Mortgage Payments for New Loans in Vancouver Up 4.5%

Steve Saretsky -

Mortgage Payments Rising, Canadians Tapping Into Equity As Debt Grows

The average mortgage payment for new loans in Vancouver rose by 4.5% year over year in the fourth quarter of 2016 to $1936 per month. Canada Mortgage and Housing Corp. says the fact that the average scheduled monthly payment is growing faster than inflation is concerning because it suggests that homeowners could struggle to make their payments going forward.

Homeowners are getting creative to keep up with record debt levels, now 167% of disposable income. Homes are being converted into ATM Machines. “Homeowners with significant unsecured debt are currently able to refinance this debt through a second mortgage or home equity line of credit (HELOC)” claims personal bankruptcy firm Hoyes Michalos.

Naturally this is keeping delinquency rates incredibly low. The number of people filing for either a consumer proposal or bankruptcy that owned a home fell to just 7% at the end of May 2017. A massive drop from the all-time high of 35% in February 2011.

Of course, this scheme of turning shelter into an endless ATM is a result of surging home prices. Vancouver home prices are up over 40% the past two years, while Vancouver condo prices are still increasing by Over 2% per month. This will ensure the money tree continues to grow, especially important considering Canadian real estate has become the number one contributor to household wealth.

Canadian Wealth in Real Estate
Canadian Wealth Mostly from Real Estate.

With real estate the number one contributor to Canadian wealth, and a key source of financing our lavish lifestyles, it seems unlikely the Bank of Canada will hike interest rates anytime soon, despite their hawkish comments yesterday.

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The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

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The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

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Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

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The Saretsky Report. December 2022