will decrease in the near future; otherwise, no new homes will be built. Additionally, the economic growth rate will turn negative.
@@chineseRATFACE I agree, too many renters/house flippers. The house flippers know how to circumvent any rules to pay the taxes. They rent for a while and once the house has passed the time period to be considered a flip, they sell it. Laws are so poorly written that there are 1000's of loopholes. Those very loopholes were put by someone that wanted to take advantage of it and share it with others (Conservatives and Liberals).
Time to reunite Canada by getting rid of what divide's us, Political parties! We should be able to elect a PM and the MP of our choice. Not have a PM selected because he's the leader of a party that get's the most seats!
Low interest rate is what got us into this hole in the first place. 4-5% mortgage rate should be the norm and a housing correction is imminent. Don’t think housing price will correct just look at US housing correction in 2008 / 2009. This reporting of 20% of negative mortgage is just the BEGINNING. More mortgages will need renewing in the coming year or two and interest rate may not come down that much. Definitely not 2% mortgage rate. That’s unhealthy
We have one of these fixed payment variable rate mortgages. At least with our bank it comes with a trigger rate. Which will readjust your rate if our payments are digressing too far from the amortization schedule.
We've been fortunate enough to be able to pay enough to lump sum upfront, which knocks down our principal earlier and actually accelerate our amortization. But for those who aren't doing that... the shock will come when they renew. But yes... variable rate was definitely a regret.
why would you not up the payments as interest goes up?
Same
Why did you take a variable rate in the first place? Why didn't you go for a fixed interest rate at the time, wouldn't that have been the safer and smarter thing to have done? What was it that made the variable more attractive to you than a fixed?
@@ClearOutSamskaras at almost every point in time a variable rate mortgage is cheaper. theres research out there on that, sure the last few years a fixed is a safer way to go, but general rule of thumb, over the life of a mortgage, variable will be cheaper in the long run.
@@666dynomaxI'm asking markuswong why he chose to take a variable. I'm not asking you why markuswong chose to take a variable. Since you're such a fan of research you'll understand the difference between these two types of questions, the one that I actually asked vs. the one that your charming verbal diarrhea fevered self would like to believe I asked.
I realize that most of humanity is always eager to hear what you have to say about any topic you're generous enough to speak on, but I'm not one of those of those billions who cares to hear from you on any topic (crazy, I know). Again, it's markuswong that I'm addressing, so if it's alright with you Your Eminence let's give him a chance to reply about _his own_ decision even though you are convinced that you are better informed about and better able to answer as to his motivations than he is.
Own nothing, be happy!!!! LOLOLOL
Don't worry be happy. Sunny ways people. Just dont think about monetary policy. I'm sure that mortgage lenders aren't. Right?
The problem is this system we allow ourselves to accept.
Only if you signed the dotted line.
Thanks Justin!
Variable rates become the holders problem, fixed are the banks. Still with the 5 year system everyone is basically variable rate. Wish I’d just paid the exit fees during the massive interest rate drop and locked in for 10 years. Not sure what I was thinking that things would get lower than 2%.
CRAZY!! The end is nigh! I thought this would be like 5-10% of mortgages....
I have BMO (in America) for a car loan and a credit card. It is the most F'd up backwards bank I have ever dealt with... Their phone app is horrible and does NOT SHOW LATE payments (car loan is for my daughter on her car) NOR does it APPLY PAYMENTS (whether done on app as bank to bank transfer OR from my savings AT BMO until the next "Mon-Fri" business day... so if it's made Saturday morning or even Friday night after banking hours, it's not applied until Monday. 😡😡😡 I've gone into local branches to find out what's going on, and have had to spend 30-45 minutes as they had to call multiple other places to figure out what is going on. That is NOT how a bank should be run!
Will someone think of the poor bankers? How are they going to put food on their table?
Two things:
Variable rate mortgages can be a trap. They are great when inflation and interest rates are stable or declining. In a rising inflation and/or interest rate environment, what seemed like a good idea can turn on you with a vengeance. The best solution is to increase your mortgage payment (if you can) to cover the interest gap and ride it out. You won't be building any equity, but you won't be getting deeper in debt either.
This is not a new phenomenon. In 1985 we had a short period of steep interest rate increases (can't recall what the reason was) but mortgage rates hit 22%. What the smart banks did at the time was limit the mortgage payments to interest only. That lasted for about 6 months while the financial markets sorted themselves out. Rates eventually declined to normal. The problem we're facing is the reshoring of a lot of US industry that migrated to Asia (China being the biggie) in the 90s and 2000s. COVID severely disrupted the complex and extended supply chains for these industries and coupled with the rise in labour costs in China gave them a serious wake-up call to the risks they faced. Shortening the supply chain and reliable, stable labour is now a critical driver. But reshoring is EXPENSIVE (capital intensive) which drives up the demand for capital and thus interest rates. Add to that a tight US labour market = wage inflation and we have a big chunk of what's driving the inflation in the NA economies and the drive by the Fed to supress inflation. The problem is that the reshoring process is going to take years to complete (there's a lot of industrial infrastructure the needs to be built from scratch) so we have at least another two to three year of this interest and inflation volatility to live with. We'll se how effective the Fed is at getting inflation under control, and KEEPING it under control ... the jury's still out on that one.
Stop the liberal explanation. This is 8 years of liberal base in charge. 😡
Lies again? CPF Mortgage USD SGD
You left out greed, inflation as one of the catalyst. Was that per spoon purposefully?
When someone extends their amortizations, they do the rest of Canadian's a disservice by keeping inflation higher and interest rates higher. Thanks.
Banks love it though, a bailout at the expense of the middle class.
That shouldn't be allowed.
I think they call that insolvency.
20% is way, way too high and the new rules will favour lenders and will lead to even more Canadians, sounds like at least 20%, being disqualified from owning a home. It's disgusting.
20% isn't high enough. People need to be protected. 20% protects them.
Interest rates will decrease in the near future; otherwise, no new homes will be built. Additionally, the economic growth rate will turn negative.
A minimum of $ 125 of payments ought to be applied to the principle regardless of interest amount.
In 3 yrs i will be paying 175000 and interest is 162000. 12000 toward principal in 3 yrs. This is very sad
@@Loverofnumber to clarify, if the payer go's into negative amortization rates then the bank would have to apply $125 to pay down the principle. If interest rates go down in the future, then regular amounts applied to the principle would be so applied.
Why $125? What difference does that really make if you have a $600k mortgage, which is pretty normal these days (lol). People were willing to sign on the line for things they could not pay for if fundamentals changes - and the change of rates going up, was 100%! People got suckered.
Keep voting For JT
The sheep will indebt themselves no matter what clown is driving
This is what happen when lalaland replace common sense. I will not be surprised if most of those folks are people who over leveraged themselves. A classic 2008 style mortgage meltdown. But no one wants to admit it. Negative amortization is a fancy word for default. Not sure how long those 3 banks will be able to maintain those loans in parallel with the high rate environment. This is very scary stuff for the economy.
Hey look, a boomer! Or a business owner, or some other privileged individual who gets their jollies off of calling out hard working Canadians who were set up to fail. "over leveraged" = a short sighted dim view by those who have no sympathy or understanding of the realities of current culture in this country. Only thing that seems to concern you is how many bags of money you can rack up before it cracks, another fine example of the leeches who created this problem in the first place.
Doesn't the USA allow it's people to 'write-off' the interest payment on there mortgage in income tax? If you switch banks to get a better mortgage rate, then your amortization period is back up to 30 years again. There should be a better way to borrow on a house. This amortization band scheme is a constant nightmare for home owners for most of their lives. Try to move your mortgage and you pay thousands of dollars in a penalty.
The US has no Medicare, failing infrastructure, gun violence, extreme racism. But they can write off the interests on a mortgage.
Since MOST mortgages in US are fixed rate LONG term loans (15/30 yrs), with historically low interest rates (as low as 2.75% for 30 yr loans) coupled with increase in standard deduction, # of people who will benefit by itemizing deduction for mortgage interest deduction have decreased significantly.
Also, you don't "write-off" interest payment in income tax, just the amount is reduced from your income. so, if you make $100k in income and have 18% tax rate (simple calculation) and have $10k interest, simply, your tax will be reduced from $18k, to $16.2k ( (100k-10k) * .18), so $1800 less in taxes.
Unfortunately, with USUAL "fixed" rate term of only 5 yrs in Canadian mortgage, the interest rate hike will be soon felt by a LOT of people when their new term comes in.
You explained it just like I would have. That was litterally perfect@@strangerland9791
There is more than one way to pay your mortgage. Pay additional payments against the mortgage. most mortgage allow you to pay at least 20% of the total amount annually
of a lump sum amount.
Easier said than done.
Not really that hard. All banks have online payments process
@vies You are dense. It's not about the methods of paying their mortgage, it's about where these people are going to come up with the money to pay their ever increasing mortgage payments.
@@cgasucks that's Mr. Dense to you, thanks. If you live your life beyond your means yes it will be hard. Want is the most expensive word in the English language and many people buy more stuff than they need. Internet as is you tube is a want not a need.
WHY DOES THE GOVERNMENT MAKE IT ILLEGAL TO GIVE LOANS THAT HAVE THE SAME INTEREST FOR THE LIFE OF THE LOAN????
When the economy is strong, more companies want to borrow from investors to expand their business. So, a mortgage provider has to pay a higher interest rate to get investors to lend to it. And when the economy is weak, the reverse is true. Shorter length mortgage terms are negotiated throughout the amortization period and range from 6 months to 10 years. At the end of each term, a new term length and interest rate are negotiated. This allows providers to make more money. It's what the system is designed around. The rights of monied interests out way yours.
Because of how capitalism works
@@amunkhufu capitalism should allow me to offer a mortgage to you that is a better rate than the banks. THAT is what is called a FREE MARKET. The government setting rules to prevent me from selling my own financial products is totalitarianism. If I have a personal lending licence I should be able to offer what I want. That's like forcing a paint store to only sell red paint.
@@BigBore525x if I find lending customers that want my loan products, it shouldn't matter what the rest of the country is doing.
Maybe next time choose a fixed rate.
Very predatory. Of course the banks don’t mind. It’s a secured, perpetual, increasing revenue stream.
Yea, so predatory for the bank to offer loans to people who want to buy homes… LOL
@@phil649 Predatory, in that banks are extending amortization periods to 47+ years. This overwhemingly favours the banks.
BMO is the place I had good and bad experiences. Recently rather very bad. Canadian banks do not need to compete for customers, it is actually opposite, the customers and clients beg Canadian banks for services. No wonder it is like that, since five big cats devided the whole country into their territories and do not need to compete. Somethind unimaginable in Europe or in US
House prices also go down and have many times over the years. Do people not know their history?
Wait till they go to renewal and need to bring it back to the original amortization. These people will be destroyed!
When your neighbour loses house it’s a recession.
When you lose your house it’s a depression .
I have 0 sympathy for the people that this is happening to. Taking a variable is a gamble no matter what. 1 out of 5 shows how many thought that taking the lowest interest rates was a sure bet and they lost. Yes, I do have a mortgage and renewed shortly before the rates started shooting sky high. I also heard stories of mortgages at rates of 13.5% (very early in my lifetime).
Getting a mortgage is easy, getting the right one is something else. Banks love when you mess up and chose the wrong one where they can cash in.
You folks are blaming Trudeau for it, but not pointing fingers at he poor products that were sold to you. Nor that these people blame themselves for not having shopped around to get a product that would fit their needs and capacity. No, easier to blame the PM who, tried to help people.
Really? Who can force banks to institute 30 year fixed mortgage like in the state?
@@josephkeith6954 So you are asking the government to fix your mistakes again? And last I've checked, seeing 8% mortgages in the US. Don't think you want to be locked for a 30 years at 8% do you?
And what most people that are part of the 1 out of 5 took a variable rate with a fixed payment. They had the option for a fixed rate or a variable rate with variable payments.
Now tell me who chose the variable rates over the fixed ones? Was it the government?
Really? Such an ignorant comment.
you are correct
@@wreckzc curious out of the two “parts” of my comment, you choose to focus on “really?” I don’t mean to disrespect the top post, just writing my response a bit too quick :)
Never, Never, Never take out a variable rate mortgage with a fixed payment.. That's just a trap. Not sure why people do this...
Not to worry too much.
Once the mortgage comes to renewal you wont qualify and will foreclose.
We had supply chain issues that, if anything, required investment to sort the mess out. Instead, we stupidly applied high interest rates and now have an actual recession.
No its not called, " rent". It sounds crazy
Great news. keep hiking rates ..!!! Best way people to learn debt slavery. Don't borrow more than you can pay...!!! It's not a trap dude. It's being NOT financially being responsible ...!!!! something is going to hit the fan..!!!!
Most people don’t buy their homes with cash. They loan majority of it with mortgage. In 2005ish 5-6% mortgage rate is acceptable due to much lower price. The low 2% interest rate environment play a parts in bidding up the price - FOMO, investors with multiple homes (i am talking about you boomers) all played a role.
Holy I know some friends with variable
He looks like he's been waiting years to throw this in the faces of those who disagreed with him lol
All of these economists and analysts always forget about inflation. My mortgage was $200,000 two years ago and the last two year has seen a total of about 10 % inflation. This means my mortgage is effectively only $180,000 , in 2021 dollars. I have had inflation reduce my mortgage but $20,000. Even at 2% inflation , if you are getting wage increases, to keep up with inflation , it is decreasing your mortgage every year. At 2% my mortgage would be decreasing about $4,000 per year , even if I did not pay of a cent of it in nominal terms.
With higher interest rates, we need more immigration to to adjust the home prices.
Not how it works
I make about 350k annually and even my mortgage is in negative amortization. Canada is dying fast
The answer is simple. You basically can't afford the home anymore. See it and buy a smaller/cheaper one. Payoff the mortgage ASAP.
Is short term better for the banks than foreclosure I guess. But I mean people, you got to start selling! Give it up, you can't drive it up forever. Sell!
Why aren’t mortgages interest long term when a property is bought instead of 3-5 year’s mortgage renewal.
Its not a good economic model
The main reason people over invest in properties is they believe massive immigrants will make the property prices and rents always go up. So who is the culprit for this?
Government is at fault because they are in a position that can actually do something. Something gotta change. Since when highest household debt among G7 not a red flag? Sad to say but a housing correction needs to happen- just like any investment vehicles - stocks, us Financial crisis 08-09 etc. no bail out please.
YES!!!!! It’s happening! The crash is EMINENT!!! 🤣
Cut up credit cards folks. The stress from the debt and interest is not worth it. Making the minimum payment will get you nowhere just more interest debt.
Here’s the deal, the banks themselves in the formulation should be looked at by the government, and by that I mean a real government, and made, where does the equitable for the banks, as well as the homeowner, instead of being only equitable for the banks.
How is rate hike helping Canadians? The inflation is staying high.
the banks won't refiance at the end of the 5yr term
47 years? And renting was tooted a bad idea, wow.
He is a lucky guy, Just pay $1133 per month, he can live in a house. Many people have to pay more for rent to live in a small place.
Thinking it was a mis-print is very telling.
These banks are greedy...simple...they make half a million on interests say for a 700K condo.
Yes interest rates were at all time lows. What did they think rates was gonna go even lower? They should of locked in at the lowest rate at that time. Not gambling on their future by living the high life. With surpluses cash to spend. When rates were low they should have made extra money on mortgage. I had a 30 yr mortgage when I bought in April 2014 now it’s down to 12 yrs left. I should be mortgage free by April 2026.
Didn’t know that Canadian banks are so risk tolerant. Variable rates with capped payments? That’s a suicidal loan product. Obviously, that mortgage client needs to double his monthly payments to keep making progress.
Meanwhile, time to short some Canadian banks. They are going to be absolutely crushed in the coming year.
Incredibly sad
still cheaper then rent for now. unfortunately a lot of people will get crushed this time around. I will probably be upside down 100k but still better then renting and would just drive some used cars for 3-4 years and get it back into balance.
wow,, who could have seen this coming?
Indentured servitude for life just to buy a home lol
i live in canada im poor disabled.. whats a house?? send a diagram
Or you sell if the value of your home dwarfs your mortgage
It feels nice to have no debt and 70k invested in equities. No education and a paid off truck too.
Well wait for more rate hikes to come I heard 5 reductions this year made me laugh that 2.9 inflation rate was highly manipulated by reduction in air travel down 13.5%
I’m paying 2700 interest only
These are defaults people. Affordability is beyond the Red Alert zone. Why is media talking this issue down as though it's just a new normal?? This is the END
Just wait until prices crash 50-60%!
interest rate is plain theft.
I am trapped same way! My mortgage is 60 plus year. 5.97$ going to my principal
My mortgage interest about 1 k and amout to payoff is less than 200k.
Sorry to hear that.
😢
What is your % Rate ?
This happens when you buy real estate properties as investment in a way more than your paycheck can afford & colorful marketing by Realtors. 😢 As Warrent Buffet says, Buy only what you need the most !
A beautiful home where you can live in peace is much better than owning 3-4 investment properties.
But the banks are still making profits what a system
This has become absurd.
That is what happens when you print money without matching productivity
Debt servitude, your home becomes your debt prison cell.
Its the banks that are getting richer
The banks are eating with two hands lol
Oh yes, lets print a bunch of money and give it to everyone with very little checking. Now we're suffering the terrible consequences
Mortgage Backed Securities anyone? No Freeland, nooo!!
OCT. 7
Debt slavery?
i did not even know there was a fixed rate variable. I don't believe Scotiabank has this,and it does not seem like a very good idea.
Most people who got them didn't even understand what it meant. People know more about their cellphones than their financing.
@@JayandSarah lol, that is probably true... and so many sub prime borrowers not understanding car loans either..anyone can get approved at the same rate as a creditcard... those people really need to not drive or pay cash for a 15 year old civic..
@@666dynomax canadian auto loan repo's are trending way up. 1 in 5 mortgages is reverse amortization at major canadian banks. The situation is shaping up for what it should do... and that is capitulate borrowers and reset asset prices to normal levels. Not this nonsense pricing we have now.
Some areas in Ontario have seen very large price drops in the last 60 days. From ask to sell, from $900k down to $700k, 200 under asking to move a home if you have to. About time.Contagion will spread.
LOL how is this country allowing just zombie mortgages, what's the end game
"Justin more debt" ....sounds about right
So 80% are not negatively amortizing. Glass is well over half full!
For now, however lots of mortgages will be up for renewal.
Banks are just legal loan sharks now. Wait and who has shown record profits over the last few years. I’ll give you a hint. Starts with bends in S
boom boom out gos the light