The World Of Private Mortgage Lending Keeps Cracking: And It Will Get Worse Before It Gets Better

One of the largest Private Mortgage operations in Canada: Kingsett announced it will suspend redemptions & distributions

Why is this happening? What happens next?

2/ Kingsett suspended both distributions (profits to unit holders) & redemptions (investors can't get money out) from it's $4.9B Canadian RE Income Fund

This fund is about $1.9B of Commercial Properties the Fund owns the rest is Mortgage Lending on Commercial Properties

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Is The Bank Of Canada Going To Cut On December 11th? YES There Will Be A Cut

Not likely to be 50 BPS but I am not certain it was ever going to be 50 unless we had catastrophic Job Losses

Inflation is up to 2% but we expect monthly reports to move around

Trend is important

2/ Not the up & down of monthly numbers, 4 or 5 months in one direction is a Trend but each report will have minor gyrations

Another 25 BPS cut is a lock & further cuts next year barring a CLEAR & obvious resurgence of inflation

Variable Mortgage Rates will continue down

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Mortgage Defaults: Crisis Coming? Renewal Cliff Approaching? Or It's Going To Be OK?

Big questions here

Let's separate the facts from the fiction

Mortgage Defaults (Missed payments for 90 Days) are increasing

But it's not what you might think, the lenders may not be banks

2/ Low Mortgage Default Rates are a wonders of Canadian Banking

Defaults floated between 16 to 18 BPS in 2022 (less than a quarter of one percent) Bankers in the USA (Average of 34 BPS) were so shocked by the low numbers they believed Canadian Banks didn't take enough risks

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We Stopped Building Single Family Homes In Ontario & BC: Why Doesn't Anyone In Any Government Talk About It?

New Construction Starts in Ontario for Single Family Homes fell to the lowest point in 69 Years

The population has grown over 450% in those years

WTF Happened?

2/ Policy Happened, mostly bad Policy

In BC the stats are not much different

Greater Vancouver new Single Family Housing is virtually extinct versus previous decades

BIG QUESTION: was the general public in these provinces ever asked if they wanted the end of Low Rise Homes?

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TRUMP WINS! What's It Mean For Canada & Mortgages

Possibly the most important political lesson that can be learned from last night is: It's JUST the Economy

If average people feel they are worse off financially than they were before they will throw existing politicians OUT

2/ And the American economy is running much better than the Canadian economy

Let that sink in

Trump has talked alot about bringing Manufacturing back to America through Tariffs

A 10% Tariff on Canadian goods would be devastating to us

But ultimately Trump is transactional

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Really Bad US Jobs Report: What's It Mean To Canadian Mortgage Rates?

Quite a bit actually

US Jobs numbers revised down & similar to Canada: Government adds jobs but private sector is reducing payroll

Opens the door for rate cuts by the US Fed

Expect Jerome Powell to cut

2/ Eventually the Bank of Canada has to worry about a falling Canadian dollar but the US Federal Reserve cutting means the drop in the CAD will slow

We will continue to see the BoC cut rates as most Central Banks synchronize rate cuts

25 BPS to 50 BPS cut on December 11th

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Immigration Is Going To Slow Down In Canada: What's It Mean For Real Estate In Canada?

By 2026 it's going to be a BIG for those who rent rooms or depend on Students for revenue

Permanent Resident targets are dropping it's very important to understand most are already HERE

2/ A big percentage of Permanent Residents come from:

- The International Temp Workers Program

-International Students

In the last 3 years over 2 Million have entered Canada in those categories, in 2025 & 2026 Canada could fill it's new reduced Permanent Resident targets

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50 BPS Cut: Bank Of Canada Governor Follows Bankers Orders? Tiff Macklem Knows Who's Boss?!

Every Bank Economist except TD & several Bank Execs called for 50 BPS & Tiff delivered

This is great for Variable Mortgages but horrible news for the Canadian economy

Emergency Cut

2/ When Central Banks enter the cutting cycle following a sharp rate run-up to break inflation the idea is constant 25 bps cuts to show no panic about economic decline

50 BPS means bad news is coming, an economic slowdown, rising unemployment & all the pain that comes with it

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We Know What's Going To Happen To Prime Rate: DOWN
What's Going To Happen To Fixed Mortgage Rates?

While we wait for the Bank Of Canada's Rate cut tomorrow (and more of them to come) what will happen to Fixed Mortgage Rates?

They go down right?

Well, that's a story......

2/ Let's review 5 - Yr Fixed Rates the truth is unless you have an absolutely certain life event on a 2 or 3 year schedule that would cause you to sell your home in 2 or 3 years the correct way to look at choosing Mortgage Rates is either OFFENSE (Variable) or DEFENSE (Fixed)

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Nothing Will Stop Canada's Economy From Slowing Next Year: We Need To Plan For It

What's does an old, fat mortgage broker know about the Canadian Economy?

I get the calls, watch the reality of ordinary people's economic lives

I understand real estate trends clearly

2/ And it ain't good, everyday people with renewing mortgages have higher payments

The Construction Industry in the 2 provinces half of all Canadians live in grinds slower every day

Manufacturing slows gradually but clearly

Every Big Ticket National Retailer sees sales down

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Why Has The Federal Government Decided The Key To Housing Affordability Is: BORROW MORE

As a country we must think very hard about this

Home prices in Canada are Batshit Crazy, I don't mean the mansions of the rich

I mean an average house in DISTANT suburbs in BC & Ontario

2/ Very ordinary single family homes an hour & a half away from downtown Vancouver & Toronto are just under $1M sometimes over $1M

Which is ridiculous: 8X or 9X average family income is all wrong

The ONLY logical hope is lower prices or 10 years of zero price increases

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Fixed Rates Bump Up Bond Yields Rise 40 BPS In Less Than 3 Weeks: What The Hell HAPPENED?

I have posted about 200X that CAN Bonds are a traded commodity: no government sets these rates these bond yields are a function of what traders think that day

Yeah, that's what it is

2/ It's a small group of Traders opinions

To radically oversimplified: it's Traders & Analysts opinions on where Bond Prices will be over time

We will often hear phrases like "the Market says" or "Market beliefs are"

The "Market" they refer to is a small group of people

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Variable Mortgage Payment went UP For The Last 16 Months Why The Hell Aren't They Coming DOWN?

Because even though we have had 3 Rate Cuts in a row, many Variable Rate borrowers have seen no decrease?

How is that even possible?

Let's break it down between the lenders

2/ Scotia & National Bank & every Mortgage Financing Corp. like MCAP & First National have true Variable Mortgages if the Bank of Canada raises it's rate your payment goes up if the BoC lowers it's rate your payment goes down

But if your Variable Mortgage is at other Banks: NO

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A 50 BPS Rate Cut From The Bank Of Canada A Month From Now: Looks Like That's A YES

I know that for a guy who thinks prediction is a Crap Business I have been saying a lot about the future of mortgage rates

I think this falls much more into the category of analysis

2/ The 50 BPS initial cut by the US Fed was an eye opener, they sure as hell could have lead off with a smaller cut but didn't & in Poker they call that a "Tell"

As I have said many times before Central Bankers everywhere have instant access on very up to date economic info

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Let's Get Clear About Mortgage Rates: They Will Keep Coming Down & People Need To Pick The Right Term

People often ask their Bank which mortgage term to take at renewal & most bank employees just respond with what they've seen lately so they say: 3 -Yr Fixed

DON'T DO IT!

2/ Why was 3 - Yr Fixed a good idea for the last couple of years but bad now

Easy: we knew eventually rates would come down but weren't sure when: so don't take a 5 - Yr even if it was lower than a 3 - Yr because 5 was just too long at high rates

Guess What? Now we know!

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What Does The Government's Decision To Make $1.5M A Starter Home In Canada Mean?

Because that's what this is: a $1.5M price falls under Canada's government sponsored Housing Plan in the USA it's $766K

Most dangerous point: Canada will do what it takes to prop up Real Estate

2/ This is the message to Developers, the RE Industry, the Banks, the Provinces & Municipalities: WE HAVE YOUR BACK

We will always act as a backstop for Real Estate in Canada

If you get in trouble we will bail you out

Quick summary of changes:

25 Yr Amortization to 30

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Premier Ford Needs To Step Up & REVERSE Insane Increases In New Home Construction Development Costs In Ontario

Since 2010 The City of Toronto has increased their charges to Developers to build New Homes by 1000% (no that's not a typo)

Other Cities & Municipalities similar

2/ Municipal Governments in Canada fall under Provincial control & although Premier Ford likes to be a people pleaser & avoid fights we have fallen into an unmanageable problem

That Cities & Towns add $150K to $350K to the price of every new home in the Province is unacceptable

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Recession On It's Way? Sure As Hell Looks Like It: Maybe It's Already Here

Crappy Jobs Numbers today & they will get worse

The highest level of legal Immigration on Earth increasing Canada's Population by 10% in 3 years will make stats look better

Reality is pretty bad

2/ The only job growth in Canada is in Government

Think about that: without taxpayers shelling out more for salaries, Unemployment numbers would be much worse

We may not see real contraction in GDP until next year as Foreign Students & International Temp Workers head home

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Bank of Canada Lowers Rate: And Will Cut In October And Again In December

It will become barely a news item soon

Let's face it: once everyone knows what's coming, there's no more tension & less attention

But how fast do ordinary people absorb this trend?

It takes time

2/ If you're seeing this post, either you follow me or have an interest in Financial / Housing / Mortgage matters

But many people don't take much interest, even homeowners with mortgages

They mainly do research on mortgages when renewal time comes or HELOC rates change

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Tomorrow The Bank Of Canada Will Lower Rates 25 BPS: NOT A Prediction Just A Statement Of Fact

Like Gravity or the Sun coming up

Bank Governor Tiff Macklem actually had a damn boring job at some points in the rate cycle

His only job now is deciding when to stop cutting

2/ The Canadian Economy is well & truly humped, Ontario is circling the drain, BC is getting nervous, Alberta is experiencing a slow down in house sales & I am surprised at that, but Alberta is still fine so far

In the other big Province Quebec, not as exposed to Real Estate

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The Fastest Growing Trend In Ontario Real Estate: Purchase Failures

People buy a house but can't CLOSE

I have posted about this before but speaking to a lawyer who's company is working on 350+ RE deals a month confirms

500% increase in Closing Failures versus Pre-Covid

2/ Some context: prior to Covid the failure rate of house purchases was less than 1%, today he estimates 5% of all purchase transactions don't close

Not the end of the world but a 500% increase just the same

What's a Purchase Failure: Buyer doesn't have the money to close

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