Too good to be true

virgin

The teller rolled her eyes when she saw me looking at it. “I’d like to meet the idiot who dreamed that one up,” she said softy, as she did banky things at our wicket.

Between us was a poster of two young hormones, she pregnant and he beaming. “We’re taking a vacation form our mortgage,” it said. On a wall nearby was a picture of a nymph who’d written about her mortgage on a bus shelter. “My husband went back to school just last year,” it said. “He told me we could take a payment vacation to get away from you. I said he could take his studies to Paris for some of the semester. We can afford to do it with a payment vacation from you, my dear mortgage.”

Seriously.

Welcome to the new world of Canadian banking. It’s not enough to talk the kids into unrepayable mountains of debt to buy houses at inflated levels, now the bankers are aggressively suggesting people stop paying their mortgages. TD, for example offers a payment vacation (up to four months), payment pause (skip a payment once a year) or a payment reduction (cut up to one full payment).

Why would they do this? First, since 90% of the market for new mortgages comes from first-time buyers, most of whom have no savings, blow whatever money they have on a downpayment, and can’t budget, this is an emotional come-on. It makes the kids feel like they can get preggers, run away to divinity school or still be young and impetuous, when in fact they’ve entered into a Faustian pact. So, it’s marketing. A stab at increasing market share in a shrinking business.

Second, when people skip mortgage payments, the bank makes more money. Huh?

This is because all those vacation payments, paused payments, reduced payments and ‘we’re-goin’-to-Paris’ non-payments result in interest capitalization. The bank is not letting people miss making an obligation, but rather taking that amount and adding it on to the outstanding debt. Then, of course, that debt is amortized, which means over the life of an average mortgage it will be at least doubled in size.

This is what the mouse print says:

Flexible Mortgage Payment Features will result in interest capitalization. That means the interest will be added back to the principal outstanding on your mortgage.

  • Interest is added back on each mortgage payment due date.
  • The amount of interest being capitalized cannot cause your mortgage to exceed the lesser of a 90% loan-to-value ratio or exceed your original principal balance.
  • The loan-to-value (LTV) ratio expresses the amount of a mortgage as a percentage of the total appraised value of a property, as determined by TD Canada Trust.
  • If necessary, we will adjust the amortization period remaining at renewal so that the mortgage does not exceed the original amortization period remaining. This may result in an increase to the amount of your regular payments after the renewal.

Now, imagine you had one of those 30-year mortgages coming up for renewal in a year or two, and that you’d taken a ‘payment vacation’ a few times. Given that the maximum length for mortgages is now 25 years, and you’d actually increased the debt, you can imagine how ugly that renewal might look, even without a rate increase.

Canada’s bank cop, the OSFI (Office of the Superintendent of Financial Institutions), is already worried about this stuff. It’s been staging ‘major reviews’ of the mortgage portfolios of all the monster banks, concerned that four years of cheapo interest rates have encouraged consumers to become pigs, and turned bankers into pariahs.

Head bank cop Julie Dickson put it this way in a speech this week: “This environment can provide incentives for banks to grow their earnings asset base by trying to gain market share (a zero sum game), increase fee income activities, reduce expenses, enter new markets, and by increasing the proportion of higher-yielding assets (both in the lending and investment portfolios). Of more concern, products and businesses that are over-reliant on low financing costs tend to grow and borrowers are strongly incented to increase leverage.”

When it comes to real estate and bank mortgages, Dickson fears bankers will get too aggressive to “maintain revenues,” that some housing markets are “overvalued” and (mostly) that “customers’ debt serviceability could be masked by low interest rates.”

This is what ultra-low interest rates do. People borrow too much. Bankers hide risks and encourage indebtedness, such as TD’s bogus skip-a-payment (and look at yesterday’s post). House prices lose touch with reality. Then the trip back to normal is brutal.

Do not be mistaken. OSFI, the Bank of Canada and F want interest rates to increase, lest the combination of a credit bubble, banker greed and consumer stupidity blow up the economy. There is zero chance the key rate will fall further. This will not be Japan. You have but months (not years) left of 3% mortgages. And you’ve been warned. Repeatedly. F did it. Carney did it. Now here’s Julie.

If you still have the bulk of your net worth in your house, well, good luck.

vacation 2

149 comments ↓

#1 pathcontrolmonk on 05.21.13 at 9:11 pm

Criminals enabled by idiots.

#2 TurnerNation on 05.21.13 at 9:12 pm

“Sticky Figures”

(Sounds like a Rolling Stones album…Boomers.)

This nasally-voice realty blog confirms it:

http://www.torontorealtyblog.com/archives/duh-reduce-your-price/8809

“The days on market are piling up now, so might I be so bold as to assume a price reduction is on the way? Please let me know, as my buyer would pay $420K for the unit and can close in 30 days.”

Of course, I get a response: “As you are aware, units are taking much longer to sell these days. My seller is not contemplating a price reduction at this time.””

“So I called the listing agent for #1101, and not trying to be a condescending ick, I said, “My buyer is very interested, but we’re doing a little reconnaissance on pricing. We notice that the same model one floor below hasn’t sold, same price, on the market for two months. So what do you think about the price?”

She said, “My seller is very firm on his price.””

#3 TurnerNation on 05.21.13 at 9:12 pm

Blog Dogs in Toronto: next Wed. evening the Duke of Devon is holding a special patio BBQ. But you must call them, to RSVP in.

#4 T.O. and GTA bidding wars debunked -May 21 on 05.21.13 at 9:12 pm

http://recharts.blogspot.ca/2013/05/to-sfh-bidding-wars-debunked-may-20.html

http://recharts.blogspot.ca/2013/05/gta-sfh-bidding-wars-debunked-may-20.html

#5 mike on 05.21.13 at 9:19 pm

Garth, you still go to the “wicket”?

That’s where the girls are. — Garth

#6 a prairie dog on 05.21.13 at 9:19 pm

Stick it to them Garth.

#7 East Van on 05.21.13 at 9:22 pm

A well researched article:

http://www.mcclatchydc.com/2012/08/12/160930/is-the-era-of-oil-nearing-its.html

The suburbs are doomed.

#8 Herb on 05.21.13 at 9:22 pm

The hell with the tongue-lashing: BANKSTERS!

#9 Chickenlittle on 05.21.13 at 9:23 pm

SCARY!!

I’ve spent entire paycheques before, but I don’t have a mortgage.

I would never do this with the cost of housing now!

#10 JayBe on 05.21.13 at 9:23 pm

:D I love it! Originaaaaal pranksters those banksters! (“Bloc-Bloc-Block! RBC Rude Boy!”)

#11 Boombust on 05.21.13 at 9:24 pm

It really is disgusting.

There is no other word for it.

#12 Seven Stars and Orion on 05.21.13 at 9:28 pm

Many of my transactions are with TD. I often suspect I am a grudgingly tolerated and moderately useful idiot to them. The mortgage vacation scheme is insulting and the marketing is gauche.

#13 AK on 05.21.13 at 9:29 pm

Goldman Sachs Upgrades S&P 500 Target

upgraded target for the S&P 500

#14 CalgaryGuy on 05.21.13 at 9:31 pm

As a collections and foreclosure paralegal here in Calgary, I am looking forward to many, many years of employment.

#15 Cory on 05.21.13 at 9:36 pm

As I have said many times, nothing will change until interest rates normalize….meaning rise!! It’s that simple. They can change the rules all they want but ways around it will be found. The true changes will occur only when the cost of money increases.

#16 Question on 05.21.13 at 9:40 pm

Hey Garth, if/when interest rates go up, what do you think the implication (in isolation, that is) will be for the CAD compared to the USD? On the one hand the CAD should go up because it becomes more interesting to hold them for investors, on the other it would deflate the housing bubble and damage the economy which suggests a lowering of the CAD’s value?!

#17 Lookoutbelow on 05.21.13 at 9:41 pm

The Banks ads are starting to look like those of The Brick or Leon’s Furniture.

Buy today, don’t pay for 12 months. And here is the silly part, this type of marketing actually works. I can’t wait to see the next wonderful offer from the Big Six.

I would be surprised to see if that taxpayer funded CMHC would go along with these types of shenanigans. Amazing what the Banks can do when all of the risk is offloaded to the taxpayer.

I know that Carney is gone, but is F sleeping on the job to allow this type of deceptive marketing to naive consumers?

BTW, did you happen to catch Ben Rabidoux on BNN today. He is effectively shorting Canadian Housing!

#18 Grant on 05.21.13 at 9:42 pm

Hi Garth, would you ever consider a ratings thumbs up or thumbs down on your comments section?

#19 Smoking Man on 05.21.13 at 9:44 pm

Wow, all Banker bashing yesterday….Ridiculous.

What is wrong with you people, banks are amazing, you can borough money from them, invest it in the bank your borrowing from, or commercial mortgages, or whatever Gartho recommends, and come out ahead by 4 or 5 %.

You guys are suffering from a myth, a myth that is programmed into your head since birth. Honesty, obedience certificates, hard work, truthfulness, team player, committed will get you that pie in the sky….Fools

You’re all the greater fools.

We are conditioned to be slaves from birth, from bringing in the teacher the apple, to homework, to assignments on time, to testing, to kissing ass, to being judged.

All Phyops, designed to make you comfortable living in slave skin.

Ego, Bragging, Love thyself, selfishness , being inconsiderate to other people’s feelings is exactly what it takes to run a successful business. You also need to do all this while wearing a disguise, pretending to be, Honest, obedient, hard worker, truthful, and a nice guy.

You don’t want to unravel all the years of preparation and effort the machine put into delivering you perfect little bitches, to make you money.

You’re naivety comes through crystal clear….

The venting on banks, newspapers, realtors is not because you don’t know what they are, you do, but because you refuse or are incapable of playing the game, cause it’s all a game….You can’t play so sulk and bitch on here.

Your problem bubble heads, you’re too smart to play happy slave, but too dumb to be happy owner, you’re stuck in purgatory hell.

I can’t fault you, what chance did you slaves have. Mon, Dad, Teacher, Preacher all molding you. Now go make your bed bitch…..

Sucks to be you guys……………

#20 Burnt Norton on 05.21.13 at 9:47 pm

Raise those rates already! Jeebus, it’s about bloody time.

#21 Smartalox on 05.21.13 at 9:50 pm

This tactic is nothing new: I graduated in 1998 with student loans written at the time the feds turned the student loan business over to the banks. On graduation, I was offered the opportunity for a ‘payment holiday’ for four months which I gratefully accepted while I sought a job.

Come September, I was presented with a bill for several hundred dollars in accrued interest, and given the option of paying the tab off immediately, in full, or tacking the tab onto my outstanding balance.

Despite making the expensive choice, I did manage to pay it all off, all $30k, and before the end of the loan’s term, by the way.

#22 anon27 on 05.21.13 at 9:55 pm

Sitting across the dinner table from my mid-20s female countrymen makes me break into a cold sweat when they start talking finance.

Every one of them has a leaky condo on a 30 year mortgage and 30K in student loan debt. Yet they are wearing designer labels and carry designer purses.

I need to go to Ukraine I think.

#23 Johnny D on 05.21.13 at 9:58 pm

BMO is saying it now. The Canadian Dollar is overvalued by around 10%.

This might be the great equalizer when it comes to Canadian real estate… Prices can stay the same here in Canada but when stacked up against the US dollar it will be like a 15-20% haircut once it drops.

Cash my be king… but the question is. Which country’s cash???

#24 Too good to be true — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate – The Affluent Boomer on 05.21.13 at 9:59 pm

[...] via Too good to be true — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Es…. [...]

#25 Chester on 05.21.13 at 10:00 pm

Most people haven’t figured it out yet but debt is modern day slavery.

#26 Smoking Man on 05.21.13 at 10:01 pm

#20 Burnt Norton on 05.21.13 at 9:47 pm
Raise those rates already! Jeebus, it’s about bloody time.
……………………………………………………..

Ha good luck to that, better yet, take advantage of them.

#27 Fzzzz on 05.21.13 at 10:02 pm

Good post. Really good post.

Is this 100% legal or is it wollowing in a grey area that only top notch lawyers ($$$$$$) can *explain* as being legal? This is pretty morally bankrupt either way. How many young people do we have to destroy before this whole thing blows up? As a boomer it is only a short period of time before we will be dependant on the charity of those we shamelessly mistreated. Paybacks are a bitch.

#28 Notta Sheeple on 05.21.13 at 10:04 pm

Wondering which Boomers paid off their mortgage first?
….the geeks who elected Algebra & Calculus, or
….the jocks who were banished to Consumer Math.

Inquiring minds need to know…

#29 Johnny D on 05.21.13 at 10:05 pm

Adding to my last comment. Garth, you should do a piece on currency. Lots of talk about it lately. What are some plays people can make? Open up USD accounts? Invest in REIT’S, ETF’S etc in US funds? What should a person do?

Lie down until it passes. — Garth

#30 Smoking Man on 05.21.13 at 10:07 pm

What is this I read from TREB

The average selling price during the first two weeks of May was $543,838 – up by 5.4 per cent in comparison to the same time frame last year. Price growth was strongest for low-rise home types, but positive price growth for condo apartments in the City of Toronto was also reported.

……………………………………………………….

Its the Bankers, The Realtors, The MSM……fault…..

Nope, track6ers….did this to you…….

#31 Brian Ripley on 05.21.13 at 10:08 pm

“Of more concern, products and businesses that are over-reliant on low financing costs tend to grow and borrowers are strongly incented to increase leverage.” said Head bank cop Julie Dickson.

Thanks for the post Garth. It fits with my case study of buying a Vancouver condo as an investment to see what the potential yield is with various levels of financing.

Here is my case study: http://www.chpc.biz/2/post/2013/05/vancouver-condo-yield-case-study.html

Spoiler alert, prices need to come down.

#32 Uh Oh Canada on 05.21.13 at 10:11 pm

YEEHAW! New townhouses built down the street are now down from 369K to 299K. Been on sale for over a year now. I’ve been waiting for this moment for years now. Although, I don’t know whether to cry for joy or from sadness.

#33 Smoking Man on 05.21.13 at 10:17 pm

The bubble head,

To smart for platform 6,
Un natural to be on Platform 5

You’re between the platforms… Its a track , heads up…

#34 Notta Sheeple on 05.21.13 at 10:18 pm

Smoking Man on 05.21.13 at 9:44 pm
“…..Ego, Bragging, Love thyself, selfishness , being inconsiderate to other people’s feelings is exactly what it takes to run a successful business. You also need to do all this while wearing a disguise, pretending to be, Honest, obedient, hard worker, truthful, and a nice guy….”
=========================

Success can be measured by many things.

From the average Canadian’s point of view, clearly you’re not one of them.

#35 3s on 05.21.13 at 10:18 pm

In the same vein – taking a break from making payments into a retirement annuity with apparently no consequences.

After combing through the fine print it was revealed that to keep “servicing” the agreement the underwriter was simply taking the monthly payments from the capital built up in the annuity – without notice to anyone.

When the capital portion runs out, the agreement simply lapses and the person is left with nothing….the winner is the financial institution.

#36 kenken on 05.21.13 at 10:23 pm

OSFI/Carney/F … all a bunch of all talk!!
all we have been hearing is debt levels are high, higher rates will be painful … yet they allow this to go on and on and that for the past few years!
why not draw the line?? raise rates or raise downpayment to 10% or simply prevent the banks to use those teaser mortgage rules like the TD mortgage break/vacation!
… which brings me to say that nothing will happen if you expect the government to help blow this bubble!
not gonna happen!
only another external event trigger this – but more and more unlikely – US picking up, no hardlanding for China, no war between NKorea and South or Japan, Eurozone-nobody-cares
by the time prices start falling (and fall for 10-20%), prices would rise another 10-20% more!!!

#37 Property Accountant on 05.21.13 at 10:23 pm

Comment on interest rates, Japan, US and Canada.

Interest rates are tightly linked to national currencies, so slight positive percentage change causes 3-5% positive change in currency – my estimate from experience as a forex trader. This is due to the mathematical equation and arbitrage possibilities in the markets caused by available forward contracts on currencies and risk-free rates on government bonds.

Japan has gone on rampage 5 months ago pumping monies through market operations aka quantitative easing). Effect? USD/JPY jumped from 80 to 101 as of today. After years of being stringent they eventually gave up. Stock Market? Skyrocketing. Goal? Defeat deflation and cause inflation. Cause Exports to be competitive.

US did not like that at all, however they continue phase 3 of their quantitative easing. Effect? USD not changed (as it has status of worldwide transaction currency). Stock Market? Skyrocketing. Goal? Inflation & Exports.

Europe, ECB specifically deliberates negative interest rates. Good luck.

Bottom line, Canada will not raise interest rates until USA do so, roughly 50% of exports goes to US and in the age of currency wars raised interest rates would kill exports even more. We have wait for inflation in Canada, that can be spurred by 1. High Commodity prices for sustainable time like oil going through the roof 2. Quantitative easing 3. Economic recovery, low unemployment, foreign investments due to economic competitiveness & low CAD value.

Government has option # 2 and ultimate decision here.

Am I correct?

#38 Smoking Man on 05.21.13 at 10:25 pm

Mark Carney good bye speech

Faster growth will depend on business investment and exports – growth engines that have yet to kick in. Exports should be $130-billion higher right now, if the trajectory of previous recessions is a guide, and the central bank expects investment to remain “below average,” Mr. Carney said.

“Our economy is less well oriented to the sources of global growth than we were in the past,” Mr. Carney said at a news conference after his speech. “That is what we should focus on, on a daily basis, is how are we going to be at the core of this new global economy, at the forefront of this new global economy?”
………………………………………………………

Translation, Canada has to join the currency war….
How do you do that,
drop rates to zero and start printing money.

If that happens , will suck to be a renter….

#39 the R on 05.21.13 at 10:27 pm

The way your writing appears non -fiction , even tough witten in a fictional method (style)is super cool. Everything else is just the trimmings and gravey.
Is that some kind of homemade ribbion( medal ) hanging on this page?

Just in case every single one on this site dosn’t know

All 40 , 35, & 30 year mortgages are grandfathered.
Grandfathered = lenght does not change ( in Canada)

#40 Stinky the Fish on 05.21.13 at 10:29 pm

And now I would like to welcome everyone to the comments section

#41 Tom Vu on 05.21.13 at 10:29 pm

#22 anon27 on 05.21.13 at 9:55 pm

I need to go to Ukraine I think.

=================================

No need….Vegreville is much closer

http://www.youtube.com/watch?v=8SbJIlEd6jA

#42 CrowdedElevatorfartz on 05.21.13 at 10:37 pm

Just the thought that people dont realize the mortgage “vacation” is being tacked onto the end of the loan…….
Gives me the “heebie jeebies”

#43 Mathman on 05.21.13 at 10:40 pm

I thought the housing market in TO would have been cooked a few years ago, but the BOC has kept the debt fuelled party going. As soon as interest rates start moving we are pooched. The correction in the TO condo market will crush people. My barista at Starbucks told me last week she bought a condo, WTF are people thinking. People are always shocked when I tell them I rent, they can’t get past it because they drank the kool aid many moons ago, as did their parents before them.

#44 prairie person on 05.21.13 at 10:41 pm

Garth, I know you say ETFs but some of us just have to stray. I just bought some American corporate bonds paying 6%. Can’t cash them in until 2016. Don’t want to cash them in. You said that 3% mortgage are only months from disappearing. 6% bonds are particularly good if interest stays below 6%. However, if it goes beyond that face value will erode until the bonds come due and they are redeemed at par. Seems to me to be a worthwhile investment. Strange to think where interest rates have been. Up to 21% to stamp out inflation, filling the market with foreclosed houses, 7% on respectable utility bonds, now down to 2% or less for many investments. Nothing lasts forever and interest rates will go up. The question is how fast and how far? Today’s good investment can be tomorrow’s disaster.

#45 Renter's Revenge! on 05.21.13 at 10:44 pm

There’s a credit union in Winnipeg who’s latest slogan is “Are you happily mortgaged yet?”

This is starting to become Orwellian.

#46 KommyKim on 05.21.13 at 10:45 pm

There is zero chance the key rate will fall further. This will not be Japan.

Speaking of Japan, how long do you think the NIKKEI will rise before it corrects?

#47 JoeQ on 05.21.13 at 10:45 pm

Why default when you can ” take a vacation from the mortgage?”

This is just a scam to delay bankruptcy for most so the bank balance sheet doesnt take a hit and I’m surprised its legal.

#48 young & foolish on 05.21.13 at 10:52 pm

We just love this blog!

It’s busting the boomers time … everywhere. Low rates equal strained pension plans. Years of stagflation seem to lie ahead in the western world. The illusion of growth through money printing. Can you really tell what your dollar will buy 10 years out?

Maybe the kids are not so dumb after all. Take it while you can and maybe never pay it all back.

#49 Dr. Hoof - Hearted on 05.21.13 at 10:53 pm

Viewed this earlier today

http://topdocumentaryfilms.com/real-estate-4-ransom/

QUOTE:

Real Estate 4 Ransom is a documentary about global property speculation and its impact on the economy.

Real Estate 4 Ransom considers the changing motivations behind property investment and challenges the notion that the Global Financial Crisis was caused by bank lending alone.

Shot over 5 years, the film focuses an economics lens on many of the big picture issues world politics are grappling to deal with. The 40 min documentary looks at whether genuine freedom has been delivered by the democratic system.

We investigate the inefficiencies of the economic system and the impact this has on potential homeowners and small businesses.

The documentary argues that with a simpler tax system, entrepreneurs have a better chance to succeed and the average Australian has a better chance of owning their own home.

==================================

It gives quite an intriguing perspective to Real Estate and how it has been used historically to enslave us, but it does lay out a solution.

I have come to the same general conclusion, that we have been brainwashed, lured along….the hook set …..then BAM !

#50 Apocalypse When on 05.21.13 at 10:56 pm

Au Contraire I believe interest rates will go down no matter how much hot air F and Carney and whoever is blowing. If they don’t the whole Canadian Economy will blow up – blow up real good like John Candy would say on SCTV. Australia just lowered their rates to save the behinds of equally indebted Aussies, rates going down, down, down, Ya baby ya!!!

I’m looking for 2% mortgages in the near future, possibly by next spring for this market is dying on the vine and the only thing that will be save it will be even lower rates! Ya baby ya!!!!!!!!!!!!!!!!!!!!!!!!!!

#51 skooby doo on 05.21.13 at 11:02 pm

Lie down until it passes. — Garth
————————————-
You mean: Investing in stocks: 90 %
Some inflation protections: farmland (too late), gold (good time now): 10 %

and keep your fingers crossed.

#52 AK on 05.21.13 at 11:03 pm

#23 Johnny D on 05.21.13 at 9:58 pm
BMO is saying it now. The Canadian Dollar is overvalued by around 10%.
——————————————————————–
BMO is very conservative with their forecast.

It’s heading a lot lower.

#53 Sebee on 05.21.13 at 11:04 pm

Best picture yet Garth.

Is that another RE ad from The Star to scare those virgins to buy?

#54 skooby doo on 05.21.13 at 11:06 pm

# 46: KommyKim:
—————————————
Speaking of Japan, how long do you think the NIKKEI will rise before it corrects?
————————————–
with the Japanese government bonds bubble bursting and everyone running into stocks with massive money printing: very long time. What are the alternatives if you hold yens?
1. Buy euros (maybe).
2. Buy gold (in this environment?) maybe.
3. buy stocks (thumbs up)

#55 Smoking Man on 05.21.13 at 11:07 pm

Ah feels good to be drinking again. Not a sheep….

You are such a sheep……………………..

Manni staring at a 16k red on my trading account on Friday.

Sold USDCAD, said f-it…not co operating. ..I hold.

Get off plane last night, I’m up 4k. Cha ching.

Called being a man…….with balls
….

Then another 4k today… you want some lessons..

Duke, give me at leased a day notice,

#56 Nodebt on 05.21.13 at 11:18 pm

Its been 1 week since the liberals got in again! I’ve
Been so happy I haven’t slept much. Christy Clark is looking better everyday as she ages beautifully! Hey crowded elevator idiot what happened to your boyfriend Dix? You drinking the same koolaide as him, it’s to bad your welfare cheque isn’t gonna go up anytime soon but you live in your moms basement suite rent free anyways!
Hopefully you get that job at McDonald’s you applied for!

#57 Shawn on 05.21.13 at 11:26 pm

WHY BANKS ALLOW A VACATION FROM THE MORTGAGE

Here’s another reason.

If you miss a payment without permission, the bank gets nervous. If you get behind two or three payments the bank has to report your mortgage as being delinquent.

This can cause the bank to have to set aside more dollars for loan losses and that lowers earnings and that gets everyone mad.

How much better for everyone if instead of missing a payment you just sort of call in and get a note to miss a payment or three or whatever. Kind of like getting a doctor’s note. If you skip work without calling in everyone gets nervous. But if you book off sick and get a doctors note, all is fine.

And it IS all fine. Expect when some people who lose their job use this ploy to string the bank along for a while. The bank is reporting your mortgage as solid but it’s not.

For all kinds of reasons, people these days can hide the fact that they can’t really afford to pay the mortgage. They can arrange to skip payments. Or just use the line of credit. Either way delinquencies are low because new money is effectively borrowed to make the payment or the payment is added to the loan by permission.

As always I turn to Mr. Buffett (the greatest fount of all economic wisdom) who observed:

“You can’t default on a promise to pay nothing”.

And “a rolling loan gathers no loss”.

#58 JuliaS on 05.21.13 at 11:28 pm

Smoking Man, I always wondered if Pavlov got his bell experiment ideas by observing school kids…

#59 Smoking Man on 05.21.13 at 11:32 pm

never seen so many people worried about virgins and property owners…..Ha

Lets be honest you don’t give a flying F about them.

You Wana vultch, want to be a some one, a priced home owner, up you level on the status level….problem track6ers are not co-operating.

Told ya. Never bet against the smoking man, what 4 or five years of perfect pics.

Your teachers did you in……

#60 Shawn on 05.21.13 at 11:34 pm

MORTGAGE DELINQUENCIES FIGURES

The Canadian Bankers Association should soon release the latest delinquency figures.

Well, by latest I mean February’s… And by soon, I mean whenever they get around to it.

And by delinquent I mean 90 days and those would be what are left after they probably pull out all the stops at day 60 to “allow” the customer to skip that third payment. Hey if it’s allowed, it’s not delinquent, right?

This money may be absent, but its not AWOL if the bank catches up with the deadbeat at day 60 and says, hey, it’s okay if you want to skip another payment, just please tell us first next time you want to desert us like that!

Our bonus gets cut if we have AWOL money so just ask permission! We’ll grant it!

Remember what gets measured gets managed. Even if delinquents are high in substance they can be low in form.

#61 Carpe Diem on 05.21.13 at 11:34 pm

So … being a shareholder of these banks … should we sell or do we expect them making more profits off the little people?

We’ve had plenty of bad companies out their, pushing chemicals on farmers, big pharma pushing lifestyle drugs with side effects, logging old growth forests for beef/hamburger production, and the weapons industry so the US can bomb countries like Iraq back to the stone age.

I think banks taking advantage of fools and their money so they can vacation and pay for it (with interest) in the future is much more ethical. At least no one gets hurt. They just have to pay more in the long run.

#62 ozy - I repet, not banks fault on 05.21.13 at 11:57 pm

I am not a bank employee and I do not love them either. But really, it’s not banks fault at all that consumers are so gullible in Canada.

I would blame the education from family.

I will not blame the school system, the government or the banks and other organizations that do what they are there for: reap from the unsuspecting

IN THIS AGE AND TIME I BLAME and solely blame THE UNSUSPECTING

WAKE UP FOLKS, INTERNET SPACE LANDED MASSIVELLY SINCE 1995 IN NORTH AMERICA AND WE ARE IN 2013 BY THE WAY, SO WHAT ARE U WAITING FOR…

#63 Burnt Norton on 05.21.13 at 11:58 pm

#26 Smoking Man on 05.21.13 at 10:01 pm

Take advantage, what, you mean take on debt, gamble the credit away, then skip town?

Nah, I’ll leave that to the likes of you.

#64 Dave on 05.21.13 at 11:59 pm

Banks love to keep their clients in debt. As you pointed out – it’s good for their business…

Garth, I need to correct you on your statement: ‘zero chance the key rate will fall further’. The recent CPI data reported for April showed we have taken another leg-down and appear to be inching towards the brink of crossing into deflation territory. Given that our monetary policy is based upon having an inflation target of 2%, you can not rule out the possibility of a quarter point reduction.

Poloz can’t sleep at night because he’s having nightmares of deflation and the economy coming to a stall. Make no mistake about it, Poloz will use a rate cut to put fuel on the fire if needed. I sure hope he doesn’t have to though – I’d like to see rates normalize just as much as you do….

#65 ozy - ok, lots of TALK, cheap, where is a crash - we arre a year later on 05.22.13 at 12:11 am

ok, lots of TALK folks, cheap

so where is da crash – we are a year or three later, do you REALIZE IT?

why does not crash ???? it will ever crash hard????

#66 Kilt on 05.22.13 at 12:14 am

I think your wrong Garth. This will be Japan again. It will be years before rates go up. Remember why the dropped rates in the first place? To promote growth. That growth is slowly grinding to a halt. Jobs are becoming hard to come by (unless you are a foreign worker willing to work for less), people are tapped out, and the easy money (flipping houses, rising commodities) is harder to come by.
I believe you said about 3 years ago that rates would be double in 5 years. If anything, you can now get rates cheaper than you could 3 years ago. Over the next 5-10 years you will see stagnant or depreciating housing prices and stagnant interest rates.
The government has to continue to bail out the idiots who bought what they can’t afford, while us savers suffer with high interest savings accounts that pay 1% and GICs/Bonds that pay 3.5%. Neither of which I would touch.

Kilt.

#67 Patiently Waiting on 05.22.13 at 12:33 am

Latest stats from the database of the Real estate Board of Greater Vancouver & the Fraser Valley Real Estate Board.
Sales of single family homes are more than 50% below 2012, and more than 50% below 2008 when the global financial crisis was upon us. Here are the numbers:

Year Sale of SFH’s this past 30 day period
_________________________________________

2013 976

2012 2104

2011 2479

2010 2353

2009 2518

2008 2019

The banksters who are aware of what is coming are so greedy that they will attempt to draw the last drop of financial blood from the property virgins and ignorant sheeple right up until the SHTF …

Though they say that experience is the best teacher …

pw

#68 Derek on 05.22.13 at 12:37 am

Hi Garth. Could you possibly comment on the Saskatchewan market? We don’t get much attention compared to TO and Van. Is the resource base a real source of growth?, or are housing prices inflated for the same reasons here as elsewhere?

#69 Patiently Waiting on 05.22.13 at 12:45 am

Sales of strata (condos & Townhouses) are not doing any better – here are the stats for combined sales of strata units for the REBGV + the FVREB in the last 30 days :

2013 1116

2012 2145 (2013 sales are 48% below this)

2011 2278 (2013 sales are 51% below this)

2010 2676 (2013 sales are 58% below this)

2009 2955 (2013 sales are 62% below this)

2008 2532 (2013 sales are 56% below this)

Cheers
pw

#70 Kilby on 05.22.13 at 12:47 am

Australia just lowered their rates to save the behinds of equally indebted Aussies, rates going down, down, down, Ya baby ya!!!
**********************************************
Yes….Down to 2.75%, long way from our 1%

#71 Kilby on 05.22.13 at 12:50 am

56 Nodebt on 05.21.13 at 11:18 pm
Its been 1 week since the liberals got in again! I’ve
Been so happy I haven’t slept much. Christy Clark is looking better everyday as she ages beautifully!
*******************************************

Yes, we all sleep better now that we have a talk show host for the next 4 years, Dix is no better but to lose sleep? “Families First”

#72 Vangrrl on 05.22.13 at 12:51 am

#45
Wow, someone has a dark sense of humour.
“Are you happily indebted/pledged to your debt until death?”
Sad thing is they could word it like that too and people still wouldn’t get it.

#73 Genxer on 05.22.13 at 12:59 am

#38 smoking

Translation, Canada has to join the currency war….
How do you do that,
drop rates to zero and start printing money.

If that happens , will suck to be a renter…

——————

The fed has been doing that for 3 years. All it has done is fuel a bull market for equities. Seeing as renters have more invested in the markets, I welcome this with open arms.

And if printing did make its way into the real economy (because by some miracle it’s different here), then interest rates would rocket up and housing would crumble. Either way, renters win.

Maybe an economics course would have helped your analysis?

#74 Drake on 05.22.13 at 1:08 am

TD obviously meant Paris, Ontario for their vacation.

#75 Info on 05.22.13 at 1:29 am

Good post Garth.

Ultimately USD ‘s race to the bottom may force F and BoC’s hand to keep rates low.

Re: #7 East Van

If you like that type of stuff check out this clip.

Matthew Simmons – Twilight in the Desert: The Coming Oil Shock
https://www.youtube.com/watch?v=e_9dgmhIh38

#76 Canadian ponzi housing bubble on 05.22.13 at 1:31 am

#57Shawn on 05.21.13 at 11:26 pm
WHY BANKS ALLOW A VACATION FROM THE MORTGAGE

Here’s another reason.

If you miss a payment without permission, the bank gets nervous. If you get behind two or three payments the bank has to report your mortgage as being delinquent.
—————————————————————–
The housing/debt bubble or a better word would be ponzi is so huge that the final outcome is a huge crash. The number of people who bought condos with nothing down or people borrowing money from their HELOC to pay their motgage. Now you have skip a mortgage payment saving you the trouble of borrowing from somewhere else. You could go the whole year without spending a single penny of your money to a mortgage by just using the skipping mortgage payments and borrowing money . The bankers in Canada have lost their heads and now Canada is facing financial ruin for the biggest farce in Canadian history. Canada has never been in such a housing bubble/ponzi before.

#77 peter on 05.22.13 at 1:35 am

Yup, the central banks & gvt sure like to screw around with things. Nikkei is up 50% since November. That is normal right? The financial distortions are everywhere. Consequences? Who tell me.

#78 Dan7 on 05.22.13 at 1:44 am

Hey Garth,

Are Banks going to hell in a hand basket when stuff hits the fan? I have 628 shares of CM and am starting to get worried of all the shorting that’s going on. Should i sell and lock in my gains or ride it out and just keep driping the div’s

#79 Onthesidelines on 05.22.13 at 1:54 am

“This will not be Japan” -Garth

Apparently, neither will it be the US ( no crash) nor the EU ( no bail-ins like Cyprus) or massive unemployment like Spain.

Sure sound like the ” We’re different and it can’t happen here” argument, except no argument is offered.

And Smoking Man, could you please just STFU on your campaign for the benefits of an assholian universe. Yeah, all the world needs now is for everybody to lie and cheat more and be more greedy. I get it.

#80 Toddster on 05.22.13 at 2:27 am

It’s the nature of the game for only a small percentage to ever “get it” and wake up from being a debt slave. Or worker bee.

Lowered expectations are the new norm in much of Canada after having their way with much of the U.S.

Thinking outside the box, being yourself, and staying away from anything that includes the word “instituiton” are my tips of the day.

#81 Yellow rox rock! on 05.22.13 at 3:08 am

Holy cr@p man! That bus shelter ad is just terrible. I really hope that the banksters didn’t pay too much to the agency for that idea.

#82 Buy? Curious? on 05.22.13 at 3:09 am

Is the lady for the TD bus shelter ad selling out or cashing in?

Damn, Smokey! One of your better posts. I agree, don’t hate the players, learn to play the game better than any of the other players, cheat if you have to win. That’s what everyone else does. Ahnold Swartzegger, Hulk Hogan and Barry Bonds used steroids to get to the top of their profession, Paris Hilton and Kim Kardasian used their own sex tapes to create their own brand, Apple, GE, GM all used sophistated tax avoidance plans to make them the biggest companies in the world. If people can’t get their head around the fact that the only way to get ahead is to cheat, well, stay poor and commit your future generations to a life of poverty or at best, what’s left of middle class.

I say, take a chance, take the money from the bank and buy yourself a big home. If you lose your job, try growing marijuana in one or two of the rooms. First time offenders rarely will see time. Or declare bankruptcy and move to a different province. I don’t understand why people use ethics or morality as a crutch. Either take advantage of an opportunity or stop complaining to me while you make me my Latte.

Hey did you see Wolf Blitzer try to get some woman to thank the Lawd for her being alive?

http://www.youtube.com/watch?v=7L8B9Qb7fi8

#83 John B. on 05.22.13 at 4:22 am

@ Shawn

I think you are correct with your assumption. As we all know, statistics is a scientifically approved lie. Making mortgages look “solid” is another way how to play the government, customers and shareholders. It looks as a very similar scenario to what Garth explained in one of his previous blog posts about MLS Home Price Index.

It is now easy for me to see all basic flaws in their Vancouver market reports. The ever blurring line between “improving” and “worsening” market can be maintained by it.

#84 TurnerNation on 05.22.13 at 8:28 am

Who is that Richard Goat-catcher guy? Interesting family name; wonder how it was earned.
Appears to be a bike tough. Real men use air cooled, chain driven not belt driven? Dunno – I’m a cager.
See twitter.

#85 Economist on Canada Housing on 05.22.13 at 8:29 am

The latest review of international housing prices by the Economist gives Canada a special mention:

“On this basis Canada’s market is especially vulnerable. A large bubble now looks set to burst. Home sales in March were 15% down on a year earlier. Buyers are in short supply. A recent poll showed that only 15% of Canadians are likely to buy a home in the next two years, down from 27% last year—the steepest decline in the 20-year history of the survey. After a big boom, the housing bust will be a wrenching affair.”

http://www.economist.com/news/finance-and-economics/21578043-our-latest-round-up-house-prices-reveals-some-sharp-contrasts-boom-and-gloom

#86 daystar on 05.22.13 at 8:38 am

#37 Property Accountant on 05.21.13 at 10:23 pm

Am I correct? – PA

Interest rates are tightly linked to national currencies, so slight positive percentage change causes 3-5% positive change in currency – my estimate from experience as a forex trader. This is due to the mathematical equation and arbitrage possibilities in the markets caused by available forward contracts on currencies and risk-free rates on government bonds.

I believe so. I’d like to simplify your explanation by adding that foreign investment chasing higher yields swelling the money supply and creating currency demand props the value of the currency which is essentially the same thing you just said, just differently.

Japan has gone on rampage 5 months ago pumping monies through market operations aka quantitative easing). Effect? USD/JPY jumped from 80 to 101 as of today. After years of being stringent they eventually gave up. Stock Market? Skyrocketing. Goal? Defeat deflation and cause inflation. Cause Exports to be competitive. – PA

I prefer an inversed 10 year chart myself (when a currency falls, I like to see it fall).

http://www.xe.com/currencycharts/?from=JPY&to=USD&view=10Y

Was Japan ever stringent? They are the most heavily indebted nation in the world next to Zimbabwe. Most other nations in the world declare bankruptcy before they get to where Japan is right now. In 2011, the Japanese government ran a 9.75% deficit. They ran the same for 2012 and 2013 looks to be higher as tax revenues actually decrease. Take note: if their central bank was to raise rates a mere 2%, the cost on servicing government debt would eliminate their entire annual budget to run the nation. How does one spell Q.E. to infinity and beyond? They have to print money or die:

http://online.wsj.com/article/BT-CO-20130129-701077.html

Nearly half of Japan’s government budget is funded with government bonds… all printed money. You tell me how this ends. And the thing with Abenomics is, sure you can crash your currency and boom stock markets and give business huge tax cuts and the big hope is trade surplus’s from a currencies competitive edge but this is just on the export side. With imports, Japan has to be experiencing hyper-inflation and its just a warm up.

Lets put it in another perspective here. Since the tsunami hit in 2011, Japan has ran trade deficits due to newfound energy imports more than any other reason. Once Japan began running trade deficits, because their strength is manufacturing, one would think that devaluing their currency gives them the best chance to run trade surplus but the reality is that their currency was headed for a major devaluation regardless and its fundamentals that are causing it.

http://news.yahoo.com/japans-trade-deficit-hits-8-6b-due-weaker-004758308.html

Has their energy gotten any cheaper as the Yen craters? I think not. Japan has to fix their energy problems and their currency does need to devalue but truly, is their Yen out of control? When a government has to print nearly half of its money to function (sure, they only owe themselves outside of those nasty little trade deficits they owe foreigners ticking upward external debt but…), you tell me.

US did not like that at all, however they continue phase 3 of their quantitative easing. Effect? USD not changed (as it has status of worldwide transaction currency). Stock Market? Skyrocketing. Goal? Inflation & Exports. – PA

U.S. government spending and tax revenues are still way out of balance. There are still no major attempts to fix it and their window to do so is closing. They might have 3 to 5 years to act assuming they have a healthy economy (I think they will but it comes late if they try) and then their own future will be that of Japan’s (think currency) if they don’t try and they would be where Japan is today… oh… 12 to 15 years from now but its too far out to speculate and a number of things can happen including environmental catastrophe, currency collapses elsewhere (like Japan), pandemic and war. There will be wakeup calls well before then so like I say, its hard to speculate.

Europe, ECB specifically deliberates negative interest rates. Good luck. – PA

Yeah… I don’t see that happening.

Bottom line, Canada will not raise interest rates until USA do so, roughly 50% of exports goes to US and in the age of currency wars raised interest rates would kill exports even more. – PA

The U.S. fed has indicated that mid 2015 is when Q.E. is parked and rates will rise. I think Canada will raise its rates moderately ahead of the U.S. and when rates do rise in the U.S., they will rise here with more drama. I still see mortgage rates around 8% 4.5 to 5 years from now in Canada (a BoC rate around 5% with a 3% spread on top), I truly do. its hard to imagine a rate like that in the western world today but then again… not so much.

http://www.tradingeconomics.com/country-list/interest-rate

We have wait for inflation in Canada, that can be spurred by 1. High Commodity prices for sustainable time like oil going through the roof 2. Quantitative easing 3. Economic recovery, low unemployment, foreign investments due to economic competitiveness & low CAD value. – PA

I predict bad things for Canada. A housing bubble unwinding and accelerating as rates rise with flare around 2015 and beyond, gold and oil prices falling for Western Canadian Select due to the energy renaissance the U.S. has experienced over the last 4 years and into the next 3 or 4 years into the future, corrupt decisions made by easily bought Canadian politicians (never elect lobbyists readers, that’s a definite no no and we’ll pay for it dearly), unfavorable demographics and so on. I wish I had more optimism but we’ve been poorly managed at the highest levels of government and business (I’m thinking federal, some provincials and financials specifically) for some time and its all coming home to roost. 2015, 2016, 2017 will be ugly years in particular for Canada.

Government has option # 2 and ultimate decision here. – PA

Like the Japanese governments of tomorrow, a lot of these options are being removed by the governments of today. As I say… not that optimistic and in truth, what’s happening environmentally to this planet as well as the disfunctionality at the highest levels of world leadership has me more concerned than anything else right now. Money is play dough to flawed systems of trade, government/governance and most importantly systems of value. What we value the most is what we work to achieve and preserve and over and over we see mass scale examples of humanity losing its way.

Take a walk in the forest some time. Humor me and just do it. Get out of the city and put on the sunscreen and drink in nature for a while. It’ll center one’s perspective to what we should value most which is life itself and far too many of us are working far too hard to do things that are far removed from this reality. We are stewards of this planet and look at what we are doing to it, others, and ourselves and for what. What do we truly value? I suppose I should watch the usage of the word “we” here but do you understand what I am saying? Value life itself as the highest value of all. Be truthful. Be grateful! Exercise power, don’t abuse it and live clean. Do this and the universe will protect you (in its respectful timelines :).

Am I correct?

#87 Steven on 05.22.13 at 8:39 am

Dying a virgin in Canada is easy! All it takes is to have a sense of propriety about financial matters,save and invest, avoid bad women aka feminists and be unemployed or have a job that pays market wage rates.
The result will be homelessness and virginity untill the day you die. At age 52.75 I think I can say this is more than just a theory. Doing what others expect of you is a good way of getting ripped off and amounting to nothing.

#88 Canuckistan on 05.22.13 at 8:58 am

Yes, Countrywide and WaMu were doing this kind of gimmickry all the time…shortly before they failed…

#89 littleB on 05.22.13 at 9:03 am

1/3 of Canadians live paycheque to paycheque, survey suggests

“This consumption pattern that has emerged over the last decade . . . is playing havoc with people’s ability to save,” he said.

“Because of the low interest rates coupled with the behaviour of borrowing, people are possibly buying homes and cars that are a little more expensive than what they would typically be able to afford.”

Meanwhile, two-thirds of households with no wealth accumulation — meaning the value of their assets was less or about the same as the amount of their household debt — didn’t expect to get any further ahead in the next three years, the study said.

However, about 70 per cent of Canadian households reported they had accumulated some wealth.

But Lefebvre said the result may have been more of a “feeling” than an objective assessment of wealth.

Lefebvre said one of the main ways for most Canadians to accumulate wealth is to pay off a mortgage as quickly as possible.

But the survey found that only 10 per cent of households had refinanced a mortgage to pay it off sooner.

“This is a beautiful time to get ahead with these low interest rates. (But ) people just seem to be living the life rather than make the sacrifice to get rid of this debt while it’s low interest and come out of it on the bright side.”

http://www.cbc.ca/news/business/story/2013/05/22/business-bills-survey.html

#90 Steve on 05.22.13 at 9:06 am

#18 Grant on 05.21.13 at 9:42 pm Hi Garth, would you ever consider a ratings thumbs up or thumbs down on your comments section?
____________________________________________

Really? I mean, do you really want others to do your reading and thinking for you? Perhaps I misunderstand. Maybe you want to see comments rated so you can avoid the most popular and therefore be contrarian in a time efficient manner?

Please don’t be a lemming, read and think for yourself!

#91 Herb on 05.22.13 at 9:14 am

#19 etc. SM,

careful, SM! When you’re enthralled with yourself you forget that you can’t type.

#92 Benchwarmers on 05.22.13 at 9:22 am

Take a mortage vacation to go blow money elsewhere haha!
The dream of every Canadian now is not to own their own home but to borrow against it.
The 30 year mortage is alive and well.
This crash is going to be painful.

#93 fancy_pants on 05.22.13 at 10:00 am

bye bye Carnage
http://ca.finance.yahoo.com/blogs/insight/mark-carney-says-goodbye-200236040.html?vp=1

#94 Gunboat denier on 05.22.13 at 10:03 am

28 Notta – the jocks who took algebra and calculus

#95 thiscountryisgoing down the toilet on 05.22.13 at 10:09 am

Local liberals want you to think that when factories collapse in Bangladesh it’s your fault….not the fault of the local governments who won’t oversee themselves….and steal the rest in corruption.

http://www.vancouversun.com/opinion/columnists/Global+concerns+rise+through+anti+rhetoric/8416121/story.html

Apparently…it all stems from Canadians not paying enough taxes !!!!! ??????? ….this according to the liberals.

I continue to think that it’s not so much about paying tax…after all taxes are the basis of a civilized society…no one disputes that……What is at the heart of the argument is that we workers have no fairness….the civil servant class is all raking in the dough while the average worker gets to pay for the excessive compensation and thereby has to do without. The rich are such a miniscule percentage that the idea that taxing rich people is a red herring because their income and wealth is nothing when it comes to where the trillions in tax revenue goes….which is straight into the pockets of special interests and unions.

The question is how the money is allocated…civil servants are taking too much of what is offered in taxation…..thats why we have no new hospitals or schools……everything is raked away in perks and pensions.

#96 Angie on 05.22.13 at 10:11 am

You can see prices falling in the burbs of Ottawa now. Even though the Ottawa real estate board won’t release their info (what is up with that?), people are starting to notice. Last month, a town house on our street listed for $10k less than the same one just a few doors down listed for the year before.

#97 Mike on 05.22.13 at 10:17 am

#89 littleB posted an article about 1/3 of Canadians living paycheque to paycheque:

http://www.cbc.ca/news/business/story/2013/05/22/business-bills-survey.html

Yet the Globe posted an article saying 1/2 of Canadian home owners want to buy another property:

http://www.theglobeandmail.com/report-on-business/economy/housing/slowdown-nearly-half-of-canadian-home-owners-eager-to-buy-property/article12049307/

Now something’s got to give. It has to be either one or the other: it’s either pay bills or buy property. We just can’t do both.

#98 Rational Optimist on 05.22.13 at 10:25 am

#86 daystar

You say that Canada will begin raising rates moderately early- or mid-2015, and that the Bank of Canada rate will be 5% early- or mid-2018 (4.5 to 5 years from now). That’s 3% movement in 36 months, .25% every quarter for twelve straight quarters. Can you really see that happening?

I agree that Canada will increase its interest rates somewhat before the U.S. does (I believe we will start to see export-led inflation sometime in the next couple of years), but not by that much. I also disagree that things will be particularly ugly- a booming American economy, and weakened Canadian dollar, will be great for Canada. No reason to be too cynical. The energy renaissance (I love that name) changes things in commodities, but change means opportunity.

#99 what crisis on 05.22.13 at 10:47 am

It looks like that within the existing economic model it won’t be feasible to increase interest rates. The whole game was: let people borrow, lower the rate and let them refinance and borrow more. Theoretically they can slightly increase the rate but for a very short period of time – only with the purpose to frighten the people and discourage them from borrowing excesses. It is very upsetting but in the long run the rates can only go down.. and then we could only wish that F and Carney would be free with their decisions…

#100 TS on 05.22.13 at 10:56 am

Do not be mistaken. OSFI, the Bank of Canada and F want interest rates to increase, lest the combination of a credit bubble, banker greed and consumer stupidity blow up the economy. There is zero chance the key rate will fall further. This will not be Japan. You have but months (not years) left of 3% mortgages. And you’ve been warned. Repeatedly. F did it. Carney did it. Now here’s Julie.
….

Wow, so many good men! Then why we are facing so much problems now? where were they before?

#101 Post Haste on 05.22.13 at 11:05 am

Good on the Banks! If you’re such a sap and can’t figure out basic mathematics – hopefully you get a financial pounding -there is that saying you can’t have your cake and eat it too.

No one is gonna do you a favour – it’s like getting a loan shark to provide some instant cash, can’t pay on due date and they say “ah, don’t worry – pay next week if you can” –

Every highschool student should go through a mandatory math class that deals strickly with personal finances (mortgages, car loans, credit cards) – we are entering a level of complete financial stupidity!!

#102 Canadian ponzi housing bubble on 05.22.13 at 11:15 am

When the tide goes out you will see how many Canadians were swimming naked. It’s going to be a hard landing. The Canaidian housing ponzi scheme is nothing Canada has seen before. This crash will make the one in the 90′s look like a good time.

http://www.thestar.com/business/economy/2013/05/22/canadian_housing_construction_to_plummet_25_per_cent_mortgage_lobby_group.html

#103 Herb on 05.22.13 at 11:16 am

#86 Daystar,

tough read, but makes sense.

On the other hand, if you’re so smart, how come you’re not a Smoking Man? I mean, just look at your last paragraph!

#104 John on 05.22.13 at 11:20 am

No inflation, no rate increases.

http://business.financialpost.com/2013/05/17/canadas-inflation-rate-tumbles-to-its-slowest-since-2009/

#105 Tony on 05.22.13 at 11:33 am

Re: #46 KommyKim on 05.21.13 at 10:45 pm

Back in the 1980′s the Japanese stock market moved interdependently of the American stock market. Japanese all think alike. We could see the Japanese markets keep on making new highs as the American market keeps on making new lows in the next several years.

#106 Asse on 05.22.13 at 12:01 pm

Anyone wonder why someone whos not sympathizes with a cause? Well, one reason is by association. When you become partners with someone whos history is fascinating but full of holes. When you realize the love of a father transcends the need of identity, of association by faith and history, struggle and identity.
When I discovered the truth I went on a mission of discovery. Not for my blood but for my families. I read an autobiography of torture, death and depravity written in the first person but the author seemingly only able to recant history in the third.
I also read The Fixer by Bernard Malmud. It became one of my favourites, I have a first edition of the pullizer prize winner. It dragged at times but was a story of discovery of identity and heroism in the face of absolute certainty. Tragic but beautiful in belief and faith. Its why I notice and try to be good to them even though I dont belong.

#107 Adam on 05.22.13 at 12:06 pm

#67 Patiently Waiting

Interesting figures. It illustrates that the top of a market usually occurs long before you actually think you’re at the top.

Makes sense. We recognize bottoms (in hindsight) to be the point where the majority is the most scared and selling for fear that the market will continue to fall.

#108 Herb on 05.22.13 at 12:21 pm

#95 thiscountryisgoing down the toilet,

I was wondering how long it was going to take before you surfaced with your old message under your new lable, Truth Hammerer and miscellaneous handles.

#109 jess on 05.22.13 at 12:26 pm

Wouldn’t you like to have no country of tax residency even as you live and do business in many countries?

Apple’s Tax Dodging: Bigger Scandal Is Congress Knew About It Says David Cay Johnston
http://finance.yahoo.com/blogs/daily-ticker/apple-tax-dodging-bigger-scandal-congress-knew-says-133333028.html

#110 EIT on 05.22.13 at 12:37 pm

The fact that people say its time to buy a house because of low interest rates is silly. Fundamentally they are attempting to point out a favourable price signal… except since the cost of money is dictated by a central authority, its not a price signal anymore.

#111 Uncle Scrooge on 05.22.13 at 12:40 pm

Just spoke with the Loomis guy at our office here in Van City. He says routes and drivers are being eliminated. Volumes way down. I hope Harper is drumming up business on his Peruvian Senate Scandal Sojourn.

#112 jess on 05.22.13 at 12:42 pm

the real irs scandal – citizens united read the transcript

http://www.democracynow.org/2013/5/16/the_other_irs_scandal_david_cay

#113 reddy on 05.22.13 at 12:43 pm

#90 Steve: Re: “Perhaps I misunderstand. “
Exactly. Consider: it’s better to remain silent and be thought a fool than to speak and to remove all doubt… Your rude response really wasn’t called for. Relax dude!

#18 Grant: I’m with you, I wish there was an easier way to wade through other’s drivel. Garth?

#114 The Prophet Elijah on 05.22.13 at 12:44 pm

“It was kind of a far-away dream a couple of months ago,” she said Tuesday, inside her brand-new, two-bedroom condo in Skyview Ranch. “Now it’s all settling in that it’s reality.”

Thompson was handed the keys to her new home by Mayor Naheed Nenshi, who welcomed the opening of a 56-unit block made more easily available to buyers through Attainable Homes Calgary Corporation.

http://metronews.ca/news/calgary/679898/attainable-homes-calgary-welcomes-opening-of-56-unit-block/

If a bust happens in Calgary always wonder how these folks will walk away from the rubble?

#115 I am in C on 05.22.13 at 1:11 pm

Today’s post kind of proves what I have been saying for some time. There will be no crash because the banks and the government, realizing how ugly that will be, have stepped in to manipulate the situation.
What is the legal definition of a mortage in default? It seems the only difference is, a non defaulter has permission not to pay.
Like I said, it is different here. We Canadians won’t tollerate a wave of forced evictions surrounding a massive mortgage default like they did in the US. The Canadian government that tolerates this will be run out of office.

#116 gladiator on 05.22.13 at 1:13 pm

OT related to today’s pic:

– Define is modern war
– “Modern war” is a 2 billion-dollar plane dropping a 50 thousand-dollar bomb on a 5-dollar tent.

#117 Grim Reaper/Crypt Speculator Ⓤ on 05.22.13 at 1:14 pm

Re Virgins:

Its been my experience the vast majority live East of Winnipeg…

Those West of the Rockies?…very very rare…almost unheard of.

#118 TnT on 05.22.13 at 1:15 pm

#30 Smoking Man on 05.21.13 at 10:07 pm

Nope, track6ers….did this to you…….

————-

You and your Track 6′ers BS

I witnessed your Track 6′ers in progress on the weekend for the first time. Track 5 is meant to be empty for the people exiting the train. This is a socially responsible process to keep people moving efficiently and safely. You pride yourself on being that quirky punk shooting your mouth off at every chance because you “tasted financial success” and then come here to make others feel bad spewing your Track 6 nonsense. We have social responsibilities as a community. People like you who pride themselves on taking advantage of our social system is like a cancer on our society. What’s next? Cutting in lines? Ignoring Stop Signs? How well will your tactics work in any other society where the masses have no order? How about the rest of us socially responsible people just start kicking the shit out of line cutters and others who pride themselves on skirting the social norms? Is this acceptable in your view?

#119 Steve on 05.22.13 at 1:40 pm

113 reddy on 05.22.13 at 12:43 pm
_____________________________

My comment was a challenge to the thought process behind wanting others to direct us (blog readers) towards reading some comments over others. There was nothing rude about it, although I used ‘don’t be a lemming’ to metaphorically emphasize the point. I regret that you are offended, and still offer that it is a better choice to wade through the comments, learning to skip over those who are not of interest, than to develop into a herd by following only the most popular comments. So, if you find them without merit, skip over my comments too.

#120 Westernman on 05.22.13 at 1:46 pm

Derek @ # 68,
The reason you don’t hear anything about the Sask. “market” is because it is insignificant and doesn’t matter…
Now you know…
And as for you you Herbie @ # 108 I certain the reason Truth Hammerer’s posts bother you so much is, for you,like all Liberals, the light of truth burns like fire…

#121 Frank le skank on 05.22.13 at 1:55 pm

#101 Post Haste on 05.22.13 at 11:05 am
Why can’t I have my cake and eat it too? What’s the point in having a f#$king cake if i can’t eat it. Am I supposed to stare at it? I don’t get that expression, am I missing something?

#122 jess on 05.22.13 at 2:05 pm

google this : Banks Win Big as Regulators Refuse to Rein in $700 Trillion Derivatives MarketBy Paul Jay, The Real News Network | Video
===============
austerity backlash

moral mondays
http://www.youtube.com/watch?v=j9Iu16sSCY8
http://www.youtube.com/watch?v=XDf4mZTsryQ

Dr. Charles Van Der Horst discusses why he got arrested for civil disobedience at the North Carolina General assembly
Every monday in Raleigh regular protests are being held called Moral Mondays, which have now led to 153 arrests over four weeks.

http://www.indyweek.com/indyweek/crowd-size-and-arrest-totals-increase-at-latest-moral-monday-protest/Content?oid=3641650

#123 Ronaldo on 05.22.13 at 2:31 pm

#47 JoeQ on 05.21.13 at 10:45 pm
”Why default when you can ” take a vacation from the mortgage?”

This is just a scam to delay bankruptcy for most so the bank balance sheet doesn’t take a hit and I’m surprised its legal.”

Plus it enables those mortgaged to the teeth who also gourged out on their LOC’s to enable them to make their LOC payments. It’s obvious that the banks are extremely concerned about the other debts (uninsured) that these mortgage holders have which probably amounts to a very large percentage of their loans. So they just tack the interest for the mortgage holiday to the end of the term and the amount of interest being paid on the mortgages will rise once they come back from the holiday. So, your right JoeQ, it is a scheme to prevent bankruptcies for all these over indepted Canadians. They’ve all become slaves to the banks. RBC shares are up nicely today.

#124 A Nightmare on Bay Street on 05.22.13 at 2:31 pm

Skip a payment ? (To be added to the total)

Or two ? Or three ?

Or four ? Or five ?

Then skip half a year ?

Skip a year ?

Skip a year every five years ?

Then : Intergenerational mortages ?

Your future unborn kids are already signed ?

Up to two, three, four kids equaly responsible for the mortgage ?

From 2 different marriages ? 3 ?

Then : Freeze yourself for 10 years, no charges ?

Freeze yourself until the economy gets better ?

When does that madness end ?

Banks now, only banks are blowing in the bubble.

This whole mess has to stop. Its beyond ridiculous.

#125 silverkw on 05.22.13 at 2:50 pm

#115 I am in C on 05.22.13 at 1:11 pm
…The Canadian government that tolerates this will be run out of office.

————————————————————
Current government created this bubble, and they should be out of office by next election no matter what they do.

#126 Ronaldo on 05.22.13 at 3:00 pm

#48 Young and foolish -

”The illusion of growth through money printing. Can you really tell what your dollar will buy 10 years out?”

Nope, but I can assure you that in that time my 10 dollars worth of AG will buy more than that same amount in paper once I convert it back to paper in ten years.

For example, back in 1966 when AG was currency, I could buy 5 glasses of beer with that one silver dollar. Today, that same dollar, even at the spot price of AG today converted back to paper will buy me 5 glasses of beer. That 1966 paper dollar will only buy me 1/3 of a glass of beer today.

Now here is the stickler. An average wage back then was about $2.00 per hour so that means that the value of the silver right now is based on $10.00 per hour wage which we know is about the minimum wage. The minimum wage back in 66 was around $1.00 per hr. so that tells me that the price of AG should be at least twice what it is today. Just my opinion.

After all that, I need a beer, so off I go to the coin dealer with my silver dollar to buy some paper money. Sure glad I hoarded those silver dollars back then. Sure helps this old boomer in his retirement.

P.S. Don’t be too concerned about the boomers, they are an adaptable bunch and not like the young entitled ones today who think they deserve everything their parents had immediately. This may be part of the reason this country is in such a mess today. Just my opinion.

#127 Old Man on 05.22.13 at 3:05 pm

I see the title of this posting ” Too Good To Be True “, as had a flash called association with Mayor Ford and it reminded me of a famous quote in life, but in reverse somewhat, or a mixture thereof.

“When you have eliminated the impossible, whatever remains, however improbable, must be the truth. ”

- Sir Arthur Conan Doyle

#128 The Peg on 05.22.13 at 3:06 pm

Can’t afford a house, bank won’t lend you the money – don’t worry “Take-back mortgages help young buyers when banks say no”.

Another stellar article from The Star:
http://www.thestar.com/business/personal_finance/spending_saving/2013/05/21/takeback_mortgages_help_young_buyers_when_banks_say_no.html

#129 Joe Bloggs on 05.22.13 at 3:47 pm

“… Do not be mistaken. OSFI, the Bank of Canada and F want interest rates to increase, lest the combination of a credit bubble, banker greed and consumer stupidity blow up the economy. There is zero chance the key rate will fall further. This will not be Japan. You have but months (not years) left of 3% mortgages. And you’ve been warned. Repeatedly. F did it. Carney did it. Now here’s Julie.”

- your regular BS. You were using (almost) same words talking about “brother Carney” more than a year back…
Wake up, no rate increase as far as eye can see… In fact Japan is just a bit ahead of us, period…
Best case scenario – they (F+your “brother”+Julie) will keep talking, worst case – they’ll turn Japanese.

Come back for a crow muffin next year. — Garth

#130 Smoking Man on 05.22.13 at 4:00 pm

#118 TnT on 05.22.13 at 1:15 pm#

30 Smoking Man on 05.21.13 at 10:07 pmNope, track6ers….did this to you…….————

-You and your Track 6′ers BS

I witnessed your Track 6′ers in progress on the weekend for the first time. Track 5 is meant to be empty for the people exiting the train. This is a socially responsible process to keep people moving efficiently and safely. You pride yourself on being that quirky punk shooting your mouth off at every chance because you “tasted financial success” and then come here to make others feel bad spewing your Track 6 nonsense. We have social responsibilities as a community. People like you who pride themselves on taking advantage of our social system is like a cancer on our society. What’s next? Cutting in lines? Ignoring Stop Signs? How well will your tactics worku in any other society where the masses have no order? How about the rest of us socially responsible people just start kicking the shit out of line cutters and others who pride themselves on skirting the social norms? Is this acceptable in your view?
………………

You can’t be serious, I hope not….. Big difference between a line cutter and a track 5er….

Second I don’t make others feel bad, I’m an educator, not a teacher….. Those programed deeply by the machine to be happy slaves, I can’t help them, grammar nazis, teachers, do gooders who lack a hidden agenda.

I’m am offensive at times, you can’t bend what you can’t offend…. My original saying.

I live for freedom, entrepreneurs, buying selling, there is a short cut to prosperity. But the ones who think like you, probably belive the tortis beat the rabbit.. Another phyop designed to emasculate.

#131 Victor V on 05.22.13 at 4:11 pm

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/one-third-of-canadian-households-living-paycheque-to-paycheque/article12056287/

One-third of Canadian households over the past year never or almost never had enough money left over after paying essential expenses, says a new report.

A survey conducted for the Certified General Accountants Association of Canada indicates that 29 per cent – or three in 10 – households found it difficult to sock away any money once key bills were paid.

The poll also shows that 25 per cent of Canadian households said they have never or almost never made savings contributions.

And it found that the household savings rate has plummeted to 3.8 per cent at the end of 2012 from a peak of 19.9 per cent in the early 1980s.

For those Canadians who are building up a nest egg, 80 per cent say they may consume at least part of it in the next three years.

=========================

Yikes.

#132 Holy Crap Wheres The Tylenol on 05.22.13 at 4:30 pm

#59 Smoking Man on 05.21.13 at 11:32 pm
never seen so many people worried about virgins and property owners…..Ha
Lets be honest you don’t give a flying F about them.
You Wana vultch, want to be a some one, a priced home owner, up you level on the status level….problem track6ers are not co-operating.
Told ya. Never bet against the smoking man, what 4 or five years of perfect pics.
Your teachers did you in……

Geez Smoking Man get some anger management assistance, it appears that you hate everyone. Live and let live dude. Perhaps your foray into Atlantic City wasn’t as fortuitous as you had hoped? Next time try Vegas with some sun and fun. You’re playing the market my friend some you win, and some you lose.

#133 Shawn on 05.22.13 at 5:07 pm

Hi-Yo, Silver!, AWAY!

Ronaldo at 126 tells us:

back in 1966 when AG was currency, I could buy 5 glasses of beer with that one silver dollar. Today, that same dollar, even at the spot price of AG today converted back to paper will buy me 5 glasses of beer. That 1966 paper dollar will only buy me 1/3 of a glass of beer today.

*****************************************

Well, all right then, silver has been a better investment than cash under a matress.

But that’s a Pyrrhic victory indeed.

Silver, you indicate had a real return of zero. It kept up with inflation (mesured as the increase in beer prices). Bravo.

But an investment in stocks or bonds has increased several fold in real terms since 1966.

Your victory over cash in a matress is a bit like bragging about being taller than the shortest of the 7 dwarfs (no disrepect too little people).

You appear to make the mistake of thinking that investments MEASURED in dollars are invested in dollars.

Money invested in stocks is invested in real corporations, not dollars.

Money invested in bonds is invested in money but comes with some return.

Only a fool would have kept much paper money around since 1966 uninvested. Jut try to locate an old style dollar bill from back then. You won’t find any in circulation.

#134 Smoking Man on 05.22.13 at 5:09 pm

#133 Holy Crap Wheres The Tylenol on 05.22.13 at 4:30 pm

Love people, I hate stupidity and ignorance.

AC I did amazing, lucky my wife made a big donation ensuring the 7 star status for another 6 months

#135 Bill Gable on 05.22.13 at 5:20 pm

HAM – that fictional coterie are busy – but in Canada? Most likely the United States, the HAM is snapping up R/E.

“China’s richest people are stepping up investment in U.S. real estate and other foreign assets as they try to preserve their fortunes in the face of a fast-changing economy, a report said Tuesday.

The report by China Merchants Bank and the consulting firm Bain & Co. in China reflects uncertainties about abrupt shifts in an economy in which growth slowed last year to 7.8 percent from the past decade’s double-digit rates.

Beijing is trying to shift the basis of growth to domestic consumption and services, reducing reliance on exports and construction that made fortunes for earlier entrepreneurs.

Communist leaders have pledged to use taxes and social spending to narrow the huge and politically sensitive gulf between China’s small elite and its poor majority.

Investor attitudes are being influenced by “the political environment and possible changes in tax policy,” said Chen Kunde, director of China Merchants’ wealth management business. They are “switching their focus from deriving more profits to protecting their existing wealth.”

Link: http://tinyurl.com/q9m8yzc

#136 Sebee on 05.22.13 at 5:31 pm

Allan Sloan says – since we’ve learned nothing the first time around, and done nothing to fix things, let’s do it again!

http://finance.fortune.cnn.com/2013/05/22/this-country-needs-another-financial-crisis/?iid=HP_Highlight

#137 David W on 05.22.13 at 6:06 pm

I see more huffing and puffing but nothing is blowing over. Seems like all the winds are propping the market, pushing head and up; when will this ship crash, we’ll have to wait and see

#138 Rates Are Going Down on 05.22.13 at 6:48 pm

MSNBC – Will Dunning Chief Economist says rates are ultimately going down.

http://video.msn.com?vid=fa99dc66-ac6c-459b-89b3-36321062412b&mkt=en-ca&src=CPSmall:shareBar:permalink:tag_recent&from=cp^customplayer_en-ca_money

#139 Canadian Watchdog on 05.22.13 at 6:51 pm

GTA and Toronto's unofficial home ownership rate for 2011.

TORONTO STAR DEMOGRAPHICS

NADbank 2011 Full Study ‐ Day of Week Readership

Household Tenure – Toronto

Own 76.3%
Rent 22.2%

Household Tenure – Ontario

Own 77.4%
Rent 21.1%

The bulk of renters who ever wished to own already made a move within the last few years, while whatever renters are left are likley to remain renters, which begs only one question: If every home sold needs a buyer, who's left to sell to? 

#140 Oceanside on 05.22.13 at 6:53 pm

Ha Ha Ha Ha….

http://www.canadianbusiness.com/business-news/homebuying-intentions-remain-relatively-strong-says-bank-survey/

#141 Ronaldo on 05.22.13 at 7:39 pm

#134 Shawn – you missed the point entirely. Does not surprise me. Refer to your post yesterday #22. You need to practice what you preach. You make it sound like your the Guru of investing. I could tell you a few things about my Pyrrhic victories that you would consider, “Too Good To Be True” but I’m not one that likes to brag as some on here.

#142 bigtown on 05.22.13 at 7:59 pm

Today I did my little house tour in Burlington, On. For you folks not from the GTA Burl is the suburb 30 min west of GTA after you go through Mississagua and then Oakville on Lake Ontario.

Any of you big hitters out there BIG TIME INVENTORY on the Lakeshore and North Shore Drive bring at least a couple of big ones (millions) to get a starter.

Surely the rich folks are not selling…respect the fact they need the cash like the rest of us. God Bless all of Burlington. It really is a beauty of a town.

#143 The Man From Nantucket on 05.22.13 at 8:17 pm

@89 littleB, paycheque to paycheque.

http://www.theglobeandmail.com/globe-investor/personal-finance/household-finances/one-third-of-canadian-households-living-paycheque-to-paycheque/article12056287/

Found the same thing in the Globe…….together with a link at the bottom referring the reader to a story that claims 47% of “us” live paycheque to paycheque.

My conclusion: 47% of news media reports are warm bullshit.

#144 Daisy Mae on 05.22.13 at 8:22 pm

#125 Silverkw: “Current government created this bubble, and they should be out of office by next election no matter what they do.”

*****************

Yeah….that’s what we thought in BC during this recent provincial election. *sigh* Didn’t happen.

#145 Legend on 05.22.13 at 8:32 pm

I owned a house for 10 years and banks made it way to easy to get lines of credit and skip mortgage payments. Sold in mid-January. renting rocks! Life is too short.

#146 InvestX on 05.22.13 at 8:53 pm

79 Onthesidelines on 05.22.13 at 1:54 am
“This will not be Japan” -Garth

Apparently, neither will it be the US ( no crash) nor the EU ( no bail-ins like Cyprus) or massive unemployment like Spain.

Sure sound like the ” We’re different and it can’t happen here” argument, except no argument is offered.

———————-
Uh oh, others are noticing.

#147 daystar on 05.22.13 at 10:00 pm

#98 Rational Optimist on 05.22.13 at 10:25 am

That’s 3% movement in 36 months, .25% every quarter for twelve straight quarters. Can you really see that happening? – RO

Absolutely. Not just .25% drops but half point drops especially around 2015. Take the speculation out of the marketplace, the values out of commodities and cripple the domestic economy with higher unemployment and what have you got? A lower dollar. Now couple a weaker loonie with a stronger greenback due to continued shrinking U.S. trade deficits and widening Canadian trade deficits and then what have you got? A bigger spread between the two currencies and what does that spell?

Try inflation. And what is the BoC’s response to inflation? That’s right, rate hikes.

I see a loonie around .90 cents by the end of the year, a loonie in the low to mid .80′s by the end of next year and, well, you see where its going.

#148 daystar on 05.23.13 at 12:27 am

Did I say drops? I meant hikes. It wouldn’t surprise me to see the BoC raise rates 2% in 4 quarters beginning around mid 2015.

#149 Small Town Steve on 05.23.13 at 1:38 am

Daystar
Yet another reason to own usd ETFs…win win