Monetary policy


Clearly rattled by comments he read here a couple of days ago (‘Carneynomics’). The country’s central banker is sorry. Honest.

In case you missed it, the Bank of Canada’s Mark Carney let it be known yesterday that people who have both hands, a foot and other dangly body parts in the mortgage cookie jar are now at risk. Debt kills, he intoned. “Households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates.”

Translation: I’m going to jack rates, little people. And be ready for tax hikes, too. Consider yourself, like, so warned.

Of course this might have meant more if the guy had actually raised interest rates – even a little – this week when the BoC overnight was set. But as it is, the bank rate stays at a quarter of one per cent, the bank prime is a 2.25%, and that mortgage cookie jar is jammed with tasty little low-cal home loans. So I’d say all this yakking will do is push more people to borrow, knowing the end is nigh.

David Rosenberg knows it. The noted economist is newly returned from a high-profile gig on Wall Street, and we banged into each other at the corner of Bay & Wellington a few days ago to prove it. He’s now estimating the Canadian housing market is overvalued by 15-35% (say, where have we heard that before?) which is about as close to a bubble as you can get without feeling moist, pink and sticky.

So, can you imagine a period, say two years, of steadily rising mortgage rates, and a coincident reduction in real estate values, car sales, appliance deals and faucets so cool nobody can use them? What would happen if the Toronto and Ottawa and Vancouver average price dropped by Rosenberg’s minimum – 15%? Well, I showed you the impact two days ago of a 10% drop in the average Toronto house price to a buyer with a 5% down. Two words: negative equity.

Also recall that if a 5% downer in that situation decided to sell, a cheque for $58,000 would be needed to close the deal (that’s new money the homeowner has to kick in), and the loss would be over $105,000, or 24% of the value of the house. And let’s not forget that a jump of merely 1.25% in mortgage rates needs a hefty salary increase just to qualify to own the same home upon renewal. But rates won’t be 1.25% higher in four years. Maybe in 12 months.

Also consider a 20% drop in Toronto prices would reduce the average home by $90,000, while in Vancouver it would bring the average SFD down by $180,000. It sure would make those people lining up to buy condos at X2, The Mark or 111 Richmond look like they scarfed way too many empty calories.

Some people call me a real estate bear. They’re right. Others say I hate that asset. They’re wrong. I have the deeds to prove it. Every rational investor should have exposure to real estate, but only fools have all their net worth in a house recently bought at record levels with financing which will grow more costly.

The last thing this economy needs is a housing meltdown, which is exactly where we’re headed unless that damn jar lid snaps shut.

Only one man can do that.



#1 $fromA$ia ( :PY ) on 12.10.09 at 10:55 pm

“…feeling moist, pink and sticky.”-Garth
You talkin’ about Nikki again?

“The last thing this economy needs is a housing meltdown, which is exactly where we’re headed unless that damn jar lid snaps shut.”-Garth
You mean damn jar lid stays open?

Either way theres going to be a correction, Boss Hog!

#2 T.O. Bubble Boy on 12.10.09 at 10:56 pm

At least Carney is being honest… unlike Flaherty and the CMHC leadership, who are still spewing the “CMHC makes housing affordable” crap in every press release.

Garth — I really don’t see Carney as being the one to burst the RE bubble. Central Bank Rates impact a whole lot more than just house prices. If the government wants to have a targeted policy change to cool down just the housing market – this has to come from CMHC.

So – I say it’s Dim Jim and Diane Finley and the other CMHC folks that need to be targeted in the press, not Carney.

Raising the minimum down payment to 10%, putting a cap on the maximum amount of a CMHC-insured mortgage (say 25% above the average home price for the city), and reducing the maximum amortization to 30-years or 25-years would all help to bring some “normalcy” back.

#3 greyhound on 12.10.09 at 10:57 pm

Garth’s G&M article quotes Mr. Carney as saying, “Households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates.”

Changes in interest rates I get, but likely changes in income? In which direction? The BoC head thinks we are all “likely” to get poorer?

#4 SWM on 12.10.09 at 10:59 pm

“And let’s not forget that a jump of merely 1.25% in mortgage rates needs a hefty salary increase just to qualify to own the same home upon renewal.”

I have been waiting and hoping that side of interest rate rises would be discussed. You would think that even if prices stay the same that renewal time will force a lot of people to have to sell if rates rise.

I’m curious, if prices stay the same but rates rise enough to require a 30% higher income, how will a Canadian bank handle the maxed out/equityless/ 5-35 mortgage holder at renewal time when their income is about the same. Will they reposess? continue to lend with a modified agreement as is being done in the US

#5 AGIC on 12.10.09 at 11:11 pm

Garth, in this post, as well as in many previous, you show what will happen to RE in case of rate is raised, and I totally agree with this.
Yesterday I came across an article where an unthinkable mentioned: “…The Financial Times reports the existence of a Federal Reserve staff memorandum that makes the case for a −5 percent federal funds rate. Meanwhile Japanese authorities are toying with the idea of outlawing cash in that country. Despite using every fiscal trick in the book and keeping interest rates at zero for a decade, that economy has been mired in a postbubble depression. So the thinking is that nominal interest rates of zero are too high and current “theory would suggest that nominal interest rates of −4 per cent might be closer to what is required to rescue the economy from another deflationary spiral,” reported the Times Online.”…
Now, on a same note, my question is: What will happen to RE in case we’ll see -%%?
Thank you in advance!

#6 My_view on 12.10.09 at 11:28 pm


If Mr. Carney “Jacks” rates, how about the C$?

#7 John Charlton on 12.10.09 at 11:29 pm

Interest rates on their own are not the problem – rates are equally low in the US. The problem is the unfettered lending practices of the CMHC that is allowing buyers with virtually no money to enjoy these low rates. The securitization of these mortgages (enriching banks) and the government guarantee (read: you and me will pay) of the associated commercial paper is what is keeping this carnival going. Carney doesn’t need to raise rates, Flaherty needs to rein in the CMHC by imposing reasonable lending standards. The longer he waits, the worse the outcome.

#8 Pascal DELAUNAY on 12.10.09 at 11:31 pm

You see Garth,everything happened!! Well…almost.Marc Carney is just worried,so everything is still fine,of course.
Unfortunately,it is already to late,as you said,there is already to many people with to much debt and it is gone end badly.Well,they are all adults,so I wont feel sorry for them,not at all,they will get what they deserve.

#9 Into The Sunset on 12.10.09 at 11:35 pm

Why a man so well educated in the financial workings of Canada and the world, cannot realize the consequences of the route he has taken in regards to the borrowing of low interest money by purchasers of high priced homes with 5% down and the coming havoc, is not understandable!

If he is afraid of moving up the interest rate due to bolstering the Canadian $ etc. Why does he not at least insist the percentage down payment on any house purchase must be 30%. Would this not help quell the frenzy going on in the home real estate market and alleviate much suffering in the future?

#10 Concessionman on 12.10.09 at 11:45 pm

Garth, I, and I’m sure I speak for most visitors, appreciate your dilegence with your blog. Insightful, Enlightening, Entertaining, and oh so right.

Other may call you an armageddonist, I think realist is more appropriate. You call it like you see it, not like so many others with the rose-colored glasses.

Keep up the good work, looking forward to the new book!

#11 View from the South on 12.10.09 at 11:47 pm

I just finished looking over the “Metro Monitor” report from CIBC – with a little summary of how bad my town is still getting its ass kicked at the link from my name (shameless plug, sorry).
Anyhow, it’s interesting to see TO and Van City sliding down the index. The report breaks down each city and each city has its own set of charts showing the past three years’ data.

#12 Responsible Saver on 12.10.09 at 11:48 pm

Thanks Garth for being the voice for the bedrock of our society….the family unit…who has seen their main expense of a lifetime….housing….turned into a Vegas slot machine by the current monetary policy makers.

#13 Raymond Wayne on 12.10.09 at 11:56 pm

“The last thing this economy needs is a housing meltdown, which is exactly where we’re headed unless that damn jar lid snaps shut.”……….

Who can/will/has to snap it shut, Garth..??

The govm’t…the banks…the BoC… or, the market…???

#14 Flounder Digest on 12.10.09 at 11:59 pm

Mr. Carney’s manipulations have pulled the carpet from under the feet of the prudent. Now they’re on the floor trying pick themselves up, dust themselves off and persuade their loved one’s to hold back? Think the prudent will get a hearing in this climate. The heedless are feeling like they’re wise. I thought leadership was about encouraging the best and restraining the foolish.

#15 Emma on 12.11.09 at 12:00 am

I keep hearing mortgage holders say they are staying variable until the rates start looking rough enough to lock in.

Many of these people are monitoring what Carney does to the variable rate to decide when to make that change but shouldn’t they instead be watching the effect of the bond market on fixed rates? What if the fixed rates are sky high by the time they smell trouble?

Granted, this chart is using broker rather than bank rates, but while there is still roughly a 2% difference in the rates this month, fixed rates appear to be at a 10 year low (for those who missed the chance last May).

Would the smell of an interest increase raise or lower bonds? Or is the market so thoroughly messed up that it’s anyone’s guess which way it will go?

#16 Sue Letourneau on 12.11.09 at 12:03 am

“…moist, pink and sticky….”

Garth, I think I’m blushing.

#17 West Coast on 12.11.09 at 12:18 am

“Translation: I’m going to jack rates, little people. And be ready for tax hikes, too. Consider yourself, like, so warned.”

Oh well, this should help:

“Flaherty rejects bank bonus taxes”

#18 Watched Bubble Never Pops on 12.11.09 at 12:23 am

Carney says ‘be careful’. Is that news? zzz

#19 Crash on 12.11.09 at 12:24 am

Mark Carney is akin to a drug pusher who gets his customers hooked on cheap credit, then jacks the rates and really sticks it to them. The things is, he KNOWS this is causing a problem, but he won’t do anything about it until it’s too late.

#20 Joseph on 12.11.09 at 12:31 am

Garth, I am really beginning to believe that BoC Governor Carney REALLY actually does read your blog posts! Too much of a coincidence in the timing of this announcement and your recent blog entry on the risks of spiraling household debt in this country. Wait a go dude!!!

#21 Deliverator on 12.11.09 at 12:37 am

Federal Government Bureaucrats to Ration Home Buying In 2010

#22 nonplused on 12.11.09 at 1:11 am

I’ve said it before, I’ll say it again. Carney is not raising rates until the loonie trades at $0.80 USD and unemployment is trending towards 5%. And I’ll add that there must also be a majority government, or he’ll loose his post. No minority government is going to let the housing market correct, let alone deflate. Only a majority government with 4 years to go will entertain the notion.

That said, Carney’s blarney is still worth noting, because over the course of a 35 year amortization obviously rates have only one way to go. And it won’t take 35 years. I agree with Garth, changes will be underway by renewal time for anyone who bought in the last 2 years.

And of course there is the black swan. Or even the white swan. If the US needs to raise rates for any reason, say, maybe because they are borrowing like there is no tomorrow and lenders are sick of “quantitative easing” and won’t buy bonds at 2% just because the US Fed is stepping in and bidding up the bonds to drive rates down, well, then all bets are off. If the US rate goes to say 5%, suddenly Carney has some room. He can get the loonie to $0.80 US while still raising rates.

I agree with Garth there will be disaster. But in the short term it is disaster for people who hold cash and bonds. Inflation will be the order of the day (although CPI will only be useful to judged whether it’s accelerating or decelerating). But at some point in the not too distant future the chickens come home to roost, and rates must rise. If you are flipping, flip early. The early bird gets the flip.

#23 BDG YYC - Geezez ya dumbasses! on 12.11.09 at 1:17 am

Good one Garth.

A lot of those 5% down 35 year mortgages over the past several years are sitting on variable rates … as are others who are sitting on relatively low equity. In Calgary and Edmonton … you have to look back several years to find first time buyers who are even in terms of having any equity whatever on a forced sell. Many would have to write cheques in order to sell. Hmmm … they could barely scrape together 5% and they are sitting on maxed out payments at soooooo low variable rates. If you’re at 2%ish and hanging in – underwater what does it look like on a piddly 2% run up in the next year or two – and god forbid any of the marginal folks losing a job.

Loved the one I heard over the last week or two – a bit of spin on unemployment. ” Don’t forget that with 10% unemployment 90% of the workforce is employed. Too funny. Like saying … hey … even though 10% of people have a cold or the flue at any time during the winter … 90% don’t. Thing is that it ain’t the same people? Maybe 25% or more end up sick at some point over the winter. Unemployment works the same way to an extent. Some folks find jobs as others lose them. I suspect we’ve got a lot of relatively recent happy and not so happy home owers who are at the low end who can’t afford even a case of the sniffles without having a financial bust.

It’s going to be interesting for the next while.

Nice ass cover … by DaBoy … he sees all the horces on the highway on the drive in – and announces – “Oh … an its ’bout time ya be lokin’ yer barns eh? When the crying starts … he’ll be sayin’ … ” But geezez I told ya so … ya dumb asses. :-)

Cheers and luck to all .

#24 Nostramadus Le Mad Vlad on 12.11.09 at 1:49 am

“The country’s central banker is sorry. Honest.” — Cookie Monster he ain’t.

Just as Stevie and Jimbo were so sorry about the IT lie. It is possible that Carney IS sorry he didn’t implement Bernanke’s orders with a touch more haste.

Never mind. All things in their time, including the implosion of this continent.

“I’m going to jack rates, little people. And be ready for tax hikes, too.” — Instead of banks having a bank holiday, why don’t taxpayers have a holiday? Are there enough jails to cram about 15 mln. people in?

That will really shake our boring old system up. The establishment doesn’t like being shaken up; maybe stirred, never shaken.
Speaking of Monetary Policy, this really is Crazy Town! Wonder what our true debt / deficit figures are?
At last! Some plain old common sense from Copenhagen — Chill Out
For those with S-D-Boxes, it’s not necessarily the greatest idea.
A Multiplex of Currencies going somewhere? “If Greece is able to restructure its tax code and install a plan to reduce its deficits to 8% of GDP, then China will invest Euro 25 billion in Greek bonds.”

#25 Patrick on 12.11.09 at 2:01 am

Shame on Carney and BOC, they lowered the interest to almost nothing and then blamed the Canadian for over spending. Isn’t the whole idea of lower rate is to stimulate consumer spending? Now that Canadian debt spirals out of control, Carney advocates consumer prudence. On another note, I been watching the bonds market and foresee some deep trouble ahead for next year if the bonds price keep dropping.

#26 bob on 12.11.09 at 2:40 am

Carney is absolutely right to point out that people need to make responsible choices in this rate environment. What’s wrong with this?

It is not inconsistent for him to lower rates in order to induce people to spend money while at the same time asking for people to make responsible choices. There isn’t just one type of consumer out there.

For many people, current low rates are, in fact, very, very good because it allows them to convert high interest debt into low interest debt, as only one example. Why are these people forgotten in the conversation to admonish the few people who make poor choices — has Carney forced anyone to take out bad loans?

Why is it the Government’s responsibility to say when and how anyone should be able to spend their own money? Why should we be against personal responsibility and for Government hand-holding?

#27 Garth Vader on 12.11.09 at 3:01 am

GT, what would you envision would happen to the value of the Canadian Dollar vs the US Dollar, if the BoC set their rate to 2%? 4%?

What do you believe is the ideal BoC rate as of today?


#28 JSVM on 12.11.09 at 3:19 am

Love it, live it…cheers to Garth as brutal honesty rules!

#29 vreaa on 12.11.09 at 3:23 am

Garth cited the National Film Board of Canada’s three short films on Vancouver Realtor Keith Roy in yesterday’s post. Thanks for the link, Garth, amazing stuff.

This is a choice ‘story from the Vancouver RE bubble’, and with that in mind we’ve archived full text transcriptions of the films, with highlighted extracts, at our RE story depository, under the title:
“I am Realtor. Nothing Realtorian is Alien to Me.”

#30 ralph on 12.11.09 at 3:25 am

“I’ve talked to you on a number of occasions about the economic problems our nation faces, and I am prepared to tell you it’s in a hell of a mess—we’re not connected to the press room yet, are we?”

— Ronald Reagan

#31 phil g on 12.11.09 at 3:38 am

Garth, what are the possibilities of this government or Carney allowing a correction of say 30% anytime soon.

#32 Tallyman on 12.11.09 at 5:09 am

The “dude” is just covering his butt.
“oh I warned em” he’ll be saying. “It ain’t my fault”

What do you expect from Goldman Sachs Scum.

#33 Bruce on 12.11.09 at 6:52 am

LOL! Is that the best picture they have of Carney? He looks like he’s on crack.

#34 Long time Blog lurker on 12.11.09 at 6:58 am

Tried to sell the cottage last summer. Two offers, first with a 25% discount to ask. The next with a 15% discount. Not prepared to sell the unique property that low. Perhaps I should have bitten the bullet. Not easy to sell.

Nevertheless, this spring I will put Toronto house on the market. Again not easy to sell especially with kids at local schools. But there are homes to rent for modest sums compared to the capital value of our house.

Thanks Garth for your persistently putting this issue front and centre. It has helped me maintain my resolve to cut my residential real estate exposure in half and fully pay off all borrowing. I won’t be living as large but I will own fully what I have and it won’t all be in real estate. Hope I can pull the trigger and get it done.

#35 Maurice on 12.11.09 at 6:59 am

So what is Mr Carney waiting for? The next election?

#36 GeorgeP on 12.11.09 at 7:00 am

Here is something interesting from Washington last night. A vote on proposed Wall Street rules.

An attempt to put restrictions on derivatives, aiming to prevent manipulation and bring transparency to a $600 trillion global market was defeated

…..Let the games continue…..

” An amendment by New York Democrat Scott Murphy, adopted 304-124 Thursday night, exempted businesses that trade in derivatives, not as financial speculators, but to hedge against market fluctuations such as currency rates or gasoline prices. “

#37 Kash is King on 12.11.09 at 7:26 am

I hope everyone is taking notice that Garth is directing his fire at Mark Carney, and not Stevo & Jimbo.

As I said before, the duly elected government has no say in the financial matters of this country; short of supportive policy from the bankers, if the bankers want that particular set of puppets elected or re-elected.

There must be lot’s of stuff that goes on behind the scenes that we’ll never know about.

Sometimes people have ideas & opinions though:

“The money sprinklers are running scared as the new financial system looms”

#38 Herb on 12.11.09 at 7:57 am

#3 Greyhound,

The short answer to your question: Yes.

The long answer: YYYEEESSS!!!

#39 Sean on 12.11.09 at 8:01 am

#9 Into The Sunset

Why does he not at least insist the percentage down payment on any house purchase must be 30%. Would this not help quell the frenzy going on in the home real estate market

Quell?? Haha… I like that one! If by quell you mean annihilate… then yeah. Don’t get me wrong, I agree with your sentiment, and would actually like to see it happen. But can you can imagine the hell that would ensue?

#40 Bystander on 12.11.09 at 8:09 am

if not raising rates – increase minimum downpayments to 20%, reduce amortizations to 25 years

Still they just blah-blah-blah

#41 Sean on 12.11.09 at 8:14 am

#12 Responsible Saver on 12.10.09 at 11:48 pm

“Thanks Garth for being the voice for the bedrock of our society….the family unit…who has seen their main expense of a lifetime….housing….turned into a Vegas slot machine by the current monetary policy makers.”

You have put it most succinctly, my friend. If it were another asset class we were discussing, we could all just walk away and choose not to invest. But this is why it really hits “home” so to speak. It is truly a human tragedy unfolding. For so many people I know, this housing nightmare is profoundly affecting the choices they are making, in terms of career choices, where they can live, delaying having a family… in the prime years of their lives. This casino like, asset bubble “economy” is tragic, and will negatively impact the economic potential of this country for a generation, at least.

#42 David Bakody on 12.11.09 at 8:52 am

Merry Christmas Canada and welcome to the “Reality of Steve’s Canada” ROSC

Translation: I’m going to jack rates, little people. And be ready for tax hikes, too. Consider yourself, like, so warned.

Perhaps that says it all, y’all.

So what are you going to do about it? I mean you and you and you who stop by here to read.

If you sell RE will you sit customers down and tell them the truth?

If you are a journalist will you print the truth wrt the financial disaster that Harper/Flaherty/Carney created, hello you quickly slammed Paul Martin for having $15 billion in the bank and a $3 billion emergency fund for some silly papers found in a dumpster in OTTAWA!

If you are a banker will you ensure you loan money not at to-days rate but with the possiblity of much highier rate you know they can afford in 5 years and ensure they are debt free and have all cash on hand to close the deal via savings.

If you are a politician at any level of government will start thinking about the well being of all those in your riding instead of your gold plated pension plan!

All others stop and think their is real good possibility what has happened south of the border and beyond could happen here in Canada sooner rather than later here in Canada if Canadians let this government continue past 2009 to spend our money to feed a false economy on a very uncertain future at best.

Mr. Carney …..”Grow Up” and be prepared for a visitor on Christmas Eve …. a word of caution warn your wife you might have a terrible night mare because of your bad deeds.

“ROSC” and the worst is yet to come.

#43 Gord In Vancouver on 12.11.09 at 9:19 am

#19 Crash

Mark Carney is akin to a drug pusher who gets his customers hooked on cheap credit, then jacks the rates and really sticks it to them. The things is, he KNOWS this is causing a problem, but he won’t do anything about it until it’s too late.

Excellent analogy.

#44 Ret on 12.11.09 at 9:19 am

As my Dad said about the Depression, ” the people in the cities got hit the worst.” Canada’s major cities have millions of post-1990 new Canadians who have really never seen a pull back in the economy since they arrived here. Understandably, they don’t believe it is possible in Canada and spend/ borrow accordingly.
If the economy slips even 5-10%, many will find that they are jobless and have little choice but to walk away from their heavily mortgaged tents , rent a container to get the Bimmer and their household stuff out of the country and blow out any remaining credit that they have to buy a plane ticket out of the country.
The Banks will be faced with billions in consumer, auto and mortgage loan losses. The architect of this mess, M.C., will no doubt argue for huge BoC bailouts for the over leveraged Banks, possibly near collapse.
Question: Who will pay for the bank bailouts?
Answer: Go and look in the bathroom mirror. (You had no other country to flee to!)

#45 jshum on 12.11.09 at 9:24 am

I was just thinking about it this morning. If rasing the intererest rates really will screw things up (like the dollar) there may be other ways that would slow people from spending more on houses than they can. Like increasing the minimum down required or reducing the maxium lenght of the mortgage. My guess is the government likes people buying up these houses right now. It’s putting fake borrowed money into the economy

#46 paul on 12.11.09 at 10:12 am

Ret “many will find that they are jobless and have little choice but to walk away from their heavily mortgaged tents , rent a container to get the Bimmer and their household stuff out of the country and blow out any remaining credit that they have to buy a plane ticket out of the country.”

This is what will happen. I know of one case a few months after the credit crunch last october where an indian family got up and left their home , auto’s , and debts and just took off from Canada. Tens of thousand will get up LAUGH at stupid Canadians and leave. This will be the reality . Why the BoC would punish those who work(produce) and save and reward those who don’t work and spend (debt)? I am starting to think I should do the same. WARNING to BofC as I will borrow money and then leave this stupid country. If work and saving don’t get rewarded Canada will go down in ruin and YOU BoC where the cause of it. Stop the financial terror

#47 PeckedToDeathByDucks on 12.11.09 at 10:21 am

Has there ever been a period where rates were guaranteed to stay low for such extended periods by Central Bankers? Wouldn’t that disrupt the normal flow of credit markets and tilt the playing field in favour of those who have the means and international connections to play the carry trade? Their moves for set time periods would be guaranteed.

Imagine a Casino roulette wheel where the ball had landed on black for the past 15 turns and the players were winning like crazy. Then the croupier announces that the ball would land on black again for the next 60 turns. The table, of course, is restricted to already seated clintelle who do very well. Wouldn’t the Casino lose a bundle? Yes, they would suffer a prolonged downturn. Yes, as in Japan, the sponsoring carry trade institution would suffer for a prolonged period but could issue an infinity of chips. Once the chps are cashed in, eventually it will go bankrupt.

The select players, however, will do very well, as long as they are quickest to cash out.

#48 infernalmachine on 12.11.09 at 10:26 am

so supposing that one has some cash on hand, where do i keep it for the next 5 years? GIC and bond rates stink, real estate is a lost cause, gold is silly, and i’m still not convinced in the stock market’s stability over the short term.

#49 Kurt on 12.11.09 at 10:48 am

#44 jshum – exactly.

#50 T.O. Bubble Boy on 12.11.09 at 10:56 am

@ #43 Ret:

You mention a good point on the non-mortgage consumer debt: car loans, non-secured line of credit, HELOC, and all the various consolidation loans will all jump as well.

From what I’ve read, most calculations showing the damage various BOC rate increases will have on a family’s finances have only shown the increase to mortgage payments — if the “average” family also has a $20,000 car debt and a $20,000 home reno debt on a LOC at Prime + 1% or higher, that’s another increase that will eat away at disposable income.

#51 Nibs on 12.11.09 at 11:03 am

David Rosenberg’s latest op-ed.

#52 Devil's Advocate on 12.11.09 at 11:04 am

My latest client update via email

Following is Garth Turners latest editorial from his website

I was reluctant to pass this information along to you as it is not likely to be considered positive commentary on the current state of the Canadian real estate markets, but I believe it is in reality. I have been following Mr. Turner’s blog for some time now and I am in general agreement with the message even though it might seem contrary to my business interests. At the end of the day after I have listened to the optimistic press releases by my own industry and that of Mr. Turner I can only surmise that it is Mr. Turner who has the clearer crystal ball and speaks less SPIN and more truth. My business is based on Trust, Integrity and Professionalism none of which could remain intact without full disclosure of such information that might influence my clients decision making. While I might not tell you what you WANT to hear, you can always trust I will tell you what you NEED to hear.

In the coming months those sellers who bite the bullet and sell for something less than they are comfortable with will, in retrospect, probably be glad they made such a decision. For those who buy, with appropriate due diligence and within their means, a home that meets their needs long term, the non-speculative rewards “home” ownership provides will continue. Those considering a real estate purchase should factor in something greater than these current historically low interest rates to the equation however.

We should anticipate some correction in the real estate markets over the coming months and we need to embrace those corrections as the return of the necessary foundational fundamentals currently lacking in the market. Just like a home, without those foundational fundamentals the whole structure above is a weakened as were it built upon unpredictable quick sand. I’m sure you would agree that the markets, all markets, have been behaving quite unpredictably lately which, I’m sure you would agree, can only be attributed to the weak foundational state of our economy. We need those foundational fundamentals restored to a strong reliable state. We NEED this correction. We need some predicatability. We need the average income earner to be able to afford an average home, when they can’t we need to fear the warning that the market is too far out of a state of equilibrium, imbalanced, and the potential consequences that brings. As in all things; it is easier to fix before it is broken.

In closing, I encourage you to approach this information and all other tepidly. No, the sky is not falling, nor are real estate values about to “tank”. Clearly a greater number of Canadians place good value in real estate – maybe just too much currently. The days of easy real estate speculation are, I think, coming quick to an end and that, I think, is a good thing. If I never hear “you don’t buy it for the cash flow you buy it for the equity gain” again it will be too soon. Dude… such equity gains are “blue sky”, “a gamble”, “speculation” pure and simple. There is a difference between investment and speculation. While I have never been a great fan of speculation, sound, well thought out investments are always in vogue.

#53 BigAl (Original) on 12.11.09 at 11:05 am

I think everyone demanding 20% – 30% down payments are being elitist.

If someone can do a 5/25 mortgage, what’s wrong with that?

Just because someone came into a wad of cash from mommy and daddy and is willing to plunk the whole thing down as a down-payment, doesn’t make them different from the guy who managed to scrape together the 5% through saving.

I know plenty of people who put down 5%, lived mostly cheque-to-cheque, and paid their mortgage off or are paying it. What would you have these people do…rent all their lives? I understand the fancy charts that show the rent vs. buy long-term comparisons, but lets face it, if you’re not the type that has the discipline to save the extra money, then real estate is an expensive form of forced savings. In the end, after 25 years of paying rent or a mortgage, I’ll bet 99 percent of the owners are better off than than 99 percent of the renters.

While I completely agree that people have to buy at the right time, and it would seem stupid to buy right now with any portion of down payment, the high down payment argument is smug and elitist….”oooh look at me, I’ve got more savings discipline/higher income, etc. than you…how dare you own too”.

Home ownership is not a right. Buying what you can only pay 5% of is a gamble. — Garth

#54 grumpy on 12.11.09 at 11:19 am

Garth, the comments by Carney about people getting themselves into too much debt coincide with the rise in prices and mania in Ottawa. So, only when its in his back yard does he notice the effects of his misguided and dangerous rate policy?

It reminds me of another old market maxim that

‘The oil price never goes up until theres snow in the traders driveway in New Jersey”

Can it be that the great leaders are too isolated from the rest of Canada that only a mania phase in Ottawa will wake them up? If so, lets hpe the headlines in the Capital focus on the problem as being national as opposed to ‘somewhere else’.

This is Nimbyism at its very worst.

#55 popeye the sailor man on 12.11.09 at 11:25 am

#2 T.O. Bubble Boy on 12.10.09 at 10:56 pm

” putting a cap on the maximum amount of a CMHC-insured mortgage (say 25% above the average home price for the city), ”

This is the first time I heard someone say this. I think this is idea, what is a first time buyer paying more than that anyway. CMHC was set up to help people get into a home, but not mansions. I also think other things like a buyer must qualify at the 5year posted rates when you want a Variable mortgage, slowly increase the down payment to 10%, and CMHC should only insure the amount of the mortgage that is unconventional so the banks will have to take the first 75% of the mortgage on there books so they have some risk, thus lend more prudently.

Just my 2 cents.

#56 Dan on 12.11.09 at 11:31 am

What would happen to those with a 5/35 or even 0/40 recent mortgage come renewal time if the rules of the game changed to minimum 20% down and/or 25 years amortization ? With 30 or 35 years left based on their initial agreement, would they now be forced to borrow with with an amortization of 25 ? If the asnwer is yes, I doubt we will see a change soon. Not sure if and how downpayment plays a role at renewal. Anyone ?

#57 Christopher on 12.11.09 at 11:33 am

If you can not pay cash for your home you can not afford it. People today are just leasing thier homes in hope of a promise and getting the “home owner” title to make them feel whole. I just hope that you will be able to keep that cash flowing for ever and ever and you have no surprises. Life is full of surprises so are you ready?

#58 Just Janice on 12.11.09 at 11:57 am

Monetary policy is an important tool to combat economic distress. Unfortunately, it has been completely neutered of this ability as instead of freeing up disposable income by lowering the cost of borrowing, it just causes people to run out and over-leverage themselves. Borrowed money is cheap, so why not?

If our lending policies were such that a person could only borrow a certain multiple of their take home pay (lets say 5 times including all consumer credit loans) as a maximum, regardless of the interest rate – then when rates dropped people would actually have money left over to save, invest, or pay down debt and the impact of monetary policy would be restored. Instead we wind up in a never-ending cycle, where low interest rates cause people to leverage more inevitably causing much pain and distress when rates rise.

The smart cookies are looking at the present circumstance as an opportunity to pay down their debts and build their savings and investments. The dumb crumbs are too busy masquerading as cookies by leveraging themselves to the hilt. If only financial literacy was a required course in high school!

#59 john m on 12.11.09 at 12:12 pm

A very dismal future indeed and i see nothing that could possibly change it now…..a large portion of our society has been seriously misled by a collection of greedy people,”face saving politicians”,and incompetent policy makers that have ventured far beyond their capabilities with little foresight for the future of their actions. A large portion of our population have all their future income invested in depreciating assets all on borrowed money..from the car in the driveway,the furniture in their home,the clothes on their back and the home itself…. the only possible way to survive would be a large continued increase in housing values to cover the maintenance on all of the other depreciating assets and rising utilities,taxes and the home upkeep itself. A rise in interest rates will spell disaster to an already disastrous situation.Sadly those of us who have maintained caution and common sense , curtailed our spending and hoarded our bucks will also have to pay the piper for the mistakes of the power seekers,the greedy ,the incompetent and the gullible. If anyone sees anything rosey in this picture please tell me?

#60 PeckedToDeathByDucks on 12.11.09 at 12:34 pm

The Rigged Casino
(in keeping with Garth’s theme of “Monetary Policy”)

Look, they are bringing out a new Green felt table!
Climate controlled. During the setup, you ask for a list of rules for the new game. The pit boss scowls at you and says that they haven’t been printed yet. The rules will change as the game progresses. He tells you not to worry about the details, eventually everyone will be a winner at the end of the day. To finance the start of the game, all casino patrons are ordered to pony up 25% of their wallet contents.

What’s your reaction? It all depends on trusting the people who run the game and their statement that we will be winners at the end of the day. On past performance and promises…do you trust them?

#61 lgre on 12.11.09 at 12:52 pm

It looks like the bankers and economist are coming out of the woodworks, if that’s not a sign then I dont know what is. Pay attention RE bulls, you’re about to get bulldozed.

#62 AM on 12.11.09 at 1:00 pm

I agree that CMHC should restructure somehow. In addition to raising the minimum down, I think there should be a graduated system in place to prevent over leveraging based on the value of the property. For example, under $200k you need 10% down, 200-300k 15% down, 400k+ 20% down. If the premise is to create the affordable opportunity to own a home, and you have $80,000 to put down on a house, you shouldn’t need to go through CMHC…just buy a smaller house… If you feel you must go for the $900k McMansion with a puny down payment, your CMHC premium should reflect that.

I think a system like this will better serve the first time buyer with a small downpayment on a strarter home, just as it was meant to be.

#63 Ken on 12.11.09 at 1:00 pm

IN my opinion the BOC should never give a specific time period as to the raising or lowering of interest rates.They should do it if deemed appropriate.

#64 Kurt on 12.11.09 at 1:23 pm

#56 Christopher – that’s an interesting thought. Put it together with another occasional poster’s assertion that a home is a consumable, not an investment, and you get a very different view of how to treat real estate. I’d say that there are two reasons why this very logical interpretation is false, and those reasons are local in space and time. The first is continued migration to Canadian urban centers, both from the countryside and abroad. The jobs, especially the top-paying ones, in an urban center tend to be concentrated in the city core. Migration creates increasing demand for residential land close to the core, and thus long-term price appreciation. The second is the shift from net saving in the 80s to maxed-out on debt today. This general change in consumer behavior created more money to chase pretty much everything; since real-estate debt could be secured with the property, property was comparitively cheap compared to consumer goods (see also mortgage interest rates compared to credit cards). So, the price of houses went up and up and up over long periods of time, allowing people to treat them like an investment. However, both of these forces have to end some time. At that point, it becomes imperative to treat a home as a consumable and make decisions on it accordingly. In the case of a house, the consumption lasts many years, so it’s reasonable, in the sense that it would be for a business, to borrow money for the initial purchase. However, the business would analyse the purchase in terms of carrying costs, depreciation, maintenance etc. and tradie off against leasing – consumers need to learn to do this as well. For me, I find it easier to just say “if I can’t pay cash, I probably can’t really afford it” and move on. My friends and family whom I consider the most successful think the same way.

#65 Canada Bubble on 12.11.09 at 1:53 pm

Is Canada’s Housing Rebound Forming a Bubble?
by Jim Adair

Canadians are a cautious people, so it isn’t surprising that after resale homes posted an astonishing rebound of more than 60 per cent since January, leading the country’s economic recovery, some analysts started looking for a dark cloud – or more specifically, a bubble.

#66 $fromA$ia ( :PY ) on 12.11.09 at 1:54 pm

One thing is for sure, Marc Carney will lose his job before Flaherty.

Sorry Marc, nothing personal. It’s all about mainting your seat in Government. Even for those who are just visiting.

#67 $fromA$ia ( :PY ) on 12.11.09 at 1:56 pm

Just visiting? Whats wrong with Canadians just visiting?
They come back because Canada needs help.

Just visiting is better than “just maintaining” BARELY.

#68 BDG YYC - Affordability for the Average Guy ? on 12.11.09 at 1:57 pm

Seems there are some who are looking forward to prices coming down so that affordability is resrored for “The Average Guy”. I have absolutely no idea which “average” guy they are imagining they are referring to.

With almost 70% of households already owing on or owning a home surely “THE AVERAGE GUY” has already
fully “afforded” in.

If someone is talking about homes becoming affordable for the “average guy” as in who’s not in (and is currently operating an independant household – as a non owning rent paying householder) they are surely not talking about the “average” guy. Now … included in this group of “average guys” somebody seems to be referring to (I’m using this “guy” term in the she-guys and he-guys way here) have to be some “average guys” who realistically can not (possibly ever) really “afford” to own a home.

Actually if you think about it … along with looking at some income numbers its quite amazing really just how many “average guys” are actually home owners. With near 70% of households already owning or owing on a home … and with 20% of households living on after tax incomes of less than $1,000 a month and another 20% still not making more than $2,500 a month … we’ve only got 60% of all households bringing in better than $2,500 a month yet 70% of all households are “owners” of one kind or another” and about a third of those “own” as in … have clear title to their home.

Its pretty clear that not only is the “agerage guy” all in but so is the “below average” guy, the “median guy” and likely a lot of very, very below average guys. Hell … practically all of “everybody” who ever wanted in IS IN … so surely this must include THE AVERAGE GUY.

Now … if affordability based on PRICE should find a way to return to historic norms … and we get back to that place where an “average” house costs say 3.5 times “average” income … the “average guy” will very easily recognize that place as ……… HELL !!!!

An “average guy” who’s hoping for prices to come down to where the “average guy” can afford one is … well …. let’s face it … Not average at all. But they might see their wish come true.

Just look south to see how happy the “average guy” down there is now that prices have gone to where prices are back to much more affordable levels for the “average guy”.

#69 kitchener 1 on 12.11.09 at 2:04 pm

RE#52 Big Al

What? nothing wrong with 5/35, what about the 0/40 we had for years? is that fine too.

I am not sure how many people 30 or younger realize that back in the early 90’s there was no such thing as 5/35. It was a min of 20% for the bank to even talk to you and if you did’nt have it you had to take a second mortgage that was usually 4-5% above prime to qualify.

Back then, there was less rampant speculation. 5/35 may have made the housing market easier to get into, but it has also causes it too become out of reach for any people.

Carney is just jawboning, trying to let the aware observer know whats going to happen down the road. He will raise rates and when it happens it will be a quick run-up for the first little while after that it will eventually level off.

Follow me on this :
To raise rates, the economy has to show improvement
Nothing but happy talk about a recovery already underway (questionable as it may be)
Carney et all warning Canadians to be prudent and look at life cycle of debt
In a few months time, we might see .5 percent GDP growth, which will solidfy the recession is over.
Rates will start to inch up. It will be a unilateral move by all G8 nations

Keep in mind, that the bankers have access to info we do not- mainly how many people are applying for mortgages and locking in rates, my guess is that # is dropping off. That is when the rates will rise, they have stayed low and have reached their maximum utility (stayed low as long as humanly possible and taken advantage off by as many people as possible). Rates will rise, people that locked in will think their savy investors while the others will grin and bear it.

#70 Kurt on 12.11.09 at 2:10 pm

Proposition: CMHC’s original mandate is obsolete and its business, far from being expanded, should be wound down.

The Canadian government’s mortgage insurance is supposed to be a tool of social policy – nothing more, nothing less. Its current abuse to manipulate the economy to enhance the chances of SH getting re-elected this spring is not and has never been a part of its mandate. The theory behind CMHC is that home ownership brings stability to communities through the long-term commitment of ownership, and therefore constitutes a social good. It was born in the era of a stable manufacturing economy, when people reasonably expected to work in one place for their entire life. Our economy has changed radically, and it demands flexibility above all else, including the ability to move for work. Home ownership is becoming an obstacle to Canadian prosperity, for the exact reasons that CMHC was originally created. Maybe it’s time for it to go, to be replaced with mechanisms to enhance Canadians’ mobility.

#71 mattvic on 12.11.09 at 2:49 pm

Any comments on the proposed OSFI Advisory? Is this the beginning of the reining in of CMHC?

#72 North Van Dude on 12.11.09 at 2:51 pm

#4 – put yourself in the banker’s shoes
Mortgage holder comes in to renew- can barely afford payments at current rate, but at renewed rate will need to adjust lifestyle significantly.

also consider that if rates are higher the value of the home may have decreased, along with the “promise” of future value gains

1- ask for equity – you can renew the mortgage but it is more expensive and i’ll want to see you put some of your own money into this

2- allow them to renew at a rate you know they can’t afford and get your repo team ready for the inevitable- you may squeeze a few more months of interest out of them

3- repo the home and resell it. Bank will have collected all that interest for the variable term and will then sell the property. If the interest paid and the sale price exceed the costs of lending then the bank makes a profit. They are not afraid to take a profit when they can.

what is interesting though is that in Montreal in the 1990s the market deteriorated so rapidly and profoundly (both economic and political issues at play) that it often made more sense for the bank to let someone continuing paying the mortgage on a house whose value was dropping daily.

#73 Elle on 12.11.09 at 3:35 pm


#1 $fromA$ia ( :PY ) on 12.10.09 at 10:55 pm
“…feeling moist, pink and sticky.”-Garth
You talkin’ about Nikki again?


What are you? About 12 years old?

I was about to send Garth’s post along to my family,
as we are all very interested in REALESTATE and the state of the economy……….until I read the cheap shot you took at Nikii the realestate sales person.
To say I’m disgusted is an understatement!

# 16 SUE ” Garth, I think I’m blushing!”…….

…you have nothing to blush about, the embarrassment should be Garth’s for putting this chauvinistic garbage on!


Whoa, lady. I was referring to bubble gum. And you? — Garth

#74 Mr. D - Ottawa on 12.11.09 at 3:54 pm

Reply to #52 BigAl (Original)

You don’t need money from your parents to buy a house with more than 5% down. From 1994-99 I was earning 35K or less per year. I saved 5-6K each year and also made some gains on investments. When I started, I wasn’t even thinking of buying a house. However, the landlords in Ottawa were getting very greedy with big rent increases each year. I bought a brand new 3 bedroom, 3 bath town home near my apartment (took possession in 2000). The carrying costs were about the same as renting my one bedroom apartment. Many renters bought homes as they figured this out.

I don’t believe in paying CMHC fees since I don’t think I’ll ever default on any debt. My downpayment was a bit over 25% (about 40K). I didn’t think it was that hard to save 25%. I even bought a brand new car two years before the new house.

It helped that house prices were much lower in 2000, but the 5% down payment is way too low. If you really want a house, you’ll save 10% or more for it. If you can’t do that, then you can’t afford to buy. Plus they make it easy by allowing a large tax free withdrawl from your RRSP (15 years to repay it). If I were a first time home buyer now, I would wait for some substantial rate increases before buying. Higher rates should mean lower prices.

#75 T.O. Bubble Boy on 12.11.09 at 4:10 pm

@ #69 Kurt :


Exactly! Why on earth is a post-war low-income housing program (that was an off-the-radar niche program for 50-60 years) now the centerpiece of the Conservative Government’s entire economic plan?

Talk about the elite riding the backs of the poor… the entire fake recovery is based on 5%/35-yr misinformed buyers who are being thrown under a bus just to extend this bubble another year or two and get Harper another minority government with his buddy Flaherty.

Before we know it, every job in Canada will either be a government position or a banker/repo man.

#76 Keith in Calgary on 12.11.09 at 4:54 pm

“No minority government is going to let the housing market correct, let alone deflate.”

Quite correct Batman…….

#77 T.O. Bubble Boy on 12.11.09 at 5:26 pm


Dim Jim – denying reality again.

He must have the R1E1 virus.

“We are watching increases in the amount of household debt in Canada. Some of this is to be expected. We have been going through a serious recession, the most difficult economic year globally since the Second World War. So one expects to see some increase in household debt, which we have seen,” he said.

Since when is this just about increasing household debt??? Debt alone is not the issue here — it is leverage and risk. I could take on a $1M mortgage if it was a $2M property and I put $1M down and make $500k a year.

5%/35-yr buyers with near-zero equity and negative cash flow are the issue… not the fact that person X has a $200k mortgage or person Y has a $300k mortgage.

#78 ManfredSteyn on 12.11.09 at 5:31 pm

#72 Elle – Lighten up, Jeez!

Thought this was interesting:

#79 blobby on 12.11.09 at 5:44 pm

Quote BigAl : “if you’re not the type that has the discipline to save the extra money”…

.. Then why on EARTH would you consider buying a house?!?!?

Quote: “What would you have these people do…rent all their lives?”

You’re from Vancouver arent you? You’ve been suckered in to the Vancouver mantra of “if you rent, then you’re a poor second class citizen.. you should be in debt.. like us!”

#80 john m on 12.11.09 at 6:05 pm

#62 Ken on 12.11.09 at 1:00 pm

IN my opinion the BOC should never give a specific time period as to the raising or lowering of interest rates.They should do it if deemed appropriate………………..they will! remember the 80’s?

#81 Dan in Victoria on 12.11.09 at 6:15 pm

As the good ship “Economic” pulled away from the harbour mouth the captain Toody grinned at his first mate Muldoon and said this ship is unsinkable its stronger than the Canadian shield. The helmsman Klarney nodded his head in agreement.
Off they sped with a great roar from their new engine made by Qua-naiti-ve Easing, The twin screws, made by low interest rates pushed the “Economic” ahead at a rapid clip.
The captain dressed in his finest dinner sweater moved from table to table in the casino, always smiling, always giving free money to the gamblers. His first mate not to be out done raised the casinos credit limit, time and time again “Don’t worry, The Economics cruise lines head company will cover all bets” carry on.The casinos boards of directors grinned greedily.
On they continued into the fog, breaking all records for common sense, man does this thing go a few passengers commented. Others who had been on a previous ship “The ressicion”marveled on how this one was so much larger but was starting to move just as fast.
Would it break the record time to get to the Grand bank?
The helmsman now feeling cocky and confident decided to tinker with the engine settings, quickly he eased back on the rate throttle, amazingly the ship sped up.
Soon the captain and first mate came back to check on him,good lad they both said winking to one another.
Suddenly out of the fog appeared a man standing on an iceberg! The captain squinted, the vision became clearer, beard, blue suit, yellow tie, glasses Damn!!!! he screamed I set him adrift months ago.
A quiet rage boiled in all three, here was the one who had told them time and time again that the “Economic” was not unsinkable.
Ram him was the command, yes sir!! was the reply.
Crash the “Economic” hit the iceberg. The bearded man smiled fools, 90 percent are under water.
Slowly the “Economic”slid along side of the berg, buckets of stimlus poured from the gapping holes.
All the passengers stopped gambling and rushed to see what was going to happen.
Its all fine they were told its unsinkable.
Here! Free money for everyone, said the captain and his crew, back to the casino they all roared!
Off they ran, the vision of huge profits from free money clouding all thoughts of impending disaster.
A few did not return to the casino, slowly they made their way to the life boats, lowered them and watched the “Economic” roar off into the fog.
Alas the beadered man was there offering to help any one that would listen…… be continued

#82 Nostradamus jr. on 12.11.09 at 6:20 pm

…It’s too bad I am not in heading banking policy in Canada…

I would have Carney and Turner on my advising board…I would sell off Eastern Canada for the cost of all of Canada’s outstanding debt….

Then everybody would be rich and living in Hongcouver…

Nostradamus jr.

#83 john m on 12.11.09 at 6:55 pm

8 billion in bonuses for our Canadian Banker ceo’s ….pretty sweet huh? That’s 8,000 millions (Whew!)……….but as our political parties in power say…things are different in Canada they never required any bailouts?…………..well excuse me but i differ in that opinion!They have been given a guaranteed no lose free lending policy backed by taxpayers dollars to create a false sense of security and a false economy………….we desperately need some honesty and a government for the people!…………Do not ever forget how we got here and rewards are not warranted!

#84 Kash is King on 12.11.09 at 7:22 pm

Here’s one way to manage a RE bubble:

“China revives property tax to avert bubble”

#85 supersocco on 12.11.09 at 7:23 pm

@#81 N jr.
Give it up already. You are the resident annoying heckler from the back that we just want to go away, and moreover, adds nothing intelligent to the conversation. Like this guy!

#86 I didn't know! on 12.11.09 at 7:35 pm

Wow. You miss a day and what do you find out? Carney is in charge of interest rates again! Last I heard it was at some market owned by “Mr. Bond” where they decided what interest rates would be…..

I also see from other bloggers that Carney is running
CMHC now too.

I’ll try to keep up from now on!

VRMs are linked to the BoC rate. Fixed terms and LOCs are set in the bond market. This might assist you. — Garth

#87 Nostradamus Le Mad Vlad on 12.11.09 at 7:50 pm

#81 Nostradamus jr. — “I would have Carney and Turner on my advising board . . .”

Carney is too closely tied with Paulson etc.; Garth can have Michael Wilson’s job.
The Muppets did a great cover version of The Charlie Daniels Band “The Devil Went Down To Georgia”; they called it “The Devil Went Down To Jamaica”. Don’t drink and drive — Smoke Shit And Fly!
One question re: this — Why?
Re: the ongoing Copenhagen Crapola. Carlin says it rather eloquently. Although Carlin is a teensy bit dead now, his message is straight to the point. Gal Ore, eat yer heart out! Naughty language. The other side of C’hagen — Control
Is Iran in Violation of the NNPT? They signed it in 2003. Guess again.
Obama (dubya’s twin) wins the NPP, yet increases the amount of troops in Af’stan by 30,000 to lengthen an unwinnable war. Comment by Obama – Elite “Obama’s very clear financial mandate is to protect the super-rich, while throwing the rest of this country financially under a bus.”

#88 Wondering on 12.11.09 at 8:07 pm

I think Carney has been reading Garth’s blogs and he knows and understands what now has to be done. The interest rates will start to rise, earlier than posted in Carney’s last statement about mid – late 2010. Garth has stated that this needs to happen now instead of later, so Carney is just covering his butt when the rates start rising before his aformentioned date.

How do you spell housing bubble? P-O-P.

#89 Grantmi on 12.11.09 at 8:10 pm

It’s almost cartoonish the BOC head and the Finance Minister….

Next thing we know… Jimmy will be staring in his own Saturday Morning show.

Any one for a Krabby Patty!

#90 Herb on 12.11.09 at 8:44 pm

“I was referring to bubble gum.”

Heck, and here I was enjoying the speculation about what I might have missed in life!

#91 jess on 12.11.09 at 8:54 pm

carney’s adumbration awaits the new u.s.a. financial regulations

whose flying the drones?

…”The company is also facing a grand jury investigation, bribery accusations, the voluntary-manslaughter trial of five ex-employees for Iraqis killed in September 2007 and the House Intelligence Committee is investigating the company’s role in the CIA’s assassination program.

American agencies have in the past outsourced interrogations, but many worry that contracting out the authority to kill brings a new set of problems.

George Little, a CIA spokesman, would not comment on Blackwater’s ties to the agency. But he said the CIA employs contractors to “enhance the skills of our own work force, just as American law permits.”

Sen. Dianne Feinstein (D-California), who leads the Senate Intelligence Committee, said, “It is too easy to contract out work that you don’t want to accept responsibility for.”

#92 eddy on 12.11.09 at 8:59 pm

5% is a deposit, its not a significant down payment.

In the 1985 film ‘To Live an Die in LA’, Willem Dafoe gets the best line:

“The fact is, that if you can’t
come up with the front money…

…you’re not for real.”

#93 BigAl (Original) on 12.11.09 at 9:17 pm

#68 kitchener 1
and #78 Blobby

You mis-read what I wrote…I wrote there’s nothing wrong with 5/25….that’s five/TWENTY-five. Not 5/35. Big difference.

And I stick by my statement that it is unnecessarily elitist to say that people with only 5% down should not get a mortgage. That, of course, should come with a FICO of >680, a solid provable income that can service the mortgage, and negligible debt.

If you’re saying people in the scenario I outline here should be denied a mortgage solely because they only have 5% and not 10, 20, or more, then you’re being elitist for no reasonable reason, other than you like being part of the landed gentry and you want to shut the door behind you.

And I also defy you to prove that the vast majority of people who own are worse off after 25 years than the vast majority who rented during the same 25 years. I’m not talking after 2 years, after 5 years, after 10 years. I’m talking after the full 25 years on a 5/25. The rent vs. buy charts are like so many other “ceteris paribus” economic theory airy fairy arguments. In the real world, all other things are not equal, and those charts make the human-nature presumption that everyone will have the same level of discipline in investing the difference if they rent. For the average person in the real world, the expensive form of savings, forced savings into the one asset, is the only way they’ll save anything.

To sum up, at the right market timing (which is NOT right now), people with solid incomes, low debt, and good credit ratings, SHOULD dive in with only 5%, on a 25 year mortgage. Don’t let elitist wannabes (who feel like they’re Warren Buffet just because they’ve amassed a few hundred G’s) tell you you’re any less just because you only have 5% down.

#94 Confused in T.O on 12.11.09 at 9:41 pm

coodos to # 69 and 74! Scrap the CMHC!!!!

#95 Soylent Green is People on 12.11.09 at 9:55 pm

Re what’s wrong with putting 5% percent down on a house…

That’s funny!

– the reason house prices have been pushed up so far is because of the cheap money available by the banks, so the stampeding sheeple are pushing the prices of houses high with their laughable bidding wars

– it’s the exact same reason tuitions are so high… the unwashed masses can get these cheap loans and the universities are like, oh, let’s jack everything up, they can afford it but shhhh, don’t tell them there are no jobs for them i.e. no paycheque to pay back the student loan plus interest, shhhhhhhhhhh


#96 Elle on 12.11.09 at 10:06 pm

(uppercase not meant as yelling)

YOU may have been referring to bubble gum, but Mr Bubble Heads’ double enten’dre was out of place. I don’t care if it is your site….his comment was nasty!

So dis him. I’m PATDS. — Garth

#97 charles on 12.11.09 at 10:23 pm

Good stuff Victoria Dan @#80. Thanks for that.

#98 Thetruth on 12.11.09 at 10:25 pm

There will be no correction! The difference in bond yields between the 1 year and 30 year is the highest since 1980. Remember 1980 with regards to inflation?? Debt will be inflated away. Do your homework people. Demand will accelerate due to increased immigration and foreigners buying homes for their children to live in who attend school in Canada.

Immigration is 60,000 families a year. The country has 34 million people. Figure that one out. — Garth

#99 Dan in Victoria on 12.11.09 at 10:45 pm

Canadas version of the “Darwin” awards. “The Karneys”

#100 kitchener 1 on 12.11.09 at 11:26 pm

RE#92 Big AL

5/25 is good, well guess that up to the last 10 years, everyone including banks where just eltist then.

The truth is that without socializing the risk via CMHC 5/25 would never have happened as no financial institution, bank or otherwise would ever take the risk.

As a taxpayer and citizen, why should I take on more risk so that someone with only 5% down can have a house?

Banks and other financial institutions only to a 75-80 loan to value, why should they assume any more risk?

Look south of the border to see the consquences of your line of thinking where housing became a right and not a commoddity

#101 Tony on 12.11.09 at 11:28 pm

Like a good poker player bluffing on every street the U.S. government is doing the same telling a fictitious lie and hoping the public will fall for it. I for one don’t and know unemployment will rise, GDP will turn negative for at least the next 6 quarters and the jobs report for December in Canada will show unemployment will increase at least a full percent point with the brunt of losses coming in Ontario. Interest rates will fall and bond prices will soar next year both in this country and in America. Load up on long term bonds especially Canadian ones.

#102 somecatchphrase on 12.12.09 at 7:11 am

“How Buying a Home Is Gambling”

Yes, this is an American article. Remember what Garth has to say about “it’s different here.” Fantastic article with some very insightful comments, highly relevant no matter where you live.

#103 Dan in Victoria on 12.12.09 at 9:10 pm

Here’s a nine foot version of the cookie monster. Give this some thought, whats really the diffrence? (Short version.)

#104 junius on 12.13.09 at 11:36 am

Good article below on the distrinction between “productive and unproductive debt” and how monetary policy and gov’t insurance have pushed the banks to back consumer loans over business loans.

#105 Mike (Authentic) on 12.13.09 at 4:24 pm

Rising interest rates? Yes please, fast, hard and quick! Stop the debt madness before it’s too late.

Better late than never I always say, but soon is always better.

#106 Alan on 12.14.09 at 3:08 am


You’re such an idiot.

7% interest rates are fine. We’ve done it before and more!

You think people are going to abandon their homes as fast as our cousins down south?

We’ll sell our cars, stop shopping, eating out and more to keep the palace alive and well.