The Steely Determination Of The Richest Man in Canadian Lending
I don't really know Stephen Smith. When we walk past each other at a Trade Show he might say, "Hi Ron" and I will reply "Hi Mr. Smith" (He started at Zero to $3B, so he will always be Mr. Smith in my mind)
Canadian Bank Regulator Studies Tightening Mortgage Lending: Welcome To The Gold Rush
@RobMcLister did a great piece on the details, to sum up: Peter Routledge the OSFI Superintendent opens consultations on tightening mortgage rules related to total lending versus income
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One BIG problem: any time any Regulator or Policymaker opens up the topic of Mortgage Rule tightening in the future 85% of the RE Agents and Mortgage Brokers start Advertising "Last Chance to BUY a house" just as night follows day there will be unwanted market stimulus
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At likely the worst time: First Time Home Buyers will be told its the last hope to buy before changes in lending rules take away their final chance to own a house
Because although they have come off totally insane highs in the GTA / GVA house prices are still Batshit Crazy
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Why Are People Still Choosing Variable Rate Mortgages? Because Their Advisors Are Idiots
About 15% of new Mortgages are still Variable
Today, Variable Rate Mortgages have higher rates and payments than 1, 2 or 3 year Fixed Rates
So why the Hell would people pick them?
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I had this conversation yesterday with a mortgage shopper
Him: They always work out better than Fixed
Me: Generally, yes, but not right now
Him: The penalty is lower for Variable
Me: Not if you take a 1 - Yr Fixed then absolutely the same
Him: Prime Rate is coming down
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Someone, could be his Bank, could be a RE Agent, could be his random friend told him about the PIVOT and come Spring Prime Rate will drop which is wrong
It's a small group. the vast majority of clients chose Fixed Rates today and never longer than 5 years
Bank CEOs Start Talking About Mortgage Defaults = Truth or Spin?
Every time a Big Bank CEO says something other than "What's for lunch?" or "Where's the restroom?" You should absolutely know they planned out what they are saying because it will be recorded some how
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So if a Big Bank CEO says: "There will be mortgage defaults" it's was mapped out a week before
Of course, there are going to be more mortgage defaults
Many mortgage rates have gone up over 100% in 10 months, so Duh, there are going to be problems
But what's real?
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And what's manipulation?
When a Big Bank CEO says 2.5% of mortgages have problems, its theater
The CEO knows 95% of those "problems" can be solved easily with extended amortization or just aren't even serious to begin with but by sending out the "problem" message
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Canadian House Prices in 2023:.Most Markets Grind Lower
Let's be clear: There is NO CANADIAN HOUSING MARKET
There's a bunch of regions with separate trends and conditions
But the math of high mortgage rates effects all of them
The highest priced feel the most pain
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GTA and GVA have the most to lose
Particularly Fraser Valley and distant GTA suburbs and satellite communities
The insane run up of 2021 prices have already given back almost all their gains in some cases 25% to 30%
Core cities much less decline
But there's more to come
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New listings were very low and Sellers were convinced that they could wait for a quick market recovery
Likely we will see a few forced sales from mortgage payment pressures and thousands of new Condos that have real trouble closing in the next 3 to 6 months
Mortgage Math: The Killer Effect of Doubling Rates in Less Than 1 Year
It's quite popular today to see posts describing how Real Estate price drops in many Canadian markets offset the rise in Mortgage Rates
These posts are stupid and deceptive
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What sense does it make to use the absolutely insane February 2022 prices as a base case?
Sure those Batshit Crazy House Prices have fallen but it is not sensible to say because prices at the absolute peak are down 30% that it's all good now
Let's talk real numbers
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Simple Example $900K Townhouse 20% down payment = $720K mortgage requirement
Let's assume 30 yr amortization
July 2020 Rate 1.99% 5 yr Fixed = $3045 monthly payment + $440 monthly property tax and maybe $129 monthly condo fees = $3614 Total