Last week we highlighted some recent data from Desjardins which noted that nearly every borrower who took out a fixed payment variable rate mortgage during the pandemic now owes more in interest than their original fixed payment. Trigger rates galore. It appears the Bank of Canada is finally coming around to the same conclusion. In a research paper released this past week, the Bank of Canada noted that about 50% of all variable-rate mortgages with fixed payments (not just pandemic borrowers) have reached their trigger rate. This represents about 13% of all mortgages outstanding. Let’s not forget that 13% figure does not include variable rate mortgages with FLOATING payments. At the end of the day it is very simple, you can not raise borrowing costs by 400bps in less than a year on top of a highly indebted household sector without experiencing significant financial stress. There’s a reason the Bank of Canada has been increasingly mentioning financial stability concerns in recent months. Don’t be surprised to see a smaller 25bps rate hike at the December 07 announcement. In a recent poll from Nanos Research, 47% of households say their finances have worsened over the past year. This is the highest

No bottom yet. Data published by CREA last week showed national house prices slid lower in the month of October, dropping 1.2% month-over-month. The national home price index is now down 15% since peaking in March earlier this year, the steepest correction on record since the index was created in 2005. Just for comparison sake, the previous record was a 9% peak to trough decline in 2008-09. The index measures the price of a “typical home” in Canada. In other words, the typical home across Canada has declined by $132,900 this year. Of course all Real Estate markets are hyper-local, and the declines are not spread out evenly. However, other than Calgary, most major metros are enduring a real correction. Source: RBC We should not underestimate the ramifications of a 15% price correction to the national home price index. Real Estate transactions and mortgage volumes have been slashed nearly in half. It is survival of the fittest now. The industry is going to go through a significant restructuring after a blistering hot bull market sowed the seeds of its own demise. Two things got my attention this week: Properly, a tech startup/ real estate brokerage has announced significant job cuts.