Thread by @ronmortgageguy

The Banks Aren't Screwing Canadians

This won't be a popular post

People will say I am shilling for my industry

But it has to be said: the reason mortgage rates went up is not to fill the banks pockets

And mortgage Skip a Payment has to attract interest

Here's why:

2/

/2 Even though our Government is raining down balance sheet money on the Banks it hasn't corrected credit spreads

I know this isn't easy stuff and I am no expert but it starts with knowing a bank doesn't fund mortgages from a big box in the basement on King Street

3/

/3 A bank funds mortgages and then wraps up a huge batch of them and turns them into a bond, or another financial instrument

Then it's part of an investment fund bought by you or government buys it as a bond or something else

Bottom line, the bank owes interest on it soooo

4/

/4 it has to pay that other party that interest even when you don't pay your mortgage payment: hence the interest keeps getting tacked on your mortgage

No point in saying don't pay anyone because then your ATM card stops working

And mortgage rates go higher because:

5/

/5 In a crazy bad financial crisis like this nobody wants new mortgage debt but people still need mortgages so rates have to go up to find a market for the mortgage debt

By now your calling BS on all this, I get it, the big box full of money in the basement sounds better

/6

6/ More simply: the banks REALLY wish this whole thing hadn't happened, eventually you will see their profits are down

Okay, the hate Tweets can start now

And for the actual experts on Treasury, CMB, MBS all the other acronyms, remember, I am just a dumb mortgage broker