Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Notify me of new replies via email
Mortgage Broker News | 04 Feb 2011, 09:05 AM Agree 0
Rising interest rates later this year could trigger Canada’s housing market to collapse, according to a new report by Capital Economics.
  • Kim Gibbons | 05 Feb 2011, 02:38 AM Agree 0
    This is a joke? The media loves to report based on inciting fear but to run with this piece is highly irresponsible. I would be greatly interested in seeing the logic behind these ridiculous numbers that Capital Economists (never heard of them before) have come up with. Are they going to tell us that the Earth is flat and we're to believe this as well? Stick to the facts, show us some tangible numbers to back their claims because a collapse of 25-35% across the board in Canada? I'm not buying it.
  • Mary | 05 Feb 2011, 03:31 AM Agree 0
    Is the sky falling too? Any decreases in home pricing will NOT happen all at once, it's a gradual process. At the end of the day, we all know it's important to discuss your own situation with a professional.
  • Ken | 05 Feb 2011, 06:37 AM Agree 0
    No Joke - this is a harsh reality. As interest rates have been falling, financial institutions have been quick to increase the amount of mortgage money that home buyers are "eligible" for..... and sellers have benefited from this inflated "perceived" affordability. On top of this, refinancing of mortgages (in a highly competitive financial services marketplace) for additional purchasing power has left way too many Canadian households with a mountain of debt that is generally financed over 25-40 years!!

    This last year of global economic challenges provided the opportunity for Governments to provide stimulus to help us all spend our way out of a financial crisis. Not only were the Fed & Prov Gov'ts spending like drunken sailors, however many Canadian's were blessed with an opportunity to refinance and spend some more via a new round of interest rate cuts. Ontario has the second lowest personal tax rate in Canada - imagine how a 3-5% tax increase will feel as we soon try to chip away at the monster deficit.

    The Future?? Rates can only go up, affordability indexes will decline as fast as they went up, and yes house prices will plummet. You do not have to be a seasoned economist to understand that a $250,000 mortgage (many folks are unfortunately higher than this) @ 7% over 30 years means that most young first time home buyers will have a hefty monthly mortgage right up until retirement. No time for kids....... who can afford them??
  • glenn | 05 Feb 2011, 08:07 AM Agree 0
    In early 2001, 5 year bond yields were mid-low 5% range, over the past ten years they have stedily tracked downward; now they are mid-low 2% range, IE half what they were. Over the saame period house prices have roughly doubled (or more. Do the math, it's no surprise what happens once bond yields rise, and they surely will
  • steve | 05 Feb 2011, 10:58 AM Agree 0
    increasing rates only affect the poor, the rich do not need mortgages, the rich do not need chmc, this carney has to be getting incentives from the banks to even consider raising the rates, as we know when rates increase so does our dollar, this will not stop people spending their equity as a matter of fact it will make them spend more of it not being able to afford their current mortgage, what ever reason their is on the news no jobs new jobs bad economy good economy it is a reason to raise rates, us Canadian have to get together and complain like other countries
  • realitycheck | 05 Feb 2011, 02:58 PM Agree 0
    Hard to believe people (sometimes it's just women) are living in la la land...worrying about all the wrong things. Yes the sky will fall economically and since we're in the clouds anyway, it should be a welcome relief to come down to earth. We are all living on credit. This is not fear mongering but truth and our globalist political class has ensured bubble after bubble, but forgot to deal with the fall out that they knew would be created in the aftermath. I imagine they figured someone else would have to deal with the political reality after they retired.
  • realitycheck | 05 Feb 2011, 03:01 PM Agree 0
    To Ms. Gibbons...every bubble bursts and so will this one. You're just in denial I'm afraid. On the flip side, is your view that prices will go up?
  • Anton | 05 Feb 2011, 05:02 PM Agree 0
    Capital Economics is not widely known or worth even talking about, but if they turn out to be right they will rub this prediction in everyones face and will be considered top economists and best analysts in the industry. If it turns out to be wrong they won't care that much and as all analysts do will re-evaluate the prediction. There is no point for them to predict price increase or stable market, because nobody cares about that and it is not news worthy. Predicting 25% drop is a bold move that, if correct, will increase the repuation by a lot.
    Bond yields rise? Government has little or no control over bond yields. If the rates are going to rise and housing will collapse the bonds will go back down quicker than they rose. We will enjoy low interest rates for 5-10 years until the housing prices settle and I will gladly pay off my mortgage. You do not loose any money if you do not sell.
    People are burdened with debt thanks to financial industry that have been trying to sell debt to everyone they can. They still do and nothing has changed. You can buy anything on store credit with 0 interest. And slowly but surely debt grew from negative into a positive thing. Now slight rate increase will put a lot of people out of control of their debt. Why? Not because people are careless, but because they do not know math and reality of debt burden. The longer they keep rates low the more unfixable the problem will become.
    GDP growth and income growth should not be a factor in considering economic situation. Nothing can grow forever.

    There are two ways things can go. One is increase in inflation rate -> increase in interest rate -> increase in house prices and incomes (due to inflation) -> net result higher house prices.
    Or increase in negative news -> consumers confidence lowers -> increase in rates (Flaherty knows when to pull the trigger :) ) -> decrease in housing sales -> decrease in house prices -> decrease in bond yields -> decrease in rates (yes Flaherty will bite the dust) -> unrepairable stagflation -> Capital Economics makes a lot of money as being experts. -> and net result -> housing prices in large metropolitan areas will still increase because of the net migration from suburbs (due to decreased employment rate) of people who wanted to buy but could not afford.
    There is too much money borrowed at low interest rates in this economy that is waiting on the side lines to jump in to some form of investment to avoid inflation that government is trying to create, in a fear of stagflation.
    Therefore any decrease in housing prices will be followed by a spike in major metropolitan areas. In suburbs you can see drop in prices by over than 25% because it is really in bubble.

  • Lion of Kabul | 05 Feb 2011, 06:52 PM Agree 0
    Housing prices in Canada are over inflated and need to be readjusted to realistic values by tightening the supply of easy credit.

    There used to be a time when you had to make a choice between owning 2 SUVs, a skidoo, an ATV, dinning out a few times a week, a couple of vacations down south a year or buying a house which you could pay off in about 15 years…. and then buy all your toys.

    But now you can have it all at the same time, at a price… the inability to save for retirement, (did you really think that your pension would be enough to cover your living expenses?) perpetual dept and artificially inflated housing prices.

    Bring sanity back into the housing market and raise interest rates, the only people who take a long lasting hit are the fiscally irresponsible drones that are financing their millionaire lifestyles with other people’s money.
  • Marc | 05 Feb 2011, 09:57 PM Agree 0
    All the comments on here that say house pricves will not drop must be real estate agents. House prices are going to drop at least by 25%. Canada got through the recession well especially the real estate market which was not really affected. The truth is, it just hasn't hit us yet. The bubble is going to burst and it will be just as bad as it is in the US. I feel sorry for anyone who is bvuying a house now as they are throwing money away.
  • Greg | 05 Feb 2011, 10:01 PM Agree 0
    House prices are going to fall hard. Its only a matter of time. The government can only pretend things are good in the housing market for so long before it has to correct itself. Houses are extremely over valued and it needs to be corrected. I just hope it doesn't hit us as hard as it did in the states. But it is coming.
  • Mike | 05 Feb 2011, 10:04 PM Agree 0
    The only people that act positive about the housing market are real estate agents hoping to make sales before the market grinds to a hault and prices fall. They know their time is numbered.
  • Jim | 06 Feb 2011, 06:12 AM Agree 0
    Currently house prices seem out of my price range, so do I wait a year for the prices to possibly fall and rates to presumably go up? Either way it seems to me that I won't be able to afford it. What do I do? Wait and possibly never get Into the market? Or bite the bullet, take my chances and take advantage of low interest rates on a fixed term? Seems to me like 6 of one and half a dozen of the other to me !!!???
  • Siona | 06 Feb 2011, 06:25 AM Agree 0
    If this becomes reality, perhaps my husband and I can actually afford to purchase our first townhouse or home. Prices are ridiculously high. Nowadays, the mortgage you get approved for is supposedly 3x your imcome. If your combined income is $60,000, you cannot purchase much for $180,000 unless you live in the boonies. If housing prices are based on what people will pay for them, then no wonder we are living in an era of debt. You never hear, "I can't afford that."
  • MIKE | 09 Feb 2011, 04:59 AM Agree 0
    The unbelieveable negativity out there is unreal! the only way prices will drop 25% is if rates go to double digits- possible but highly improbable. Who is Capital Economics anyway?
  • Q | 09 Feb 2011, 04:59 AM Agree 0
    For all you who say/assume the market is going to collapse my question to you is how much money have you made in real estate over the last 5yrs?
    For the last 5yrs everyone has been saying year in year out we are in a bubble, the market is going to correct/collapse, etc, etc, etc..... I have made the most money over the last 5yrs in real estate then the previous 10. There is opportunity in every market, position yourself accordingly and you will end up on top. Be smart.

    I actually welcome these far feached reports it means more opportunity for those that dont subscribe to this sort of propaganda. Good luck to all.
  • Its Happening Already | 09 Feb 2011, 05:13 AM Agree 0
    Many who bought in 2007-08 with 5% down now has a property worth less than their mortgage. These folks are at risk and if they lose their ability to make payments, it could trigger and ripple through the economy. This would cause insurer to payout what they have collect to protect. It just better not be additional taxpayer money to prop them up. Canada is not immune, to think so is head in the sand.
  • padarzoli | 09 Feb 2011, 05:14 AM Agree 0
    God save the public from these so called mortgage professionals airing their oppinion above. Analyst has been proven right and has been proven wrong That is their job. Your job is to serve your client, get the best rate, be honest to the lenders and serve them best of your abilities. Predictions and oppinions are not mortgagebrokers responsibility. Try to be a professional and focus on building confidence your business, negativety is for losers.
  • mark | 09 Feb 2011, 05:22 AM Agree 0
    The forecast is for 25% of value to be removed in the next three years. The assumption is that everyone is in variable rate mortgages and will not lock it in before the rates increase from where they are today. Therefore, more sellers than buyers and prices decrease 25%.

    This is not likely since the majority of Canadians have equity in their homes and fixed rate mortgages. We need to see the complete report as a decrease of this amount must assume some other factor like a decline in population for values to erode this much. We just came through a two year period with more sellers than buyers and values only declined 10-15% nation wide and these declines have largely been recovered.
  • Melody | 09 Feb 2011, 05:43 AM Agree 0
    Memory recall people! We are NOT headed for a real estate market crash similar to the USA, as a few of you are agreeing with. Remember what caused the US crash in the first place: the incredible amount of greed, irresponsible lending practices, lack of financial regulation and, well, just more stupidity on the buyers' part when it came to taking on mortgages they just couldn't afford.
    Then, what a surprise, the borrower's got no skin in the game, no incentive to pay off their mortgage (gov't tax incentives) and there's nothing wrong with just walking away from the house they can't afford. All of this on mass, and it leaves an enormous supply of houses for sale, hence price declines (economics 101 - supply & demand rules). Add to this massive job losses and overall economic struggles and you have many big problems further complicating and fueling each other.
    We already established that Canada did NOT stoop to that level of lending. Plus, a majority of homeowners have established equity in their homes (stop painting everyone with the same brush as having used their house like an ATM machine the past few years!) and are much more interested in paying off their homes sooner than their amortization dictates.
    We've already seen a number of catastrophic events hit Canada and somehow financial policies and the Bank of Canada have managed interest rates well enough to avert a major shake-up. Steady and slow increases in real estate pricing are sustainable, however, will likely just slow down on the pace of the increase for a while.
    Fear mongering for the sake of trying to get famous and generate media publicity is shameful. This just causes more unnecessary stress for people interested in buying a home who rely on credible news to guide them. Seriously, shame on Capital Economics for starting this rediculous rumour, and shame on the media for giving it air time to help fuel economic uncertainty.
  • Paul | 09 Feb 2011, 05:50 AM Agree 0
    The one where the lemmings follow each other of a cliff because one of them decides to jump..
    Assuming the BOC raises rates (which it will) do we really think all of the economic stimulus and rate dropping they have worked on over the past 3 years to keep the canadian economy steadfast would really be un-done by the very hands that have sought to prevent it from happening.
  • one of those mortgage brokers | 09 Feb 2011, 06:43 AM Agree 0
    Interesting comments, seems the people that dont own any real estate want a crash, after they buy they will want the value to increase. If you are flipping then you are always taking a chance, if you are buying a place to live then who cares you have to live somewhere, if you are buying investment and it cash flows again who cares? This report to me doesnt take into consideration local markets, immigration, job creation, a very sound banking system, and yes a more conservative owner in Canada than the US. There are always people on the fringes no matter what. Look at what your goals are and make a sound decision on facts, do your homework and lockin for the longterm if you are worried we have 10 yrs rates that are very low.
  • It's only Money | 09 Feb 2011, 10:57 AM Agree 0
    I have been lending since 1993 and although this is not a long time it is interesting to see where we have come from and where we are going. In 1999 I became a mortgage broker one out of every 3 calls I could help due to equity, or lack there of. Most people had mortgages bigger than what they could sell or refinance for. Everything is cyclical.
    Flaherty although a bit dramatic in his comments about rates going up and people not being able to afford homes is a concern for some Canadians. If you are maxing your borrowing ability to purchase now at 3.65% for a 5 yr term then there had better be increases in wages to account for the mortgage to renew. That is in essence what he means.
    I believe what padarzoli says for the most part. I have long believed that the prices will come down and they continue to go up. To start to warn your clients about this ever ending doom and gloom will come back to haunt you. Rates will go up and rates will go down same as housing prices.
  • Roger | 09 Feb 2011, 12:19 PM Agree 0
    A great way for Capital Economics to get their name in print....they obviously have not done anything else productive(has anyone heard of them?)so they have to resort to negative gabbleflab. Why does the press give them space anyway, tell them to pay for their ads,
  • Sophie | 09 Feb 2011, 12:31 PM Agree 0
    some people thrive on negative news...know yourself and plan your don't need to live beyond your means if you're not a risk taker..and for those who are hoping for house prices to plummit you probably never owned one to begin with.
  • mortgage needs | 09 Feb 2011, 01:37 PM Agree 0
    For as long as Canadian government supported/assisted Hi-Ratio Mortgage Default Insurance is available, and depending on the ease of which this is available; and our Canadian govt. continue to issue/underwrite reasonably priced Mortgage Backed Securities, then the Canadian housing market is unlikely to suffer the collapse like that of the U.S. housing market. There is nothing wrong with higher housing prices because it is no more than a transfer of wealth(savings) from Buyers in exchange for the Sellers store of wealth in their home (asset / investment), and provided as that Buyers' "wealth" used in the exchange (purchase) is sustainably leveraged. In so far as our major cities are concerned, even if we do not see increased domestic incomes to warrant increased house prices; it is that successive waves of immigrants from Hong Kong, South Korea, Philippines, Taiwan, Iran and now China, have been bringing in considerable downpayment Cash ( i.e. Foreign Cash Inflow, speaking of which the Americans could use a good dose of foreign cash inflow to help pull up house prices, but I think Canada has a softer and friendlier image). Banks have to push loans to boost the Asset side of their Balance Sheets, and the only way to ensure better accountability is to have their commission sales and performance incentivized employees on trailer-only compensation models
  • mortgage needs | 09 Feb 2011, 01:51 PM Agree 0
    ..played a role in a domino effect on the decline. If those whose compensation bonuses benefitted from this mark-to-market accounting rule on the upmarket, had enough foresight and/or been upfront enough to point out the repercussions in a downmarket, then the steep crash might have been averted. As it turned out the regulators only realized the implications as the market unravelled in quick time and so put a moratorium on that rule. Look up mark to market in Wikipedia, and then look up the related FASB rule if you are interested.
  • mortgage needs | 09 Feb 2011, 02:08 PM Agree 0
    and it does not do if our housing sector is growing and other sectors are lagging behind. I propose a small [-non-housing related ] business default insurance program as a way to buttress our economies, increase employment and so incomes [ small biz. is the largest employer ]; as well as boost the number of candidates for IPO to add to the base of public companies in our stock exchanges. Of course the program has to include safeguards such as dedication of upfront Lender Fees towards mandatory support from Accounting, Advertising & Promotion, Specific Industry Operations Specialists, Legal and possibly R&D outfits [ - this last support only for larger and more complex operations, possibly Mid-size businesses ]. As well, it will set targets to achieve at least modal average industry performance yardsticks, and better still even higher performance criteria towards IPO desirability.
  • ronnie amyot | 09 Feb 2011, 05:44 PM Agree 0
    Real Estate has doubled every decate...increased at a rate of 5.5 percent per annum on average the past 70 years and there is no reason to predict otherwise the next decate or two. However, a roller coaster that follows an even path is no fun at all. More houses sold at 13 percent than at 9 percent. The cost of land is determined by the amount of wealth possessed by those who wish to occupy it and not by the number of people. The US crash was caused by regulation and not by the lack of it. Investment grade bonds requires a rating by a rating agency and this gave investors a false sense of security and trust. Otherwise, mortgage backed securities would not have been able to be sold. Mortages would not have been able to be sold to Wall Street Bankers. And,houses would not have been able to be sold to people with no income and no down payment at any price. When it all washes out and the roller coster comes to a stop, it will follow the same path of double every decate...except for some places that become vacent and prices drop to nothing. It was a theft.
  • Sharna | 10 Feb 2011, 03:42 AM Agree 0
    I am thinking that should I sell my house because i see in my neighbors 9 houses was listed since 5months, only just one sold less 20000 asking price. Is it correct that House prices are going to drop at least by 25%?.
  • Don Berthelette | 10 Feb 2011, 10:09 AM Agree 0
    I'm a real estate agent. I remember an occasion about 14 years ago when there was a concern that house prices might drop. My wife heard alarming statements made by co-workers and she came home all in a tizzy. She asked me if it were true and if so what would we do. I said " It really doesn't matter to us because we aren't selling!". And because we don't use our real estate to finance our lifestyle the only people who needed to be concerned were our children-the heirs to our estate. However, I knew I was going to be going through a difficult period helping those folks who needed to sell & buy somewhere else. Between 1998 & 2003 there were some stressful times. Especially for those who bought beyond their reach. As for those who were accustomed to refinancing their real regularly to live the good life....well they just had to reign in a little. The market place did follow the lead of the buyer's ability to pay and real estate prices either came to a halt, dropped somewhat or slowed down. It varid over that period.
    Since, it has been a fast and frenzied market that has brought market prices to a point where they once again are starting to get out of reach. If one own's real estae one should do their best to hang onto it. If one does not, like always one should be seeking out the earliest opportunity to get into affordable housing and only let it go when one is able to exchange for another. Ownership of real estate free & clear at some point in time is the key to a comfortable & secure retiremnt. The " Buy, Hold & Prosper " concept works in real estate too!
  • Jason Hilborn | 11 Feb 2011, 06:17 AM Agree 0
    Great press released designed to drive traffic to Capital Economics website and corresponding services. I've emailed Capital Economics requesting the hard data and models they used to arrive at the 25% drop in aggregate home values in Canada (I will update this forum when received). Working in the mortgage industry I see first hand the debts levels Canadians are exposed to - and I can state with confidence that rising interest rates will hamper growth in home values in the mid term, but it will not result in a market crash as Capital Economics is predicting.
    Being a London Based company I expect their Canadian models are incorrect and the 25% drop was fluffed by their marketing department to grab headlines. Bravo!
  • Henry Froese | 19 Feb 2011, 01:13 PM Agree 0
    The problem the house prices are so high is directly related to low interest rates.This presents additional problems very little savings.There has to be a balance of resonable rates.Less government intervention would be
  • W | 10 Mar 2011, 06:51 PM Agree 0
    Whoever does not think this housing market will come down is obviously blind. Ask yourself who is our biggest trading partner?? Could it be the USA?? what happens if there economy doesn't recover?? Will we be affected?? will many canadians lose their jobs again?? and if they do how will they pay for their mortgage payments if they dont have a job?? What happens if we go throught the 80's all over again?? are interest rates going to be at historic lows much longer?? CHMC are they equal to being similar to Fannie Mae and Freddie Mac?? Do they have any sub-prime loans?? of course not they have some 40 yr 0% down mortgages though which are pretty damn close to it. Oh what happens when they refinance in 1-2 years if interest rates are much higher? Do you see inflation going up?? of course not we live in a dream land not reality so noo inflation. If food prices and gas prices and prices of everything we consume keep going up dramatically will canadians be able to afford houses?? Demand and supply will determine that. You people who think prices cant possibly come down 25% are stupid, use your brain and logic and whats going on in the world economy and you'll be able to put the puzzle of reality together. Do some more research outside of the box and you'll be frightened at the government data on canadian consumer debt which will bring you back down to earth. Also go back decades and decades and look at the average cycle of the housing market. Are wages in canada really rising at the same rate as housing prices?? Its good that most canadians think the housing market can't go down because they think it'll keep going up... thats what they said before the last housing crash... Last comment... you think the last recession was bad wait till the next one hits it'll be one you won't forget and it'll make U.S history.
  • pokercasino | 25 Mar 2011, 10:26 PM Agree 0
    Hello all! Who can tell me about poker bonus site?
    I need find best casino and poker bonus code for play.
    Sorry fuc**g offtopic!!!
  • Pharme729 | 01 Apr 2011, 07:04 AM Agree 0
    Hello! kdabdfc interesting kdabdfc site!
  • Pharmb460 | 01 Apr 2011, 07:08 AM Agree 0
    Very nice site!
  • Pharme846 | 02 Apr 2011, 11:32 PM Agree 0
    Hello! dackkfc interesting dackkfc site!
  • Pharmd360 | 02 Apr 2011, 11:33 PM Agree 0
    Very nice site!
  • Jdogg | 09 Apr 2011, 12:50 PM Agree 0
    The supply of houses for sale keeps increasing, because people can't afford to buy extremely over priced homes. If the price of homes keeps increasing the demand for homes decreases. The banks must find a way to lower the price of houses, to bring back up the demand. Afterall, an empty house doesnt make a bank any money. Soo when the bank sees fit, they will trigger a decrease in any way possible to maintain the housing market. Because we all know debt creates income.
  • Victoria | 10 Apr 2011, 11:50 AM Agree 0
    Sophie, are you for real? Of course people who do not own a home are hoping prices will plummet.
    Can you honestly say that the 100-125 per cent increases in housing prices during the bubble made purchasing a home reasonable or even accessible for anyone starting out? Furthermore, you seem to forget that the "negative news" some people are "thriving" on does have a basis in reality. I am sure that there were many just like you in the States who refused to heed all the "negativity" surrounding reports of the impending housing collapse there. Sometimes the news is negative - sometimes we choose to bury our head in the sand because we don't want to hear it. Sorry sister, you're logic is flawed.
  • Pharme813 | 10 Apr 2011, 10:43 PM Agree 0
    Very nice site!
  • Jason | 06 May 2011, 04:09 PM Agree 0
    Every market has it's ups and downs. The greater the rise, the greater the fall. It really is as simple as that. But if you really need more evidence, look at the first time home buyers that walked in to the bank with a combined income of 80G and that bank said "Oh well hey, we can give you 500G, I hope that's enough!" So now they are in a 500G house on a 35 year mtg. Every percentage point increase increases the payment by aprox. 100 dollars per 100G owing. This family has to renew in 2 years. The rate will be 1-2% higher at that time. Now they need to come up with an extra 500-1000/mo to continue to pay for "their" house. remember...they are already living tight, the furniture they have is all used, budget is tight. Gas prices are increasing, as are commodities -> food. It's getting tougher. IF they some how manage the will have far less income to put into the economy. And things are no different for those home owners who bought before the flood gates opened but saw their neighours just bought a new Mercedes. "Well, you just need to refinance! you can have one to!". Sorry to all of you warm and fuzzy optimists...but we are not being negative, we are simply realists. This is not going to end well, and the longer it takes for this to ride out, the worse it's going to be...but you're right, we're wrong...keep dreaming and don't bother watching the budget.
  • ruireSepsculp | 22 Jul 2011, 02:21 PM Agree 0
    Hi everyone, I imagine that i may ask you right here about my problem. You see I need some cash shortly ... and I though in a website like this there may be folks that can assist me. I cannot invest too much time mastering brand-new stuff and invest etc... I need fast quick profit ... if at all possible to be regular - has any one found any possible way for me for making some money in the next like 17 days? Please give me any kind of details that you might have and consider it can be valuable? (no MULTILEVEL MARKETING offers, please).
Post a reply