Losing it

Richard’s been looking for a condo in the Vancouver burbs, and Bruce the Royal LePage guy has been helping. The search has focused mostly on New Westminster, where only a year ago people showed up at condo openings with sleeping bags, lawn chairs and the all-important empty jar with a good seal.

Today, all gone. The great condo implosion, destined to ripple across the country later this year and into 2013, is already being felt here. People who bought recently have realized nothing, and those who need to get out must do so at a loss.

Just take a look at the summary of listings Bruce emailed to Richard yesterday morning. And to think mere months most people (and all the media) were falling for the marketing crapola being spread by local promoters like Cam Good and Bob Rennie. The word then was that HAM – Hot Asian Money – was unlimited and unstoppable. Because everyone in Mainland China wanted to live in a regional city which excels at mould-growing and can’t build a decent highway, the locals would soon be priced out.

“Buy now or buy never!” was the realtor battle cry. Now it turns out the Asian invaders were Chinese-Canadian families from Surrey and Richmond who have jobs and mortgages like everyone else. Meanwhile we have the sad spectre of an entire local population who thought they were as special as snowflakes, and sold each other houses in a frenzy of indebted horniness until nobody could any longer afford. Guess they never read The Gift of The Magi.

In any case, the entire market will crumble over the coming months. Condos first.

We whisk you now to the godless GTA, where 85,000 new condos are currently in the develop/permit/marketing/construction phase, — enough to satisfy record demand (mostly from speckers and flippers) for the next 8 years. As you likely know, there are more residential towers being built in Toronto than anywhere in North America. Outside of the city, this is viewed as humorous.

To grasp it, take a quick drive past the downtown core on the elevated Gardiner Expressway (be very careful not to drive under it).  Laid out before you are dozens and dozens of glass-sheathed condo spires, housing tens of thousands of people who once thought they were smart. But not only are their ‘investments’ being watered down daily as cooler versions of their units come to market, but we now know most of these towers will have be reglazed in a decade or so – promising condo fees that will make many of them unsaleable. People who live in glass houses, shouldn’t.

Anyway, here’s Assiz, a dude with a problem that’s the same but different:

I’ve been reading your blog for quite some time now.  I did purchase a condo 3 years ago in Toronto.  I purchased with the intent to actually live in it, unlike many speculators.  The closing date has now been pushed out 1.5 years from the original completion date and when I drive by the building (Queen and Broadview) construction is slow.  Work is never being completed on weekends or late into the day.  After all, the developers don’t wouldn’t want to have to pay overtime hours so that it eats into their overall profit.

I did buy one of these units at a time before the Condo boom really started to take off, I purchased in the lull of the market in 2008/2009.  I am fortunate in that I am not heavily leveraged into this asset, but it has been a frustrating process and I am just waiting for the next letter from the builder to say that the completion date has been bumped out another 6 months.  Luckily, I have taken your advice and my own frugality into consideration and have been renting at a low low price of $650 per month (inclusive) allowing me to continue building equity and not exposing myself to any additional real estate.

Poor Assiz. His condo deposit sitting there for years. His dream home a hole. Living in some guy’s dank basement as the best, horny, oats-spreading swingle years of his young life slip mercilessly by. This is what the Greeks meant by tragedy. Or was that their bond yields?

Obviously a lesson in how not to buy. And three years into this morass, Assiz probably couldn’t even find a greater fool to buy the unit assignment from him. Maybe he didn’t even ensure he had one when he walked out of the now-long-forgotten sales centre with the hottie saleslady and the model erection covered in the red dots. I mean, who wouldn’t buy?

Finally, here’s Mike. This blog scared him. Which I can understand. Most days it terrifies me.

He wants mortgage advice. I’ll let you handle it.

I’m not a week into following your blog, and already you have my head spinning. Now I’m considering breaking our mortgage (we’ve got about a year left), and locking into a 10 year fixed at a still fairly low rate (4%) to avoid having to requalify after the new rules come into effect. I’m worried that we may not be able to requalify after the changes, as I’ve just started my own business this last year, so my income is low and not very stable, and on top of that, my wife is finishing up her job in the next few months (with or without a new one). Uncertain times for our family.

I’d be interested to know if you think: 1) Is pre-empting the new rules by breaking and locking into a new mortgage a worthwhile idea to give us some time to get better income flowing? and 2) Does locking in to a 10 year rate sound smart or ludicrous (my brother has a 5 year variable rate thats at 2.7% right now as a comparable, and I think I could negotiate the same). Any insight you could provide on this would be incredible.



#1 TurnerNation on 05.23.12 at 9:05 pm


#2 Josef on 05.23.12 at 9:07 pm

Josef is BACK!!! Baby!!!

#3 furst on 05.23.12 at 9:09 pm


#4 T.O. Bubble Boy on 05.23.12 at 9:10 pm

The Vancouverization of Toronto continues:

193 MELROSE AVE Toronto, Ontario

April 9, 2011: listed at $1.25M
June 10, 2011: after 2 months with no takers, re-listed at $1.25M

May 23rd, 2012: listed for $1.43M

So, apparently a house that no one wanted for 2 months last April is now worth almost 15% more than last year.

HAM or no HAM, this is the peak of bubblicious greed and unethical realtor scams.

#5 50% correction predictor on 05.23.12 at 9:16 pm

I toured condo sales centres in Mississauga last weekend.


#6 Dimitry on 05.23.12 at 9:19 pm

I am ..

#7 Stupesing in Cabbagetown on 05.23.12 at 9:21 pm

“model erection covered in the red dots” – herpes?

Architect’s model. You certainly disgust me. — Garth

#8 Kevin on 05.23.12 at 9:22 pm


You have a “low” income, and your wife will soon have none at all, and you want to know if you should lock into a soon-to-be unaffordable mortgage before the banks are forced to stop lending out unaffordable mortgages?

Dude, you should be selling, not renewing. Take any equity you’ve built up, sell at the top, and rent until your new business gets off the ground, your wife gets her employment situation sorted out, and the market rewards you with a 15% off sale.

#9 DDCorkum on 05.23.12 at 9:23 pm

I don’t think you will be able to negotiate 10 years at 2.7% fixed. Bond yields are low these days, but not that low.

The federal government is yielding about 1.9% on the benchmark 10-year bonds. 2.7% would imply a spread of only 1.2% over that. I can’t see it happening — the bank still has to make money and you are not as risk-free as the country of Canada.

#10 Mister Obvious on 05.23.12 at 9:24 pm

“… there are more residential towers being built in Toronto than anywhere in North America. Outside of the city, this is viewed as humorous”

Well, we sure think its a hoot here in La-la. BTW, we could build a decent highway, we just choose not to.

#11 NoName on 05.23.12 at 9:28 pm

I think Rob Phord want be too happy with all this… It will drive him nuts all OT he will have to pay city clerks to handle all applications for property tax adjustment.

no paying off a deficit in Toronto any time soon…

(but I could be wrong on this one)

#12 Canadian Watchdog on 05.23.12 at 9:28 pm

Every wonder what condo speculators running for the exit door looks like? http://i49.tinypic.com/358nh91.png

#13 GarthBelieber on 05.23.12 at 9:30 pm

I have a good friend who is a realtor in London, and on a fairly consistant basis, he has stated the housing market is overpriced. He would not say how much of a drop in home prices he believes will happen, however he has mentioned on several occasions that house prices have to drop and that theyre inflated compared to incomes.

One just has to look at the overall picture of the economy and you can clearly see (if youre head is not buried in the sand) that Canadians are entering unchartered territory with extremely high home prices, increasing personal debt all while riding on the hopes that interest rates will stay at historically low levels and home prices will go up indefinately. This is backed with the beginnings of anti-union (decent paying jobs) rhetoric, job losses, lack of employment for new grads, etc. etc., not to mention baby boomers and their complete disregard to prepare for retirement.

Friends, neighbours and others on my street drive newer cars and I often wonder how they can afford this $300-400k house, two newer vehicles, kids, fully furnished house when I know the household is barely pulling in $90k annually. This is in London, I cant imagine how people in the GTA do this!

Scary times are ahead.

#14 Aussie Roy on 05.23.12 at 9:40 pm

Aussie Headlines

The soaring number of home owners facing eviction for unpaid mortgages in WA has led Legal Aid to step in, persuading lenders to put off repossession.

Property repossession applications have more than doubled since 2007-08, during the height of the property boom, to a rate of nearly 25 per week.

Falling property prices amid the global financial crisis, as well as lenders taking stock of their riskier loans, are much to blame, with about one in 20 WA properties now worth less than their purchase price, according to RP Data’s annual Equity Report.

Advertisement: Story continues below

The state has the second highest number of homes with negative equity (4.9 per cent) in Australia, and is home to five of the 10 regions with the highest rates in the country. The national average is 3.7 per cent.


The report credits the mining boom with keeping Australia ahead of the pack but says consumer caution and the ”persistently high exchange rate” are holding back other parts of the economy.

Dislocation caused by the high dollar was ”generating substantial uncertainties that could weigh on employment, confidence and growth, with potential negative spillovers on house prices”.

Australian house prices, along with those in Canada, France and Sweden, are still ”very high relative to rents and incomes” and the OECD points to further falls.

Australia’s house price to income ratio is 121 per cent compared with the OECD average of 98 per cent.


HIGH house prices will challenge credit growth more than cause a mortgage crisis over the medium term, a Credit Suisse report suggests.

Falling demand for overvalued homes will have an impact on the ability of the big four to grow their mortgage books, Credit Suisse said.


#15 Painted Toenails on 05.23.12 at 9:43 pm

Mike, presuming you won’t sell (although if you’ve been reading this blog for weeks you should have a realtor on speed dial by now) I’d suggest you. lock. in.

4% rate guaranteed for 10 years. No requalifying hassles, no uplift on your mtg rate. I assume you are handling the mtg now, despite your current low income. Life happens, you have a family and they need to be housed.

Sign on the dotted and then go get a cold one and watch the rest of the show. It’ll be spectacular.

#16 TurnerNation on 05.23.12 at 9:50 pm

“…the model erection covered in the red dots.”

Art imitates life? :-o

This pathetic weblog apparently lives on the following home-spun wisdoms:

– Bikes, Babes, and Balanced Portfolios;
– There’s no replacement for displacement;
– If it’s too loud you’re too old.

I know of the condo in question – it’s lazily named “The Ninety”.

#17 Retired Boomer - WI on 05.23.12 at 9:58 pm

Mikey, Baby-

Are you taking ‘stupid pills’ or what? List that shit-box and sell it fast, before you don’t qualify for renewal, and rent!!!

OK, you could break your agreement (Pay) and renew for 10 at maybe 4 and change. Then in 2 years the dump is worth maybe 80-90% of todays value. Real Estate north is toast guy, face it. Get the hell out before you file the tits-up bankruptcy petition like lots of the same fools south of the 49th. WE have cheap houses here, I know I own some.

Don’t get me wrong, a deal can be had after a few get there noses bloodied, the bankers don;’t care., but do YOU wish to be in that first wave of sellers, or would you prefer being in the last wave of sellers? Your choice. There is always a buyers’ market somewhere.

You’re Welcome!

#18 Can it be? on 05.23.12 at 10:07 pm

Just based on my own observations… The market is clearly in a rut. Things in my previously hot neighborhood are not moving. More listings pop up daily but nothing is moving. There is action, people are looking, open houses on the weekend, but to my surprise nothing…. Another deal that was supposed to go through for just under a million in the south end of Mississauga… Fell through on financing. I think financing rules are slowing down the market. There are many people that don’t pay income taxes, or very little income taxes and are speculating on a lot of homes. If mortgage qualification is based on reported income, the game certainly changes. I remember a realtor being nervous when the government changed the rules where all and any mortgages you had would have to be declared, thus decreasing how much you could borrow. I believe ther will always be mortgage brokers that work the system,, but it’s getting harder. The speculators are being eliminated slowly… And those buying are starting to realize a million dollars is not “nothing”… :) can’t wait to see what happens in Toronto this summer!

#19 BC Bring Cash on 05.23.12 at 10:08 pm

Comparing Canada’s CMHC to the US Fannie/Freddie. Canada’s Sub Prime is about to be exposed. Crises is just delayed a few years.

#20 Can it be? on 05.23.12 at 10:12 pm

As Far as Mikes problem… Shop the mortgage around. Are there not mortgage wars? Maybe a bank will suck up the early penalty to lock in the ten year. Or sell to be on the safe side?

#21 Steven Rowlandson on 05.23.12 at 10:13 pm

Those condos still cost too much!

#22 EIT on 05.23.12 at 10:18 pm

Don’t forget to hedge! All you renters start buying gold!

#23 Neta on 05.23.12 at 10:20 pm

“The latest call for change comes from former Bank of Canada governor Gordon Thiessen and former senior deputy governor Paul Jenkins.

In a report for the C.D. Howe Institute, released Tuesday morning, the two ex-policy makers say there needs to be a committee of agency heads with formal power and accountability rooted in legislation
The committee would ultimately be accountable to Mr. Flaherty, and would give him regular reports. Indeed, since the committee would be made up of unelected officials, Mr. Flaherty would have “ultimate ministerial override power” under the authors’ proposal, although this would be exercised “only in extreme circumstances of serious irresolvable disagreement.”

Well, I wonder what suddenly prompted such a big and traditionally very quiet dogs to bark?
THe main idea of their proposal is to take regulatory powers from hairy hands of the little elph. So, what is happening? What they are worrying about? Do they see something what we don’t see? Is our Titanic qietly taking water? Dancing on upper level, we don’t know what is happening below the deck. Is there a water in the Engine Room?
Mr. Thiessen and Mr. Jenkins, what keeps you up at night?

#24 Mr Buyer on 05.23.12 at 10:21 pm

ESCAPE. Mike, ESCAPE. It is likely too late.

#25 Not 1st on 05.23.12 at 10:24 pm

Assiz, if the developer has pushed your completion date out that far, its a fundamental breech of contract and you are entitled to your deposit back, unless you signed some follow up authorization for them to delay. I hope you didn’t.

As for Mike, the lending rules are probably going to change, but…there is another show going to drop in the economy which is going to bring around more QE, emergency rates and extend and pretend from central banks so I think you have ample time to lock down. Couple more years I think. Watch for the U.S. economy to go off the cliff in about 9 months lead by at least a few countries in the eurozone experiencing a hard default as well as a real slowdown in chinese demand.

#26 45north on 05.23.12 at 10:26 pm

Mike: I’ve just started my own business this last year, so my income is low and not very stable

Mike it doesn’t sound good. You know I’d talk to a mortgage broker – it’s what they do.

Canadian Watchdog: Every wonder what condo speculators running for the exit door looks like?

like the number of listings doubles every 48 hours

#27 Toronto_CA on 05.23.12 at 10:26 pm

Garth, great post as always. I just heard of another GTA friend who has been told his condo fees are increasing (only 10%) this time. Given how huge the condo fees are in the GTA relative to other big Canadian cities (and say, Miami’s condos from the crash) and how the fees are sticky–I don’t think once they go up they will ever go down even if the value of the condos go way down in a crash; I would love to see you do an entry on condo fees in the GTA and the impact they will have in the coming market correction.

#28 Dan in Victoria on 05.23.12 at 10:26 pm

Geez Mike, I hope you don’t run your business on knee jerk reactions.
Sit down grab a beer, pop the top, take a long pull, and go back, way back and start reading this blog.

You haven’t given enough information to lay out a proper plan.
You know like a ………business plan……. only to run your house hold.
Every person is diffrent, every circumstance is unique.
What works for me won’t work for you.(Believe me)
Take the info here, slowly work your way through it
(Sort of like a simple math problem)
See where you end up.
Remember if you fudge the inputs, the answer will be wrong / misleading.
Finish your beer and, clasp your hands together, put them behind your head, lean back, close your eyes…….think critically.
Then come back and ask some well thought out questions.
Quality questions = Quality answers.

#29 Cory on 05.23.12 at 10:36 pm

Owning is great…or is it??


I wonder if the banks see a top too???

#30 fake employment letters on 05.23.12 at 10:39 pm

So I recently accompanied a friend as she visited a close acquaintance to deliver a belated house warming gift. I was surprised that she (unemployed) and her husband (part time truck driver) could afford this new and very large home. When I commented on this to my friend she informed me that employment letters for the purpose of declaring income can be bought and that many ppl do the same thing in order to get paid maternity leave. So this young couple with 2 kids bought a 3000 sq ft home in an expensive suburban area using fake documents when in actuality her husband makes a little over 20000 annually. Now the question is did the broker know? What has this world come to.

#31 Dodged-A-Bullit-In-Alberta on 05.23.12 at 10:39 pm

Greetings: Would very much appreciate if you would delete the morons who post: { first, furst, second,} etc. This blog has a lot of value, and assholes such as these should go elsewhere.

#32 Renting In The GTA on 05.23.12 at 10:43 pm

Mike – Sell Now!!! and Rent…

After reading this BLOG and listening to my father (A Real Estate Agent)

My wife and I decided to sell our house in Richmond Hill in July 2011 as we truly believed prices were out of hand.

We took everything we made on the house + all of our life savings and decided to have Garth and his team monitor and manage a balanced portfolio for us.

We plan to have it invested until the market comes back down to earth.

So far it has been a great decision… We sold for $543,000

I just checked another exact same model in the same area… Listed last month for $559,000… Price dropped to $539,000 and finally sold for $531,000…

I know $543k vs $531k seems small but this is 10 months after we sold our house…

Who said Real Estate always goes up?

Thanks Garth!

#33 Karie on 05.23.12 at 10:45 pm

Hey Mike –

You sound like you’re on the young and ambitious side. Not sure why you want to tie yourself into something for 10 years. I have a 5 year variable rate mortgage currently at 2.25 and is up next year. The rate has even been lower than that in the past but could go up in the future. I think variable rate mortgages are great but are for people who can handle the rates going up and/or down – not sure that really sounds like you. You can lock in but not at the variable mortgage rate. Do some research and find out the penalty for breaking your current mortgage and also that 10 year one. That should help you with your decision.

I don’t know enough about you to say much more except give yourself financial breathing room. I love being a home owner but I have always lived below my means and keep my mortgage payments on the low side by never taking on a huge mortgage.

Hope your business takes off!

#34 John G. Young on 05.23.12 at 10:49 pm

#159 Westernman on 05.23.12 at 4:28 pm

“John G. Young @ # 77,
Thanks for the compliment… thing…”

You’re welcome.

#35 timbo on 05.23.12 at 10:50 pm


China’s Flash PMI is 48.7 so watch out for more speed bumps. China is not going to save the day…yet.

#36 Foggy on 05.23.12 at 11:02 pm

I went thru just such a process with my sister in 2005. She was on a variable and had to renew. I said – lock in to a 5 year @5%. She was 29 and had never seen “normal” rates as I had. I said in the 80s and 90s we would kill for a 5% mortgage. Some friend of a friend told her to continue going variable because it was so cheap. That was their entire thought process. She went variable and as it turned out I was dead wrong. Who the hell would have figured rates continuing in the 2’s and 3’s for such a long time?
But as discussed on this blog lately, rates WILL go up in the next few years. RBC’s variable is now prime (3%) plus 2 tenths. A 7 year fixed (open) is 3.99. Not a lot of difference and reasonable security. Even though I was wrong before, I would lock in to 7–>10 years.

#37 SophieZombie on 05.23.12 at 11:03 pm

#30 fake employment letters —
Buying a Maternity leave with a fake Employment letter ?
In which province is that ?

#38 Fleabitten Monkey on 05.23.12 at 11:07 pm

Does anyone have a link to the content (charts, demographics etc) of the meeting that Bob Rennie presented a few weeks back in which he tries to support his case for the condo future in Vancouver being promising? I’d like to see his opposing views supported.

#39 45north on 05.23.12 at 11:07 pm

Now it turns out the Asian invaders were Chinese-Canadian families from Surrey and Richmond who have jobs and mortgages like everyone else.

where’s BPOE? the guy who wrote: the Asian invaders will bid up housing in Vancouver, cash only. Renters such as Bill Gable are total losers – once having sold he can never catch up ( with the soaring Vancouver market ). Maybe this is just a bump in the road and not the start of a long-term decline as was seen in the republic to the south.

#40 Chaddywack on 05.23.12 at 11:12 pm

I wonder what the chance is of HAM coming back in Vancouver like they did shortly after the 2008 downturn…..

#41 Canadian Watchdog on 05.23.12 at 11:13 pm

My first post #12 was just a warm up. Here’s what TO condo speculators heading for the exit door looks like. http://i48.tinypic.com/2d14l6p.png

Alas, with today’s BILD/RealNet data reporting new Toronto condo sales down 19% y/y (remember this is peak season); http://www.bildgta.ca/media_releases_2012_detail.asp?id=880 making April the fourth consecutive monthly loss this year, which begs a few questions:

i) just who will purchase developers’ shadow inventory? when ii) assignment holders plan to assign units to the same public buyers developers are targeting as iii) public speculators also plan on selling units to (ready?) the public.


But never to fear, as every speculator was already told, “if you can’t sell it, you can always rent it.” Well, we can now look into the future as our friendly city of Van has already given some foresight on how renting is working out for them, because craigslist stats now show over 1000 unique listings under the one bedroom section per day, equaling over 46 listings per hour. http://vancouver.craigslist.ca/search/apa?query=&srchType=A&minAsk=&maxAsk=&bedrooms=1

If you’re not out of the market by now, your chances of selling are getting slimmer by the day, literally.

#42 XKR on 05.23.12 at 11:16 pm

Mike, if you had sufficient, stable employment income it might be worth breaking and taking on the 10yr at 4%. But, reality is your income risk is so high right now that you might have to break the 10yr to sell in the future – ie. if things don’t pan out.

Unless you’re really into exits like strategic default, which would destroy your credit, you’d be well advised to sell now, take the money and run, chill and rent. There’s no shame in it and, its a good way to keep your shelter costs fixed in uncertain times.

#43 Kasia on 05.23.12 at 11:18 pm

I’ve been watching the market around Markham for months now. Townhouses are still selling over listed prices, but that is it! Most houses which use to sell within a week before are now sitting for weeks! I see the agents re listing them usually at the same price, which is just stupid. Anything over 700K is just not moving at all and more new listings just keep coming up.
I watch and wait…

#44 WPG_Savant_Syndrome on 05.23.12 at 11:19 pm


Today was a bad day! Been getting worse awhile.

Tired of real estate idiots (with babies at thier side) asking me if I think they can “afford” thier payment on thier first house. (They don’t like my answer and hate me for it!)

Grandma can’t sell her Van Island house

Garth is saturated with liberal thought.

Brandon Snow F’ed up bad by buying facebook.

The wife is …..grrrrrrr

Smoking Man…… I’m turning into you (thanks for the pink flyod link btw).


#45 WPG_Savant_Syndrome on 05.23.12 at 11:20 pm

Pass the Crown please!

#46 Smoking Man on 05.23.12 at 11:26 pm

Canadian Real Estate to the world right now are like US Treasuries, safe

Sorry basement dwellers but this little boom is going to go on for a bit, the demand in TO is amazing. No rate spike or BOC and OECD will stop this madness .

Why do I hate Harper so much, just saw him speak again on TV, reminds my of a fat boy in school who was bullied, spent the rest of his life ploting his revenge, sold his soul to the devel, to get some leverage. The devil will smoke him when his usefullness is spent.

Did he ever play hockey, doubt it.

Just saying

#47 Mr Gadget on 05.23.12 at 11:28 pm


#48 WPG_Savant_Syndrome on 05.23.12 at 11:30 pm

Oh yeah…… and my buddy’s soon to be wife was found out to be a porn star 10 years ago…… LOL

#49 timbo on 05.23.12 at 11:39 pm


“The insolvent country’s worsening liquidity has led to public insurers being unable to pay bills and prescription drugs running dangerously low, say chemists. On Wednesday, the sector staged a one-day strike to highlight the “emergency situation”.

Humanity be damned! This is bloody sad…..

#50 Some guy on 05.23.12 at 11:40 pm

The Vancouverization of Toronto continues:

193 MELROSE AVE Toronto, Ontario

April 9, 2011: listed at $1.25M
June 10, 2011: after 2 months with no takers, re-listed at $1.25M

May 23rd, 2012: listed for $1.43M

So, apparently a house that no one wanted for 2 months last April is now worth almost 15% more than last year.

There was a drowning a year or two in the pool at that place, probably why it is a hard sell.

#51 OwlEyes on 05.23.12 at 11:46 pm

There must be a cause of action in Aziz’s story somewhere. Why are so few people suing condo developers in TO?

There are predictions out there that say that 2012 could be a big year for lawsuits, however,

#52 Tim on 05.24.12 at 12:00 am

Bad example, New Waste is a shithole. There are areas where I wouldn’t even walk around at night. It is surrounded by freeways, and something like 300,000 cars pass through New West daily. Great air…

#53 Junius on 05.24.12 at 12:39 am

#39 49north,

BPOE’s reality cheque bounced. Turns out that HAM turned to SPAM and left for greener pastures.

#54 99% on 05.24.12 at 12:43 am

#40 Chaddywack

I wonder what the chance is of HAM coming back in Vancouver like they did shortly after the 2008 downturn…..

I am no genius, but I would say….NONE. A close relative is in China/Hong Kong now and he tells me that the RE is really depressed there. So bad that the developers are scared senseless cause no one is buying. RE was something that this generation always thought would make them money. In fact, China has only known RE to increase, but now they are afraid. There are also rumors that Canada is really clamping down on undeclared worldwide income and tax evasion. The third nail in the coffin is that Mr. Kenney swore he was going after past fraudulent immigration practices and may revoke citizenship.

The basic HAM mentality:

1. I don’t mind selling my house for less than I paid.
2. Don’t let Government know about my money.
3. May have fudged on my immigration application.

HAM is running away from Vancouver as fast as it can and heading towards the States, it doesn’t look like they will be coming back.

#55 Jane on 05.24.12 at 12:54 am

Once lived in New West. Strongly suggest you walk by any prospective condo buildings at all hours of the day. Think Whalley, Surrey, for some of the addresses listed in the post tonight. It is a thoroughfare for those coming across the river and heading downtown. Some nice neighborhoods, but not in condoville. Oh ya, don’t forget to check the leaky condo status on the majority of the river condos.

Stay away, far away!

#56 saanichtonian on 05.24.12 at 12:56 am


From The Vancouver Sun – Jun 18, 1973 (page 50)

a couple of examples…

In North Van


Fantastic view — ideal for deep
sea moorage 1 yr. old contemporary
home spotless condition. 4
bdrms., 3 bathrms., 2 cut stone
fireplaces open plan living & dining
rm., gourmet kitchen 2 huge sundecks.
Architect designed re. rm. dble carport.
carefree gardens. Quick possession.
Hot at $92,000 (realtor name etc)


In Richmond


Beautifully finished downstairs.
This three bedroom home has app. 2650 sq. ft.
floor area. L-shaped rec. room. plus lge. bar.
double carport & workshop. nice den & lovely
utility room. For appointments (realtor name etc)

So, how’s your dollar’s value holding up today?

And by all means read the front pages.


World expert warns inflation to continue’

Its a hoot, and shows the world is more gibbled than ever.

#57 mac on 05.24.12 at 12:58 am


You’re overreacting. Relax. That proposal, to re-qualify every mortgage holder on renewal won’t be enacted. It’s the one the mortgage industry shills are breathing heavy about and trying to panic Joe Average over so we can all gang up on the heavy-handed, mean ol’ meanies at OFSI.

Beautiful thing about it is someone smart at OFSI probably put it out there to bait the mortgage lobby into stomping it into the ground while the rest of the housing-bubble killer proposals sail through. Nice one OFSI!

By the way, as much as I love this blog, I try to blend it with reality. Garth has been calling for a knock-down fire sale on housing for quite a few years now. Just stress test yourself against future rate increases and make your best guess as to which kind of mortgage to get. Oh. And don’t go and buy 3 condos just to flip them. That should go without saying.

#58 rhw on 05.24.12 at 1:06 am


#59 Kilby on 05.24.12 at 1:07 am

#31 Dodged-A-Bullit-In-Alberta on 05.23.12 at 10:39 pm
Greetings: Would very much appreciate if you would delete the morons who post: { first, furst, second,} etc. This blog has a lot of value, and assholes such as these should go elsewhere.

I agree, I get a lot from this exchange and do recommend it to others but those first postings take a lot of credibility away from new readers.

#60 Smoking Mans smarter cousin on 05.24.12 at 1:09 am


I kin teech U to be FURST on Garths Blog everytime…Guaranteed !

Attend my 3 day semenar…Cash only…..wire to Nigeria….Line up starts now….

#61 Nostradamus Le Mad Vlad on 05.24.12 at 1:10 am

#32 Renting In The GTA — Good critical thinking. Nice to see some people still have that ability! Item on Financial Evolution.
FB Insider trading? Getting dirty; 29:06 clip Inflation and the Bolsheviks, Yuri N. Maltsev; 12:38 clip Govt. picking brokers apart, silver, etc; Looneytunes The link earlier said the Yen was stronger than the Euro, so if the Euro is higher than the loony, we must be scraping the bottom of the barrel; Extra Benefits Working for the govt.; Fatcat Sadomasochist or the boss from hell; Greece Close to quitting; Uneven economic recovery Ten best and ten worst US cities; Wall St. Banks and Used Car Salesman What’s the diff? Oreo Cookies Kraft’s US$2 bln. / yr. cookie; 1:46 clip Frugal freezing; Cash Crunch hits Greece, Greeks stop paying taxes, and here. Link in.

6:14 clip Freddie knifes Zuckerberg; Zero (German bond yields); Single Women The Greater Fools? Merkel and Hollande All’s fair in love and war, and Implosion imminent; Remember Limewire? The RIAA says it owes them US$72 trillion; 14:47 clip Tiptoe thru the Tulips; JPM, FB and others; New Home Sales Jump, but to whom; US Share of World Exports; Japan’s new Cardless ATMs; The Wild, Wild West All because our economies are in the shitter.
2:26 clip How not to perform a takeoff (Brazilian passenger jet); 2:46 clip Chinese and Russian navies finish their war games exercise; Fukushima Four times higher than Chernobyl; 2:30 clip Quarter of Japanese considering suicide. It’s not worth it, as one has more negative karma added to their baggage, increasing their number or rebirths; Hekk on Earth Why govts. are removing our rights and freedoms; Famine Another way of how the west gets under people’s skin. There never was anything wrong with Yemen, except they have plenty of oil; The Holographic Universe; Natural Disasters Calling all resevists — you’ve been promoted! 38:11 clip Solar flares — new take; Quite interesting medicine news re: skin cells; Browser Wars Three way tie; NATO America’s rugue arm of war machine; Chiropractic Adjustments can lower blood pressure and prevent heart attacks; Record Number of pregnant women refusing flu shot; Europe could sink Obomba’s re-election bid.

#62 Horny HAM on 05.24.12 at 1:12 am

#30 fake employment letters on 05.23.12 at 10:39 pm

Their broker most likely recommended or supplied the fake papers.

Like the saying goes, all is fair in love and house horniness.

#63 Bill Gable on 05.24.12 at 1:23 am

45 North. You are on the wrong side. Watch the next couple of years. I feel happy to let my owner subsidize our life, while they get ready to put in two new elevators. I don’t write the check. Vancouver RE is soaring like a turkey on WKRP.

#64 truth hammer on 05.24.12 at 1:30 am

decades of entitlement have spawned a lot of dingbats.


Driving down the economy of an entire city is a great idea……so who has to pick up the slack……let me guess…..the homeowners.


Lets float a great idea today…….if you don’t like Canada’s approach to education and public service benefits from a host that has already done everything possible to help you……leave.

#65 Phil Indablanque on 05.24.12 at 1:38 am

“I’m worried that we may not be able to requalify after the changes, as I’ve just started my own business this last year, so my income is low and not very stable, and on top of that, my wife is finishing up her job in the next few months (with or without a new one). ”

Sell immediately. You should not own a house

#66 Freedom First on 05.24.12 at 1:47 am

So many people I know that own apartment condos have not only seen their condo fees spike over time, but have told me they have had notices slipped under their door. Sorry to say, that the notice said a charge for renovation, or repair had to be paid over and above the condo fee, as the emergency fund had to stay at a certain level, and there was not enough money in the fund to cover the costs. Some people told me there charge was for $10,000, and others had charges between that, and as high as $60,000. It had to be paid. If you couldn’t pay with cash, or by re-mortgaging, you had to sell. No exception. Another factoid: The condo buyers in Canada have very little consumer protection. Lots of examples here: for one, the leaky condos in B.C. where the owners were left high and dry……so to speak. Be careful out there. Mike and Assiz…….what did you learn?

#67 Tamsen on 05.24.12 at 2:04 am

“This blog scared him. Which I can understand. Most days it terrifies me.”

Hilarious, Garth!

#68 Herf on 05.24.12 at 2:18 am


They’re not A-holes. A-holes are useful.
But I agree with your sentiment. The goof balls you’re referring to are a bit of a speed-bump to the flow of this blog. Or perhaps, more like a splinter up one’s posterior as s/he slides down the bannister of this blog.

#69 daystar on 05.24.12 at 2:32 am

Hi, Mike.

If you have income issues and you are worried about LTV’s with new OSFI regs, then your worries and fears are appropriately placed. Let me add some more for insurance.



I wish I knew which province you lived in as it could make a difference on borrowing costs. Otherwise, 2.75% to 3.19% fixed over 5 years is what banks are offering now and as you know, the devil is in the details.

10 year terms will be a jump by 1%. If you can negotiate 2.75% at a major bank for 5 year terms, you should be able to get 3.75% at a major bank over 10 years. 4.21% should be most you will pay if you negotiate. My advice to you? Go for 3.75% over 10 years and don’t look back. It really is as good as it gets historically so either way, you can’t lose.

Here’s why. The BoC is currently able to borrow 10 year bonds below 2%. This can’t and won’t last forever. The #1 reason is that Canada’s gross public debt, the summation of federal, provincial and municipal debt is in the high 80’s with the loonie around 1.02 pricing our GDP high (because its in U.S. dollars). Conversely, as the loonie drops, gross public debt to GDP climbs.


Look at where that places us in the pack of the most indebted and ask yourself what’s happening to those nations that have greater debtloads than ourselves. Note that 100% gross public debt to GDP levels are near a point of no return (unless governments introduce high taxation and cut spending dramatically or have low external debt percentages). Now ask yourself what the chances are of our collective governments balancing budgets, or the loonies chances of continuing to ascend past par diluting gross public debt into hiding, especially with a Euro unwinding.


The Euro is weakening for good reason and the result is a stronger U.S. dollar leaving the loonie flatfooted partially because of lower commodity values, partly because of slower world growth. Greece will be gone before the year is out. Next year, its Italy. In 2014 Spain and Portugal follow as write downs from unwinding RE/credit bubbles bloating public debt become extreme. By 2015, 2016, Belgium and France could join them. Each event will drag the markets and push the U.S. dollar ever higher leaving the loonie to fall.

Mark Carney is hoping the Euro exit helps the loonie as well as the U.S. dollar. Ain’t gonna happen for 3 good reasons. Canada’s gross public debt to nominal GDP ratio (priced in U.S. dollars) is too high. The loonie isn’t the U.S. dollar for one, Canada has a world known RE/credit bubble on its hands forcing bond investors to price in increased public debt risk caused by future bailouts/recessions unwinding RE/credit bubbles bring and while external public debt percentages are in the 40’s, it’s still too high and the loonie’s high value compared to the 1990’s is also hardly in our favor. A high loonie makes gross public debt to GDP ratios priced in U.S. dollars highly currency sensitive and it all spells currency risk that begs for higher interest rates, especially with governments that continue to borrow at gross public debt levels around 5% annually.

At some point over the next 3 to 5 years gross public debt in Canada will hit the 100 mark or higher and sadly, it will somehow take us by surprise. If the loonie averaged .92 cents this year, we could be there by the end of next year and that scenario, ugly as it is, is the downside risk no one has spoken of in Canada and yet, that downside risk is very real. If the loonie stays at par with gross public deficits at 5% or near it over the next 3 years with GDP growth at 2% annually, Canada adds another 9% gross public debt to GDP and floats in the high 90’s during a mild U.S. recovery forcing rates climb in Canada and this is a 50/50 chance of happening. (Iran could change everything with oil soaring if there is war and falling should war end quickly, the loonie is energy sensitive) In year 4 and 5, if governments are still running 4 to 5% annual gross public deficits, borrowing costs are likely to get away on Mark Carney and BoC rates hit 5 – 6% and stay at 6% or higher should Canadian governments continue on with their debt bing and not raise taxes and cut spending… dramatically to address the crisis. Price in a 3 point spread and think about what this will do to interest rates and housing in general throughout the next 5 years, especially at current bubblicious prices and then our economy as a whole!

If you can get a 10 year term for 4.19% or less, do it. People today getting a 5 year term at 2.75% (or 3.19% at a major bank) are saving 1% over getting a 10 year term, for the first 5 years. To make that up, interest rates would have to be 2% higher than current 5 year renewals, or higher than 4.75% to 5.19% 5 years from now so you are literally betting that interest rates will be more than 2% higher 5 years from now to make a 10 year term worth your while. What I’m predicting is that BoC rates will be past that 5 years from now (its chances are 3 in 4 unless governments raise taxes and cut spending now in some provinces, dramatically) and its possible we are there within 3 years for reasons outlined but I’m being conservative and say it will happen within 5 years.

Going to 10 year terms never made sense in Canada since borrowing costs have been in decline since the mid 90’s especially coupled with an appreciating loonie but thats all past. The loonie is near par with rates at record lows. Things change. Where will the loonie go now and conversely, where is Canada’s gross public debt levels headed especially with a falling loonie as shellout from a weak Euro and as a consequence, where are BoC rates headed?

Unless the world thinks the commodity laden debt ridden loonie is safer than the U.S. dollar (and they won’t) or our governments miraculously balance budgets back toward surplus (won’t happen) expect BoC rates to be north of 5 to 6% within 5 years and stay there until governments turn it around and that could take another 5 years if at all so…. lock in for 10 and be safe.

Heck… 5 year terms locked in at 3.25% were a dream a few short years ago. 5 year terms at 5.25% will be a dream 5 years from now so where is the risk? Go long! Best of luck, Mike.

#70 spatchy on 05.24.12 at 2:35 am

#38 Fleabitten Monkey

Below are links to his speech on youtube..

Part 1 http://bit.ly/LrFVLR
Part 2 http://bit.ly/LrRBuw
Part 3 http://bit.ly/KgyMwD
Part 4 http://bit.ly/LrGyVJ
Part 5 http://bit.ly/JzddLf

Another link to a blog with his numbers from the presentation http://bit.ly/KAoeFI

#71 Bilbo Bloggins on 05.24.12 at 2:43 am

Don’t feel pity for Assiz.
If he really had the intention of purchasing to live in what stopped him from buying a completed unit?
After all the market was slow in 2008/09.
Instead he purchase a call option.
Another specker bites the dust.

#72 Aussie Roy on 05.24.12 at 3:25 am

The Skyscraper index.

Looks like Melbourne (Aussie HAM capital) has the same oversupply, over the next few years.

CANADA http://skyscrapercenter.com/create.php?search=yes&page=0&type_building=on&status_UC=on&status_PRO=on&function_residential=on&list_continent=NA&list_country=CA&list_city=&list_height=&list_company=&completionsthrough=on&list_year=

AUSTRALIA http://skyscrapercenter.com/create.php?search=yes&page=0&type_building=on&status_UC=on&status_PRO=on&function_residential=on&list_continent=OC&list_country=AU&list_city=&list_height=&list_company=&completionsthrough=on&list_year=

#73 Aussie Roy on 05.24.12 at 3:57 am

Aussie Update

THEY’RE among Sydney’s most stunning properties, sprawling waterfont mansions with some of the best views in the city.
But there is a cluster of super-rich houses that no one wants to buy – and agents say it’s unlikely they will sell at their current prices of $40 million or more.
The multi-million pricetags attached to homes belonging to such people as Ron Medich and recruitment magnate Julia Ross make them almost impossible to offload in the current economic climate.


THE outlook for the housing industry remains gloomy after data showing the value of lending to the sector is still heading lower.
The figures from the Australian Bureau of Statistics (ABS) on Monday showed the number of loans approved to home buyers rose by an insignificant 0.3 per cent, after seasonal adjustment, in March.
The value of home loans approved was down by the same margin, while the value of loans approved for investors fell by 1.0 per cent.


Is this mortgage broker suggesting that banks lend at fixed rates and don’t fix the supply of these funds, thus taking on the interest rate risk?. Clearly this is either an untruth or a sign he has no idea, not sure which is worse.

“We’re not at the bottom of the market yet, we are at the start of the bottom of the cycle.
“Lenders will now offer you very low fixed rates but that’s because they think rates will come down. A bank is not going to offer you a low fixed rate if they foresee rates going up.”


#74 Aussie Roy on 05.24.12 at 4:17 am

Aussie Headlines

In a nutshell, my hypothesis is that Australia’s baby boomer generation – which comprises roughly one-quarter of the Australian population but owns nearly half of the nation’s housing assets – will gradually become net sellers of Australian housing as they enter retirement, thereby acting to push down home prices in the process.

The baby boomers were key players in the rapid house price appreciation experienced in Australia in the decade to 2008. As the baby boomers reached peak earnings age in the 1990s, they began buying up investment properties en masse as a way of both minimising their tax (via negative gearing) and ‘saving’ for retirement. They were also likely to have significantly increased demand (and prices) for owner‑occupier homes, since many in this demographic would have traded-up to their most expensive (‘peak’) home over this period.

However, with the baby boomers gradually entering retirement, it follows that their appetite for investment properties will shrink, at the same time as they are downsizing into smaller homes. As such, one of the key demand-drivers of house price growth over the past 15 years will disappear.


The Melbourne housing construction boom is set to continue, with an article today in Property Observer claiming that a record number of apartments will be completed in Melbourne in 2012 and 2013, followed by a slump in construction activity.


#75 Jane24 on 05.24.12 at 4:18 am

My daughter is in London and she says the city RE is still very hot, especially at the top end.

Arab buyers from countries turning from secularism to Islamic governments courtesy of the Arab Spring.

French buyers escaping from the threatened new 75% income tax rate and then just commuting to work in France.

Greek buyers getting all money out and into London property and banks asap.

Even in these times there is still a lot of money in the world. Incidentally I don’t think these buyers have Saskatoon or Winnipeg or their radars.

#76 P & T S on 05.24.12 at 5:26 am

Stupesing in Cabbagetown on 05.23.12 at 9:21 pm

“model erection covered in the red dots” – herpes?

Architect’s model. You certainly disgust me. — Garth

You two owe me a keyboard!! Nothing quite like a coffee nasal enema!!

(Just hope it’s “The Herps” – it could be Smallpox!!)

#77 I'm stupid on 05.24.12 at 5:41 am

Someone once told me condos are like herpes once you get them you can’t get rid of them.

#78 tophead on 05.24.12 at 5:56 am

Taxpayers on hook for severance pay

Federal public servants’ buyout packages could top $2 billion


#79 maxx on 05.24.12 at 6:09 am

#4 T.O. Bubble Boy on 05.23.12 at 9:10 pm

I wouldn’t dream of buying RE now…it’s a diseased investment unless VERY deeply discounted.
Sellers have had their day and it’s well and truly over. The only trick they seem to have left in their bags is playing silly little mind games in a dead Spring market.
Many realtors I’ve spoken with in the past month are changing their tactics and advising sellers that if they really want to shift their properties they have to price them “competitively”. My In-box sees “price reduction” properties every day.

#80 Dontcallmeshirley on 05.24.12 at 6:15 am

Did you know that securitizing lenders (eg. Merix, Verico, etc) typically don’t meet a borrower in an actual face-to-face? The mortgage process is purely an exchange of documents via a mortgage broker.

It will be a real mess to re-qualify the tens of thousands of mortgages that have been booked this way.

Securitizing lenders don’t have the resources to do re-qualification work. They’re literally 8 guys in an 1100 sq ft office.

Pandora’s box.

#81 maxx on 05.24.12 at 6:19 am

#17 Retired Boomer – WI on 05.23.12 at 9:58 pm

Mike, listen to him.

#82 penpal on 05.24.12 at 6:39 am

If the Greater Fool is the fool that follows, then Canadians are quite simply the Greatest Fools as we have had many (USA, Spain, Ireland, Uk, etc. and now Australia and China it seems) RE markets fail before ours.

Canadians have heeded none of the warning signs and have spouted the exact same, verbatim cliches that people spouted in all the markets that have declined significantly.

#83 penpal on 05.24.12 at 7:08 am

At the conclusion to this mania, recent and first time home buyers will experience the true perils of “owning” an asset in an illiquid market with negative sentiment and no doubt, negative equity.

Condo “owners” will have even a more full on experience as they are treated to condo (strata) fee double-digit increases annually, special assessments (due to faulty design and build), tax increases, etc.
these issues and others that will crop up will increase their costs of occupancy while reducing the appeal (and therefore price) of their condo.

The delusion is about to end.

#84 penpal on 05.24.12 at 7:19 am

Re: Mike’s dilemma

Mike is a poster child for the RE delusion/mania in Canada.

Anyone with the abilities to start a new business would not be asking for advice on this blog if they weren’t in some way tainted with this Canadian RE madness.

Mike, get a grip!

Sell the f’ing place, go rent, get the lowest fixed cost base you can for your family NOW!

Go rent very soon while your wife is still employed and has a reference / credibility for your new landlord.

If you cannot do as suggested, you are not ready for the sacrifices and don’t have the smarts required to run your own business SUCCESSFULLY.

#85 MarcFromOttawa on 05.24.12 at 7:40 am

#31 Dodged-A-Bullit-In-Alberta on 05.23.12 at 10:39 pm
Greetings: Would very much appreciate if you would delete the morons who post: { first, furst, etc.)

No. Me like first posting estie.

#86 TurnerNation on 05.24.12 at 8:07 am

Alberta’s economy: money being siphoned off by the fundamentalist Cons? Maybe they should not have twice elected an alcoholic premier. Gee.

Fundamenatists are sooo easily fooled.


Follow the Money: Where is Alberta’s Wealth Going?

by Kevin Taft

Detselig Enterprises Ltd. | January 18, 2012 | Trade Paperback

Alberta’s most insightful political commentator is back with another essential book. Kevin Taft, together with economists Mel McMillan and Junaid Jahangir, follows the money to uncover why Alberta — one of the richest places on earth — still talks poor when it comes to public services. Do we really spend more than we can afford, more than we can sustain, on health care? On education? Why doesn’t Alberta have enough hospital beds? Why have our schools faced teacher layoffs? Why are our city streets pot-holed, and why are rising numbers of Alberta children living in poverty? Where is all our wealth going? Follow the Money uncovers the truth behind the government’s austerity slogans and cutbacks

#87 Jim Lahey, Sunnyvale Trailer Park Supervisor on 05.24.12 at 8:10 am

#75 Jane24

“Even in these times there is still a lot of money in the world. Incidentally I don’t think these buyers have Saskatoon or Winnipeg or their radars.”

Would Sunnyvale be or their radars?

#88 TurnerNation on 05.24.12 at 8:27 am

#41Canadian Watchdog on 05.23.12 at 11:13 pm

For the first (furst) time I’m noticing the new Cityplace and nearby Tridel Reve condos listing for sub 300k prices:



#89 TurnerNation on 05.24.12 at 8:29 am

Cdn Watchdog check Vancouver’s kijiji condos for sale. They are also streaming in, hourly:


#90 TurnerNation on 05.24.12 at 8:39 am

Nearly new condo, already un-saleable due to high condo fees. This is 2nd or 3rd price drop for it. Can anyone check?

It’s large, and so is the condo fee. Building is ~2 years old.

Fees increased 15% in its first (furst) year!
Within a few years this unit’s condo will be a cool G note monthly.


Realtors in a panic!!

#91 In GARTH not God we Trust on 05.24.12 at 8:44 am

The collapse of the condo market in the GTA is going to make the Dutch Tulip Mania of 1637 seem rational and sane by comparison. The bearded mystic oracle, all wise, all knowing, former parliamentarian, minister of revenues from coast to coast, financial tea leaf reading prognosticator without equal, lone wolf rebel who told the parliamentarian peckerheads where to go, fearless and intrepid leader of all blog dogs and unyielding, unrepentant lone voice of reason in the financial wasteland of Canada has served notice to all the CONDO ZOMBIES that are stalking this fair land. Get out while you can!

#92 Tom from Mississauga on 05.24.12 at 8:44 am

Hi Mike

So what is a subprime mortgage borrower to do. Really tough, eh?


#93 The Original Dave on 05.24.12 at 8:54 am

I just wanted to thank Canadian Watchdog for all his charts and information. I always stop to read your comments and info. Thank you sir.

#94 Canuck Abroad on 05.24.12 at 9:07 am

#90 TurnerNation … re high condo fees…

Yep, found something like that this morning. Condo for sale, 2 beds plus “library” (pulleeze) and 1800 sq feet and priced at 825k. So far so normal for TO. But the condo fees alone are more than 2200 per month!! OMG.


This building is located only a block from the majestic old apartment buildings at 1 Clarendon Ave and 2 Clarendon Ave and where a 3 bedroom and study can be had for about 3k per month rent. The buildings there are much more beautiful than this one. People who buy apartments in Toronto are nuts.

#95 Steve on 05.24.12 at 9:16 am

Interesting chart at the bottom of today’s wisdom. Any thoughts on what cause(s) were behind the change of slope from the relatively moderate rate of increase during the first decade shown, and the obviously steeper slope over the last decade? Does this coincide with specific regulatory changes? Habit changes on the part of banks (insuring more mortgages so they could be sold as risk-free ‘investments’ to others?)

Being newer to this blog, and topic in general, what happened back in mid 2ks is not clear to me. Who can help?

#96 CrowdedElevatorfartz on 05.24.12 at 9:20 am

Its still raining here in HAM-Land. Pouring actually.

Scientists just discovered a new type of mould in Vancouver……,


It renders the victim into a gibbering , babbling idiot that spews real estate lies while staring into the mirror.

Ignore the infected, they will either dry up and dissappear or suffer terminal financial malaise.

#97 Grantmi on 05.24.12 at 9:21 am

#48 WPG_Savant_Syndrome on 05.23.12 at 11:30 pm
Oh yeah…… and my buddy’s soon to be wife was found out to be a porn star 10 years ago…… LOL

When’s the bachelor party?? Is the STB Wife invited.

#98 Form Man on 05.24.12 at 9:45 am

#95 Steve

The Harper regime won power in 2006 and began deregulating the mortgage industry at the same time as increasing CMHC’s insurance dramatically. This was driven by ideology and a deliberate attempt to juice the economy because they were a minority government in the hunt for a majority. Canada will now pay the price for this misguided idiotic policy.

#99 disciple on 05.24.12 at 9:46 am

Very good question on where Alberta’s wealth has gone. That would take some serious digging to get to the bottom of that. Or you could take my word for it that Harper has turned Canada into a banana republic.

Behind every great fortune is a great crime – some French guy said that… I assume in French…anyway here is the true story of the RUSE-velts and Kennedy’s:


#100 john on 05.24.12 at 9:51 am

Has anyone else in the GTA noticed the crap that passes for rental houses here? I sold my downtown bachelor pad last month (shockingly for full, over-inflated asking price) and now the fiancee, dog and I are looking for a detached or semi with a yard in mississauga, oakville or burlington. Everything either is decrepid and cheap, or very nice and very expensive. We’ve got a pretty reasonable budget (around $2500 a month for the two of us with a combined annual income of $150k) but there is not much in that range. We’ve tried low-balling a few places that are around $3000 and have been listed for at least a month, but no one will take (having fido hurts our cause apparently).

This all leads me to wonder, who actually owns the SFH rental houses in the non-HAM burbs? And why are they willing to sit with them vacant for months.

One other note, I’m beginning to notice more and more houses that were listed for sale that are now either dually-listed for rent and sale or appear to have been taken off the market. Those might be our best option but we’re not looking to move for another two years when we re-assess what the buying market looks like

#101 refinow on 05.24.12 at 9:55 am

Stay away from the 10 year mortgage…It is exactly the direction your Bank wants you to go…


I find it so funny that the masses are like lemmings approaching the great cliff…

It sounds that more and more of the “not-in-my Backyardigans” are coming to the same conclusion that housing prices going to correct.. Finally the light-bulb turns on..

But to lock in your mortgage for the next 10 years, you will be making a colossal mistake…

We are clearly entering the most uncertain questionable real estate market in the history of housing. All around the world countries real estate values are falling to levels that in some cases are returning to 1980’s values…

And your strategy is to lock in for 10 years because you are worried you won’t qualify for the mortgage you already have under the OSFI rules ? Because your mortgage was approved using overstated income that you have never in your life achieved, your credit rating has tanked or you haven’t paid your $800 407 bill.

So you think the smart move is to contractually obligate yourself to likely a 5 digit penalty if you ever decide to sell in the next 7 or the 10 years… Hmmm

If you look back over the last 10 years and you have been making periodic withdrawals from your equity PTB machine, what you don’t understand is you have been supplementing your lifestyle with those mortgage refinances… And the PTB machine is now gone… No more refinances….. period.

But to avoid the big bad Bank showing me I can no longer afford my house I will obligate myself to a higher mortgage payment then your are currently making for the next 10 years, and now if I have to sell, either for financial reasons or to just hang on to what little equity is left, the 10 year mortgage is more kool-aid.

The Bank’s want you to go this direction, they see this as an immediate way to transform a very large percentage of mortgages currently sitting at 2.1 – 2.90% to 3.99% with no cost what so ever to the Bank’s… Just sign this conversion form… and boom the profit on this mortgage portfolio just doubled or tripled…with no acquisition costs. And for all those in a a years time or longer who realize they can no longer afford their MC Mansions now get to pay a massive penalty cutting even further into their declining equity….

The 10 year mortgage is a not the solution….

It just epitomizes the poor judgement that so many homeowners have, who already know they can’t afford their homes at 2.10%- 2.90% variables, and they think their situation will improve by increasing their payments to 3.99%….and hand cuff themselves to their home for the next 10 years.

Check mate ……Bank’s win again.

#102 Mortgage Brokers in an All Out PANIC! on 05.24.12 at 9:58 am


Canadian households can handle a 40% drop in housing prices.

Everyone knows the house of cards is going to come crashing down. 40% ++ drop in prices is going to hit Canada. 40-50% drop and we will hit HISTORICAL averages. No wonder mortgage brokers and realtors post on this blog day and night in a panic.

#103 TimV on 05.24.12 at 10:08 am

Mike, if you read the draft guidelines at
you’ll notice that much of it surrounds income verification and loan-to-value guidelines + verification. There’s some interesting asides about accounting for family composition, retirement age, etc, but income and ltv are, by my reading, at the heart of it. Note that these guidelines are mostly for prime (20% or more downpayment) mortgages. For < 20% mortgages, there will likely be separate (and more stringent) guidelines, I expect. Further, these guidelines only apply to federally regulated institutions; relatives and other non-federally regulated lenders, can offer whatever loans they want to offer you, more-or-less. I'm not smart enough to know if you're business can own a mortgage. Hm.

To reduce risk, you either reduce LTV (be sure to account for "normalized" housing prices in whatever area you live in), or you increase income and income stability.

If you can't do either of those, and you can't move, then it seems hard to avoid risk. 10 year mortgages have break fees, too, and risk of incurring those break fees (possibly at a time when "normalized" housing prices are in effect). Just my thoughts, for what little they're worth. Without knowing at a minimum your LTV or your location or some better idea of your wife's job prospects, anyone offering advice is just kidding themselves and you. Just my thoughts, for what little they're worth.

#104 TimV on 05.24.12 at 10:13 am

One other thought, Mike — you could call-up a mortgage broker and ask them: what is the best mortgage I can get from one of the alternative (ie, non-federally regulated) lenders? That would give you some idea of what mortgage rate you would be looking at if you’re unable to renew w/ your bank.

#105 Mike on 05.24.12 at 10:27 am

Hi, it’s Mike here.

Thanks to Garth for putting my situation out there for comment. And thanks for all the feedback everyone, lots to consider (esp #69).

I understand now I should have added in more information and made my situation clearer so it would be easier for people to comment. Aside from mostly liking our neighbourhood (in a not as godless part of the GTA), one reason why we want to keep our house is that we get $1800/month or $21600 a year from renting out part of the house, which we’ve done for years. I expect to make just $12000 this year myself with my business (same as in year one, but good prospects ahead). And whether the wee wifey will return to work is an unknown. Because we bought in a “bad” neighbourhood, and about 6 years ago, thankfully we can live off of our rental income and my projected business income. So our house has some intrinsic value for being able to make us money as well as house us, and we can (just barely) make ends meet.

Hope this is enough and the right type of information. Given these further details, right now I’m really wondering: is breaking the 5 year fixed mortgage (with 1 year left at a rate of 5.65%) to lock into a 10 year fixed for 4% smart, or foolish? (And why?)

Thanks all!

PS: I did a little research on rates. Over the last year (ING, Feb 2011 to Feb 2012) 1 year fixed has risen by 0.44%. 5 year has dropped by 0.39% 10 year fixed has dropped by 1.35%. That means the spread between 1 year and the 10 year has closed by 1.79%. That sounds huge to me! I kind of feel the premium for the 10 year fixed is much lower than I’d expect. Is this because the banks themselves don’t see rates rising that much at all?

#106 penpal on 05.24.12 at 10:35 am

@ 94 Canuck Abroad

That building is legendary in Toronto.
I think it has the highest common or condo fees in the city and has had for over 15 years as far as I know.

#107 disciple on 05.24.12 at 10:37 am

#101 refinow… Great post. Totally agree. A monopoly on the roof over our heads should never have fallen into the hands of the financial parasite class. The fact we accept this as copacetic is a testament to our tacit complicity in our own enslavement. Just yet another way of saying “mind control”… (I had to get that in there somewhere).

#108 Daisy Mae on 05.24.12 at 10:42 am

#66 FREEDOM FIRST: “…Some people told me there charge was for $10,000, and others had charges between that, and as high as $60,000. It had to be paid. If you couldn’t pay with cash, or by re-mortgaging, you had to sell. No exception….”


And some have opted for Reverse Mortgages…digging themselves in deeper.

#109 Mike on 05.24.12 at 10:48 am

Thanks #103, TimV.

And thanks for feedback #s 8, 15, 20, 24, 26, 33, 42, 57, 65, 81, 84, 92, 101 and 28: hopefully this is good enough info, and lol 17!

#110 45north on 05.24.12 at 10:51 am

Bill Gable: You are on the wrong side

sorry Bill, it’s not what I meant.

[email protected]

#111 Pr on 05.24.12 at 10:53 am

This is madness! Some people in the gouvernement should be investigated ,the same for central banks. This is 100% by design. Follow the money, and look who benefit from this bubble.

#112 Dom on 05.24.12 at 10:54 am

Manufacturing will continue to shut down in Canada until Canadian workers can work for less. This housing bubble is a huge problem and I think the government knows it and is now going to crash the housing market. Prices need to fall anywhere from 30-50% depending on where you live. Housing prices have increased with the increased CHMC loans . Look at the chart Garth provided which clearly shows prices are higher only because of CHMC. Without CHMC prices will revert back to the mean.


#113 wopaholic on 05.24.12 at 10:56 am

Mike wrote:
PS: I did a little research on rates. Over the last year (ING, Feb 2011 to Feb 2012) 1 year fixed has risen by 0.44%. 5 year has dropped by 0.39% 10 year fixed has dropped by 1.35%. That means the spread between 1 year and the 10 year has closed by 1.79%. That sounds huge to me! I kind of feel the premium for the 10 year fixed is much lower than I’d expect. Is this because the banks themselves don’t see rates rising that much at all?

Umm no Mike, it’s because banks want to suck you into a 10 year commitment where you are trapped into the many pitfalls that are very well illustrated in post #101 by “rifinow”.

#114 2centsCanadian on 05.24.12 at 10:58 am

Dear Mike ….. when did you buy your house? How much did you pay? What is it worth today? What will it be worth when it’s 20% less than today? What % is your mortgage of 20% less of todays value? Do you like where you live? What will your monthly payments be at a 3% or 4% mortgage? What will that payment be in relation to what you could rent a similar house in a similar neighborhood for? What would that payment be in relation to renting in the cheapest neighbourhood you could stand to live in until you see how your business goes? At that point (if you sell) … you will have your equity out (I hope there’s equity) and you can buy back into the RE market at discounted (realistic) prices, knowing your new business is stable and and/or your wife has found a new job. Renting will fix your living costs for a while and take most of the uncertainty out. But if your mortgage isn’t huge, you like where you live and you have decent equity in your house (even at 20% less than todays house value) … why not lock in for as long as you can and concentrate on getting that new business rocking?

#115 J.I.M. on 05.24.12 at 10:58 am

WRT all those new condos being advertised. The really amusing thing about all the amenities listed ie. the pool, the exercise room, the gourmet kitchen etc etc ; is that the vast majority of the condo purchasers won’t ever use them!

#116 Frank on 05.24.12 at 10:59 am

Form Man on 05.24.12 at 9:45 am #95 Steve

The Harper regime won power in 2006 and began deregulating the mortgage industry at the same time as increasing CMHC’s insurance dramatically. This was driven by ideology and a deliberate attempt to juice the economy because they were a minority government in the hunt for a majority. Canada will now pay the price for this misguided idiotic policy.
Word is now that since Harper got his majority he will allow the “free market” crash of the housing market to happen as he knows very well he will not get a second term.

#117 Canadian Watchdog on 05.24.12 at 10:59 am

Trouble at Burano Condos: http://larissadoherty.com/?p=231

“Burano Condos have already seen some delays in occupancy dates for long-awaiting residents. It looks like that trend will continue as they work to replace and repair the damage. Most importantly of all, it was confirmed that no one was hurt or injured at all.”

How to get rid of shadow inventory in three easy steps:

1) Make a building fire, a big one.
2) Extend occupancy, delaying assignment holders from selling their units to the public.
3) Get rid of your shadow inventory.

#118 Steve on 05.24.12 at 11:00 am

Mike, here are more questions,

1) How much equity in your house (at expected current prices)?
2) How much mortgage balance/amortization?
3) What is your IRD cost (cost to cancel mortgage)?

and then perhaps you should break this down into distinct pieces:

1) Can you afford your house? (many here think not, based in part on your ‘fear’ of OFSI regulations outcome, and your stated income. Banks consider only 50% of rental income for good reason when analysing your ability to pay)
2) Can you pay the mortgage off in 10 years?
3) Is the IRD cost less than the benefit of chaining yourself to this house for 10 years? (Lest you pay another cancellation cost within 10 years)?
4) Given your apparently dire financial situation, will your wife work for the next 10 years?
5) What amortization were you thinking of on the new mortgage? (highest possible? then you should exit now…and stop living off your future before you spend it all)

Hope thinking through this will help. Please post what answers you care to share. Seems like the biggest issue is to be honest with yourself – something most of us seem to have trouble with – but it is a good sign you have the sense to be scared. Good luck, and hopefully you will resist slipping back into denial!

#119 Nebbio on 05.24.12 at 11:05 am

The building at Queen and Broadview that our friend Assiz is talking about is a project of condo shiller Brad Lamb. It didn’t even get started until more than a year after the stated start date. I found it funny that the sign showing the start date was left up long after the time had come and gone. What a painful reminder to purchasers that they had been duped. I guess Brad was too busy finding new victims to bother to take the sign down. At this point, work is proceeding at a samils pace. Buyers beware!

#120 Fred on 05.24.12 at 11:08 am

Mike #105

Future mortgage rates are a guessing game. If I had only one year to go on my current term I’d find out the cost to break / change and if it was more than a couple of thousand bucks I’d just live with it. But that’s just me. My guess is that rates won’t go up greatly over the next year. But as I say, it’s a guessing game.

I would also say that if you are just barely scraping by now then what you really need to do is get more income coming in. You need a safety margin. One of the two of you has to go out and earn some money. If you are trying to get your business off the ground then you need the support of your partner, or a rich benefactor.

#121 TimV on 05.24.12 at 11:14 am

Key bits of information, Mike. If you’re able to qualify for a 10 year mortgage w/ the income you listed ($12000 yourself plus $21600 rental), then your mortgage must be fairly small. It sounds like your wife staying home is voluntary. Why don’t you reconsider this? Even at min wage, you would basically double your family income. If the mortgage is small enough to get you 10 years on the income you listed, then you can probably pay it off pretty fast after you double your family income. If this is correct, then just wait-out the 5 year that you currently have. On the other hand, if the mortgage is actually quite large, then you need to consider carefully your confidence in your future income, I suspect.

#122 truth hammer on 05.24.12 at 11:20 am

The pimps insist ‘you’re richer than you think’. In this recent DBRS statement although correct in pointing out that debt is driving Canadians into the poorhouse….they still insist on using the same numbers that the pimps have fed the media……..lies lies lies. The averages for cities can not be compared to the averages in Iqualuit…..but because ‘averages’ bring the slush into the cup it is the most misused stat of all.


#123 Mike on 05.24.12 at 11:36 am

Appreciate people taking the time to write. Here is more info on my fabulously wonderful situation:

Bought for $144k, current market value maybe $230k. But…. current mortgage $175k, from refinancing after 1st reno, and we have $39k on a line of credit from second and final reno. So $214k total owing. I know, doesn’t look great. It’s that we live here AND bring in $21.5k a year from rent, and that our place is gorgeous, that makes us feel like the house isn’t a bad thing.

Maybe 20 years left on mortgage and we are hitting up the LOC for $1k a month right now, but that will end when my wife’s job does. We plan to keep the house. We want to keep this house for life, and one day just have it as a rental property if I can make good money again. My wife may work again, but it’s an unknown, just depends on situation with kids and a few things.

So we’ve invested HUGE for us in this house with renos. And because I think we have good cashflow from the house (while still living here), I feel like its worth it to do whatever we can to keep it (legitimately that is).

We can just barely afford this house when my wife stops working, but yeah, it’s doable.

Right now our rate is 5.65%, so getting even a 10 year one is so much lower.

It would be a huge leap to think we could increase our income enough to pay off the mortgage in 10 years, so I don’t count on it (but I know it is possible depending on how my business goes).

I really need to find out that IRD so I can factor it in.

QUESTION: Is 4% really a high rate for whats likely coming? Or are higher rates really that unlikely for many years? I was thinking if we locked in at 4% for 10 years that we would be doing really well, say after the next two years when I thought rates would surely have risen beyond it. Thoughts?

Thanks all.

#124 Harlee on 05.24.12 at 11:47 am

#56 saanichtonian.
I can remember Vancouver in the mid-1970s when houses sold in the $50-60,000 range.My folks paid around $55,000 for their house in Renfrew Heights and I remember looking at the mortage and thinking:”Man,that’s a LOT of money to pay for a home” …and 35+ years ago I guess it was!My parents both had jobs and had no problem handling it. I was still living at home,but had a job that paid minimum (plus a dime) so we were all doing okay. I came across a blog from “kids” who grew up in the area near Rupert Street hill(at Grandview) and went to Renfrew School. Some of them said their folks built homes in that area for $15,000 -20,000 just after the Second World War .Ranch-styles houses that are mostly gone now and replaced with “Mcmansions”…..
I get a nostalgiac chuckle out of an article I have from the Toronto Star,July 1971.I was on vacation with my folks,and bought the “local newspaper”. The headline: ‘The end of the 10 cent chocolate bar’ .The manufacturers were agonizing over the decision to either raise the price to 15 cents (which the consumers might think is too much) or should they just up it to 13 cents..(which is an odd-number) or should they keep the 10 cent price but shrink the bar ? But,the bar is already pretty small! Would the consumers accept a smaller bar ? Such a major decision ! What to do? I must have thought the article significant then because I cut it out and put it in my scrapbook. .A lot of fun to look back on it now,back in the days when 5 cents was a major concern….

#125 Arthur on 05.24.12 at 11:51 am

Friends own a condo in Richmond. Within the first year the intercom system failed. I don’t know the details but not fixed under warranty. Apparently the wiring failed and is too expensive to fix. Visitors have to call the owner’s cellphone and then they have to come down to the entrance to let people in.

It seems like it will be a nightmare to sell once condo prices crash.

#126 Arshes on 05.24.12 at 11:51 am

@ Mike

PS: I did a little research on rates. Over the last year (ING, Feb 2011 to Feb 2012) 1 year fixed has risen by 0.44%. 5 year has dropped by 0.39% 10 year fixed has dropped by 1.35%. That means the spread between 1 year and the 10 year has closed by 1.79%. That sounds huge to me! I kind of feel the premium for the 10 year fixed is much lower than I’d expect. Is this because the banks themselves don’t see rates rising that much at all?
Like Gail says, plan like a pessimist live like a optimist. You need a more defensive stratedy, considering you new business may depend on what happens to you financially you really need to go over ALL your numbers and make plans as what you need to do to keep afloat no matter what happens in the future.

You dont want to get caught with you pants down, cause you thought interest rates would stay low, and then they didnt.

#127 Alex N Calgary on 05.24.12 at 11:52 am

Its scary right? part of me wants people who greedily rammed their way into new houses, and then using HELOC to pay for all their trips, cars, trailers, DirectBuy 3d TV’s, its way more people then you want to believe.

Some of me wants to keep my job and who cares if they leveraged their butts off, having no extra money to travel is pain enough I guess? Part of me hates the arrogance, the easy life, why did I bother to goto school? In Alberta all you need is 3 months of trades training, or 1yr legal secretary course, then boom 800k acreage and super duty diesel, people with student loans and fix their own cars are suckers.

Those girls I know, maxxed out leverage style, they’re pretty decent people, just with no idea how to handle finance or read the web, I mean, all the info is right here. House Horny is a real thing, social pressure, and the belief the Banks and Gov. wouldn’t let them throw their life away on debt. would they?… people don’t deserve whats to come, although hard lessons are the best lessons.

Also, this city has the worst roads I’ve ever seen in the winter, solid ice, can’t salt, no gravel, yet a touch of rain and everyone is crashing into everyone…oh cowtown!

#128 DUI on Money Road on 05.24.12 at 12:02 pm

#13 GarthBelieber on 05.23.12 at 9:30 pm
They don’t afford it. I know, I’m living that lifestyle.

My daycare bill alone next year will be ~$2500/mo.

I am living (waiting) for 5 years in the future (to go from red to black)…

#129 Snowboid on 05.24.12 at 12:06 pm

#83 penpal on 05.24.12 at 7:08 am…

I am slowly being convinced that renting a condo may be the better long-term solution. No worries about special assessments, etc.

Purchasing our last rental condo would have required a monthly outlay almost double what our rent was. The place was large, but old and would need major work within a few years.

Now we are renting a 4 year old place, upscale – a bit smaller. The monthly costs to own would be about 75% more than our rent.

About 15% of the buildings’ units are for sale, talked to a couple of owners last week – said nothing is selling.

Maybe we will end up back in a SFH, when prices are back down to where we can pay cash!

#130 refinow on 05.24.12 at 12:09 pm

#69 Daystar, you are still looking at this in a very short sited manor.. So both you and MIKE please pay attention to this posting..

The 10 year at 3.78 is with a major Bank. The major Bank’s use The discount you received to calculate IRD….

The current 10 year posted rate is 6.75%… Confirmed on each, RBC Scotia, bmo TD Cibc sites prior to writing this email…

So your discount to calculate future IRD is 2.97%… The highest discount ever given off of a posted rate… Remember the day when we would get a .25% off of posted??? eventually floated to 1.00% off of posted, and here we are at 2.97% off of posted….

So lets look at a $300,000 mortgage and you drink the Bank’s kool-aid and sign up for your fantastic 3.78% 10 year mortgage….. great rate… don’t deny that…..

now lets assume all rates remain the same….

and in 1 years time you have to sell……

Bank’s don’t have a 9 year mortgage rate, so they use the 7 year mortgage rate. Posted 7 year mortgage rate is 6.35% not much different then the 10 year at 6.75.

Big Banks IRD calc…

Posted 7 year rate 6.35 – your great discount of 2.97% = 3.38%

They take your 3.78 rate – 3.38% rate = .40%

$300,000 X .40% or .004 X 9 years = 10800 penalty….

5 digit penalty….. even if rates don’t move….

Now as time progresses, lets say you want out after 5 years… so i use the 5 year posted rate…

5 year posted 5.35% – (2.97 Discount) = 2.38%

and your $300,000 mortgage was at 265,000 in 5 years it would be significantly higher if it was on a 30 year am….
But i will give it $265,000 for shitz and giggles

$265,000 X (3.78 -2.38%) x 5 years = $18550… hey here is your new penalty after 5 years if rates dont change…. How you liking your 10 year fixed mortgage with that great discount you negotiated…..

That 2.97% will hang over your head for each and every year…..

Now lets look at the guy who stayed variable at Prime -.10 and sells after 12 months…

$300,000 X 2.90% /12 m X 3 M = $2175.00 penalty….

So pay $10,800 penalty with the 10 year fixed or $2175 getting out of a Variable…..

You think the Bank’s don’t want you in that 10 year mortgage…Of course they do…..

MIKE don’t drink the Bank’s Kool aide…Stay away from the 10 year fixed…….

#131 Bottoms_Up on 05.24.12 at 12:11 pm

#100 john on 05.24.12 at 9:51 am
Ontario law dictates that a landlord cannot discriminate based on pets you have (and cannot kick you out of the rental)– therefore, you are in your right to NOT disclose the fact you have pets. Yes, you might piss your landlord off by initially lying, but if the law is on your side, why wouldn’t you?

#132 Bottoms_Up on 05.24.12 at 12:25 pm

#43 Kasia on 05.23.12 at 11:18 pm
Do you know how ridiculous that sounds?

‘Everything over $700,000 in Markham just isn’t moving’

HELLOOOO….$700,000 is enough to buy SIX or SEVEN decent houses in the burbs of Phoenix (a city the size of Toronto by the way).

It’s also enough to buy THREE or FOUR decent houses in a plethora of places across Canada.

#133 TimV on 05.24.12 at 12:39 pm

Kids? Daycare? Hm. I think you’re worrying about rates too much. OSFI regulations are just for situations like this. If you really want to do “whatever you can” to stay in your current place, then OSFI is not likely your friend. It seems to me that if you truly want to do “whatever you can” to stay in the place but can’t commit to an increased income, then you have to take the 10 year option regardless of interest rates. Are you willing to risk that OSFI regulations force you to requalify in 1.5 years? (Note that whatever changes OSFI forces onto CMHC have not been announced yet). If you have to requalify but can’t, what are the chances you’ll find an alternative lender who’ll take you on with nearly 93% LTV (accounting for the credit line); or possibly a worse LTV if house prices do anything worse than stay flat. I’d be wary about getting caught up trying to predict interest rates when a very high LTV with unstable income (will you need daycare if wife works?) are the real elephants in the room.

#134 daystar on 05.24.12 at 12:40 pm

#105 Mike on 05.24.12 at 10:27 am

Hi again. What are we talking for a penalty to break the mortgage with a year left Mike?

If I was you, I would talk to my bank, tell them what I want to do (go to a 10 year term at 3.75%) and see what they will do for me. They could give you a break on interest rates, penalty or both. Feel them out first, try negotiating and get back to us if you can?

I know what you are thinking… where are interest rates going to be a year from now and thats a highly legitimate question considering the world economy, the U.S. freezing rates near zero into 2014 and so forth but things change.

Getting back to Europe, the Euro offered a true alternative to the U.S. dollar. That alternative is in question now and the U.S., while swimming in debt themselves, rolled over a mountain of debt through Q.E., their lion’s share of debt not maturing for an 8 year average and when the round of bonds comes due again they are likely to Q.E. their way through it.

Its hard to say how the world markets will view Q.E. campaigns in the medium term (its up to their trading partners and creditors more than anything) but the short term offers little risk for the U.S. dollar from the side of government bond maturities and world events (Euro) and as investors take flight to the U.S. dollar in troubled times, there is no need for more Q.E. from the U.S. in the short term and that is also good for rates so one would think that rates in Canada will flatline over the next year right? (Its why for me, gold is a dog, no offense fellow bloggers, but thats another issue)

Lets fast forward a year. Mortgage insurance in force is at 567 billion now and has been growing by $50 billion a year. You see the problem? Once CMHC hits 600, they are tapped. OSFI will come into effect in the latter half of this year chilling CMHC loans and this is highly likely to increase borrowing costs by banks who have to think twice before making loans no longer backed by government insurance. I think that newfound risk will be priced in even as less supply for MBS’s wanes, in the form of higher rates. In other words, the BoC rates may go sideways for a year but the spreads will widen between the BoC and our banks so…

It brings us back to plan A. I would feel out the bank I deal with in terms of what they are willing to do to accomodate a 10 year term, mull it over (with the rest of us if you so desire, thats what some of us are here for) and go from there!

#135 spaceman on 05.24.12 at 12:50 pm

“As for Mike, the lending rules are probably going to change, but…there is another show going to drop in the economy which is going to bring around more QE, emergency rates and extend and pretend from central banks so I think you have ample time to lock down. Couple more years I think. Watch for the U.S. economy to go off the cliff in about 9 months lead by at least a few countries in the eurozone experiencing a hard default as well as a real slowdown in chinese demand”

– can I borrow your crystal ball ? this is pure speculation not advice… Canadian Banks have just reported record profits, 20 % better than last year, all of them. Real Estate is toast in Canada, but its picking up in the US. US economy who the hell knows…

Deal with reality, not speculation.

#136 Timing is Everything on 05.24.12 at 12:53 pm

#56 saanichtonian
#124 Harlee

Just 4 U… ;-)


#137 TnT on 05.24.12 at 12:55 pm

#100 John
Do not disclose your pets detail when filling out a rental application. This is a loop landlords use.

Read this site for the tenant rules.

Here’s the question about pets:

Q) The landlord says I must either move out or get rid of my pet; Do I?

A) Only if the pet is dangerous, causes allergic reactions or causes problems for other tenants or the landlord, must you get rid of your pet or consider moving elsewhere as per Landlord application to terminate tenancy based on animals.

Even if you signed a lease with a “no pets” clause, if the pet is not a problem for anybody they can not enforce it; such no pets clauses are invalid under the law.

You do not have to move or get rid of the pet unless the Board issues a written order to do so.

Know your rights and respect the law :)


#138 Mama Bear on 05.24.12 at 1:01 pm

In February I listed my house (Aurora-small starter home) with the condition that I get to rent it back for 18 months from the new owner. It sold the first day. I had 2 offers, both were from young families. I got my full asking price and we negotiated my monthly rental fee (very affordable for me) I feel it was a win/win for both myself and the new owners.

#139 greed on 05.24.12 at 1:01 pm

I see the best of the best are now posting links to conspiracy blogs.
Just so this blog is valued did you know Garth is actually the son of….
Check it out: http://www.thetruthaboutGarthTurner.ca

#140 greed on 05.24.12 at 1:02 pm

Part 2

Got ya!

#141 disciple on 05.24.12 at 1:02 pm

I’ve started to get spam emails for condo developments. Never seen that before. Does this mean anything?

#142 lord lucan on 05.24.12 at 1:09 pm

Interesting article on house prices in Greece and France as a result of the Euro crisis (still overpriced is the takeaway):


#143 Investx on 05.24.12 at 1:09 pm

“Many now see eurozone in Japan-like ‘Lost Decade’”

I had wondered a few years back why rates couldn’t stay low for a while. They did in Japan. I was told it was different here (Canada) and something about bond market forces.

Interesting to read now that some believe the Eurozone may be headed for their own “Lost Decade”.

#144 Snowboid on 05.24.12 at 1:25 pm

#131 Bottoms_Up on 05.24.12 at 12:11 pm…

The laws are opposite in BC, not disclosing pets is grounds for eviction. If a landlord allows pets, they can also request an additional deposit.

#145 Canadian Watchdog on 05.24.12 at 1:30 pm

Genworth MI Canada Inc. dips below two year low http://tmx.quotemedia.com/charting.php?qm_page=11494&qm_symbol=MIC

#146 Steve on 05.24.12 at 1:31 pm

Mike, you refinanced, and have a LOC. It looks like you already drank more than your fair share of the KoolAid.

You keep asking if you should break your mortgage (but have not figured out the cost) so you can sign up for a long term at 4%. I am guessing this is because you feel that you will have fixed and reasonable costs for the next decade. If that is what you are looking for, then you better look into what those fixed and reasonable costs would be if you rented. Then compare your options. Move at the end of mortgage and there is no cancellation cost.

The banks own you. They own your future, maybe even your children’s future. You gave it all up on the double re-finance and LOC. Someday you need to escape that servitude, hopefully before death.

Seems like the main issue right now is that the house is your primary source of income. Being gorgeous is irrelevant, except to your emotional attachment. How much does it cost you to live there (all-in) compared to renting a place? If you drop the mortgage and LOC, along with the income, are you further ahead?

This is back to the main question: Can you (and should you) afford to live in that house. You have been living beyond your means (or there would be no LOC and no refinance) so the real decision for you is whether or not to continue to do so.

Financial logic says STOP. Habits say CONTINUE.

It is clear you are leaning towards the latter, but you should really run all the numbers and think it through. Not doing so is another sign of denial.

If you still decide to continue, then I would hazard to guess that you are never moving, so going long (~4%@10) may be your best option, along with getting more income (wife, or your business).

Good Luck!

#147 randman on 05.24.12 at 1:53 pm



#148 Dan in Victoria on 05.24.12 at 1:58 pm

See Mike.
Lots of pretty smart people here.
Lots and lots of diffrent angles to ponder.
Might take a couple beers to get through.LOL.

Daystar @69
Damn, now you got me thinking…….

#149 Blacksheep on 05.24.12 at 2:15 pm


“as investors take flight to the U.S. dollar in troubled times, there is no need for more Q.E. from the U.S. in the SHORT TERM and that is also good for rates so one would think that rates in Canada will flatline over the next year right? (Its why for me, gold is a dog, no offense fellow bloggers, but thats another issue)”
Correctamundo….Post election, is whole different story. Gold should be a buy this fall, as long as Greece doesn’t cause to much trouble.

take care,

#150 new_era on 05.24.12 at 2:32 pm

Well Golly Gee, doesn’t overbuilding, less immigration, less demand , over supply, ==> lead to drop in Housing prices, ==> which leads to higher unemployment (ex-specially in all industries associated with real estate , credit crunch, higher interest rates



#151 greed on 05.24.12 at 2:34 pm

#147 Randman
So much anger. Just stop paying your taxes it worked out for Wesley Snipes…..whoops maybe not.

#152 armpit on 05.24.12 at 2:35 pm

Royal Bank announce earnings past quarter missed estimates by one cent. All Bank stocks are down today.

I think RB had some fancy accountanting to prop up the earnings to only miss by a penny…(which we won’t have in the future)

#153 Mike used to be in Leaside on 05.24.12 at 2:36 pm

I’m jumping in late, but for Mike my view is :
– Don’t go for a 10 year fixed – take a five year fixed and try for a rate near 3%
– That is an historically low premium from the variable rate – normally the premium is 2%.
– Use your 1% rate saving for prepayments & you’ll be way ahead after 5 years.
– Don’t assume you have to ‘break’ your mortgage – I called my lender and with a little persuasion they were willing to blend in my current rate several added years at current discounted rate

Above is assuming you aren’t selling. If you want comfort these are great rates, look at the 5 and 10 year bond charts:


#154 Daisy Mae on 05.24.12 at 2:48 pm

#116Frank on 05.24.12 at 10:59 am
Form Man on 05.24.12 at 9:45 am #95 Steve

“Canada will now pay the price for this misguided idiotic policy.”
“Word is now that since Harper got his majority he will allow the “free market” crash of the housing market to happen as he knows very well he will not get a second term.”


Voters will not forget Harper, his 38% ‘majority’ and the ensuing mess he’s made of the economy. So what will Harper have accomplished?

#155 Chris on 05.24.12 at 3:05 pm

Aussie Roy – What do you see happening in Perth in regards to rent prices in the next 6 months? My friends are renting a 2bdr beautiful townhouse w/ ocean view in Scarborough. Looking to do the same. I visited there earlier this year and loved it so much that I think I might go back for a year or 2 while I’m young and not stuck here because of a house (I refuse to pay these kinds of insane prices), and because I can. :-D

#156 Soggy Dreams on 05.24.12 at 3:06 pm

Who is more screwed? The pot-smoking, video game playing, unemployed bum hiding in his parent’s basement, but with no debt. Or the high-flying, free spending 80k/year kid who just bought a leaky condo for $800K. Assume they are the same age, same background.

#157 Auroran on 05.24.12 at 3:21 pm

[quote]#138 Mama Bear on 05.24.12 at 1:01 pm

In February I listed my house (Aurora-small starter home) with the condition that I get to rent it back for 18 months from the new owner. It sold the first day.[/quote]

Details please. What area of Aurora (street/neighborhood)? Size of the home and number of bdrs. Sale price. And most importantly how much is your rent? Also, who was your realtor?

I wanted to do the same thing like you for the last two years. My attempt to contact a HAM agent who had a similar house listed for rent didn’t get a reply. My other attempt to get such “investor” on Kijiji also didn’t generate any leads.


#158 Kevin on 05.24.12 at 3:21 pm


“Ontario law dictates that a landlord cannot discriminate based on pets”

Read the fine print, there’s a loophole. If the landlord lives at the same property (for example, you’re renting their basement suite and they still live upstairs), then that rule doesn’t apply. They can discriminate however they want. They can decide no pets, no smokers, no babies, no single people, no people with the wrong colour skin, no whatever. Anything is fair game as long as they live in the same building.

#159 jon on 05.24.12 at 3:27 pm


#160 JB on 05.24.12 at 3:31 pm

#32 Renting In The GTA

question for you. What is the company garth works for/owns?

i’ve been trying to find out before with no luck since i’m looking to try a new financial adviser/planner

#161 tkid on 05.24.12 at 3:33 pm


youtube is full of videos, and try watching some of Frontline’s financial episodes, of folks in the States who used their house as an ATM and had no business doing so. I’d tell y’all to sell and rent, but you probably can’t afford the rent plus the car(s) plus food plus utility bills. You currently have a wife working and rental income coming in plus whatever income the business generates – if I have read your three posts correctly – but you are still hitting the loc for a grand a month.

My recommendation – break and go for a 10 year. It won’t make any difference to your financial status in the long run. You are headed straight for bankruptcy, and won’t keep the house either way. As you won’t make any money selling the place, at least you might get a few months free rent from the bank while they prepare the forms to repo the house.

Oh, and get the 4% 10 year confirmed in writing. I ticked all the boxes on the BMO site and they would only offer me 6.5%

My best advice? Get someone with balls-and-spinal-column made of steel to review your family’s financial situation/spending habits a la Gail Vax-Oxlade.

You need to cut your expenses about $2000 a month – $1000 to pay off the loc in 3 years, and $1000 to balance out your budget so you stop dipping into the loc. Balls of Steel might be able to point out where you can cut back.

If I have misread your post and you are paying off the loc by a thousand a month, I’d definitely break the mortgage and go for a 10 year. Once you get the loc paid off, go for broke on the house.

The advice I’ve given you is not meant meanly, but in the hope it helps. Good luck dude!

#162 2centsCanadian on 05.24.12 at 3:47 pm

About Mike …. do I read you right in seeing you bring in $21K+ a year for rent? With your $175K mortgage at 5.65% ($1,215/mo) and your LOC that you’re paying back only $1K a month you and some property tax and heat and hydro … your rent is paying for almost all of your bills.

I would do everything possible (wage-wise) to tip toe to next years renewal time (wifey hang on to that job until then at all costs) and if you can get the mortgage down to the high 3’s/low 4’s .. you’ll pay about $200 less per month than you do now (down to $1,050) …. and make getting rid of that LOC your 2 – 3 year goal after all of that. With your $1,700mo tenant, your LOC gone and a 4% mortgage …. you and your wife could both work at McDonalds and live ok.

With your tenant brought into the picture … selling (at near $0 equity) and renting will be more expensive.

Keep in mind, my option will probably have you underwater (-equity) for 2-4 years … but as far as “over all cost to have a place to live” ….. your houses rentability makes all the difference.

As someone who has had rental houses (it ain’t as bad as some say) ….. being able to rent the area of the house you live in ($1500/mo?) and having your tenants rent ($1700+/mo) ….. to an investor (if what you say is true) the math would suport a price for your place in the $400K’s. You must live in the middle of no-where.

#163 First to last on 05.24.12 at 3:47 pm

Ask a realtor:


I love the closing line “So relax and enjoy! The future will look after itself……”

#164 Arshes on 05.24.12 at 4:00 pm

@ Mike.

1. Contact a mortgage broker or your bank, you need to know what EXACTLY your options are. You may not qualify for the mortgage you are looking at. Plus you need to know the costs of breaking the mortgage, it may be more than you think.

2. If you re-finance, you may want to consider re-financing into a longer term mortgage if you can, it will free up cash flow in the mean time. But you more interest in the long run. But remember this option gives you breathing room.

3. Bank as much money as you can for emergencies. You’ll need cash on had for the future if things dont go as well in your business as expected. (Esp if you want to keep the home, you wont be able to if you cant make the mortgage payments)

4. You wife needs to look for work. ASAP. Even if its only part time.

5. Speak with a Tax Accountant regarding your business, you may be able to hire your spouse for your business and do some income splitting (Though at $12,000 a year, theres not much income to split.)

6. Review your budget, and cut back even a bit. Bank the savings.

7. Keep you personal finances seperate from your company. If your company doesnt go as well as expected you dont want it to drag down the family.

8. Draw a line in regards to your business, dont throw good money after bad, if you business doesnt go well or as well as expected.

9. Consider taking part time work just to keep you self out there employment wise, this will give you options for the future.

10. Learn to plan more like a pessimist, so you can stay ahead if things go bad. Under estimate your income, over estimate your expenses to allow for breathing room.

11. If you can i would encourage you to encourage your kids to get summer jobs. They can contribute to thier college funds or pay for thier wants and what not.

Now if this were me, I would try to extend my mortgage, lock in for 10 years, bank as much as I can for those years. I wouldn’t even look at paying down the mortgage agressively or making extra payments (so essentially your renting from the bank), liquidity is key especially in a new business and keeping your self afloat and flexible for the future.

Your key to wealth, wont be your home but probably your business or any future employment if the business doesnt do too well.

Mind you, I dont really care much for Home Equity i prefer investments over that.

You have make a decision on what your priority is, before you know what you should you do. Cause something has to give. And you’ll need to adapt and be flexible when it does.

#165 Country Girl on 05.24.12 at 4:01 pm

#101 Refinow
I agree with you 101%.

#166 Rust Belt Buster on 05.24.12 at 4:06 pm

#123 Mike on 05.24.12 at 11:36 am –

In spite of all of the sound advice that you’ve been given, suggesting that you sell and get your family situated on more stable footing, you still argue the merits of being “an owner” , no matter the obvious risk.

Go ahead and refinance. Be sure to come back in about 4 years and let us all know how that has worked out for you. Assuming you can still afford to own a computer.

#167 Canadian Watchdog on 05.24.12 at 4:14 pm

#152 armpit

“I think RB had some fancy accountanting to prop up the earnings to only miss by a penny”

It’s called a repo window, where banks get to dump bad loans in exchange for cash, right before they report. http://www.newyorkfed.org/markets/expanded_counterparties.html

#168 Triplenet on 05.24.12 at 4:19 pm

#112 DOM

Could you tell me what the value of my $500k house will be when values revert to the mean? Will this be more or less than a 50% value reduction?
What is the financial formula for revert to the mean?

#169 Renting in the GTA on 05.24.12 at 4:21 pm

#160 JB on 05.24.12 at 3:31 pm

Turner Tomenson, Wealth Management Group


#170 Van grrl on 05.24.12 at 4:34 pm


“…and we have $39k on a line of credit from second and final reno.”

Geezus, am I reading that right?? People actually spend that kind of money on renos?! My visa hits $300 and I panic.

Wow. I’m a renter waaaay ahead of the game… haha

#171 AG Sage on 05.24.12 at 5:11 pm

Mike, most important advice one can give to a new small business person: It takes 18 months to start paying out. You better be hunkered down to make it to the point it will start rolling on its own. This is why lack of access to capital is the number one reason for failure.

Triplenet, What did it sell for in 2003/4? Add inflation over time (roughly 3%). What’s the number?

#172 Triplenet on 05.24.12 at 5:44 pm

#171 AG Sage

Purchased for $165 in 2001
Value today $350k
No changes, reno’s or upgrades.
Inflation factor – is that the same as the revert to mean factor?

#173 99% on 05.24.12 at 5:52 pm

#130 refinow

I thought that even if you hold a 10 year mortgage, you are eligible to discharge after 5 years without penalty in Canada? Or just a rumor?

#174 Mike Rotch on 05.24.12 at 6:02 pm

Mike, I ran some numbers because I like to ‘solve’ the world’s problems on my coffee breaks.

In rounded numbers, you have about $180K mortgaged at 5.65% 1 year remaining on the term.

Prevailing 5 year rates are 2.75%

I assumed you were 5 years into a 25 year term and don’t feel like scrolling back up to figure this out. The math works out a little differently for a 30 year term, but this will give you the idea.

If you can talk to your banker, you should be able to “blend and extend” rates into a new 5 year term at the weighted average (1 year at old rate averaged with four years at new rate)….This works out to 3.33% or so.

The cons:
-5 more years of debt servitude under an illiquid pile of bricks and drywall where you’re already having trouble paying for everything you want. This sucks.

-If, Garth forbid, you have to sell, you have a rate that’s deeply discounted versus the posted rate, and IRD can be a merciless bitch!

The pros:
-immediate effect of the blend and extend is to lower your total monthly payment by about $230.

-Interest payment decreases by about $320, and principal payoff increases by about $90 per month.

-You can get a 4 year extension in before the new regs take effect.

-At the end of the new term, you have almost $30K more of the principal paid off, so at worst, you’re not as far underwater.

-The $230 reduction in total monthly payment can be redirected to help service the HELOC, so that balance can hopefully start heading downwards as well.

Results of analysis:

If you could sell at high enough to pay off the mortgage and HELOC, and accept life as a renter, that’s probably the sanest move. I am an owner myself, but if not for a conditional gift of lots of money towards the downpayment, I never would have swallowed the koolaid……just made no sense to me even before I discovered this pathetic blog.

If, however, you are committed to staying, get an appointment with your banker and ask him what he can do to help you take advantage of today’s lower rates…….and then mention that you were considering blend and extend if he doesn’t offer it straight away.

#175 Canadian Watchdog on 05.24.12 at 6:06 pm


Deposit structure:
$3,000 on signing
Balance to 5% in 30 days
5% in 180 days
5% in 365 days
5% on occupancy


#176 Mister Obvious on 05.24.12 at 6:11 pm

#156 Soggy Dreams

“Who is more screwed? [etc.]… “


They are equally screwed.

#177 TurnerNation on 05.24.12 at 7:18 pm

All Canada’s cities will be in flames by the time the Harper govt is done. The students, workers, seniors, ordinary people are waking up.
One again the only people who will be taking away our freedom, just following orders, will be our “heros” in uniform.

Doesn’t affect you, you say? Maybe one day your child will call, sobbing, having been unwittingly “kettled” on their way home, arrested, held without lawyer, food, water – as in G20 – and eventually released without charge. Then you will raise h-ll.

#178 vinny on 05.24.12 at 7:21 pm

just start????


#179 TurnerNation on 05.24.12 at 7:26 pm

#64truth hammer on 05.24.12 at 1:30 am

You’re not making any sense. The students are rallying against what you hate: the “liberal” system! All those entitled, ivory tower “liberal” university intellectual professors who foist liberal ideals onto the youth, while collecting giant liberal salaries and pensions, union perks tenured job for life. Job for life! All the while raising rates, limping wrists, and forcing kids into more debt. Lord knows, most every job asks for a degree these days. It’s non-neogtiable.

Leave the country? No way! When you money’s been stolen do you simply turn and walk away? Surrender? I thought the french did this. But in this case they’re not.

#180 Nostradamus Le Mad Vlad on 05.24.12 at 7:53 pm

#154 Daisy Mae — “So what will Harper have accomplished?” — Precisely what he told everyone in the early 2000’s — you won’t even recognize this country by the time I’m finished with it. He only needs one term with a majority to finish us off.
17:16 clip PMs. Follow up to a link from yesterday re: 599 mln. ozs. of paper silver being dumped; 0:43 clip Geography of a recession; FB Like Bre-X and Nortel, we never learn; EU De-claw the mouse that squeaked! Excuses, excuses Free banking ending? Property Taxes and Orthodox Religion About time they paid their fair share.
True – False? If proven to be true, the US just shot itself in the foot again, and retaliation will happen; EU and Monsanto Great reason for France to leave the EZone, reclaim its own currency and laws; UN Of course they will say radiation levels are safe. They are the ones promoting a one-world govt. with them in charge; Cameron New scandal involving Murdoch; Sneaky and Deceptive Romney showing a politico’s true colors; Killing Civilians “The US drone program is killing civilians simply for traveling in large groups while the ‘terrorists’ are trying to provide humanitarian services.”; Obomba Calling on Hollywood for help; 8:38 clip Cop disciplined for supporting OWS; FDA Mass homicide of one million Americans each decade.

#181 Daisy Mae on 05.24.12 at 7:55 pm

#124 HARLEE: “The manufacturers were agonizing over the decision to either raise the price to 15 cents (which the consumers might think is too much) or should they just up it to 13 cents..(which is an odd-number) or should they keep the 10 cent price but shrink the bar? But,the bar is already pretty small! Would the consumers accept a smaller bar?”


Some things never change….

Remember when metric was introduced? Prices remained the same, but the sizes of everything decreased. The same thing will happen when we lose the penny — only in this instance the cost of everything we buy will increase 5 cents.

Can’t win for losing. Are we fools, or what? We have the ‘cons’ to thank for this one….

#182 Daisy Mae on 05.24.12 at 8:19 pm

#146 STEVE:
“Financial logic says STOP.
Habits say CONTINUE.”


THAT is profound…

#183 Al on 05.24.12 at 8:29 pm

What happens o the insured mortgages after Genworth goes bust?

No worries. CMHC insured it. — Garth

#184 Pr on 05.24.12 at 8:30 pm

What ever the fundamentals , Garth, remax, etc. say, it doesn’t mater, because their is a breeze of bank run in they air! And this is not good for… anything!!

#185 Aussie Roy on 05.24.12 at 8:34 pm

Chris on 05.24.12 at 3:05 pm
Aussie Roy – What do you see happening in Perth in regards to rent prices in the next 6 months? My friends are renting a 2bdr beautiful townhouse w/ ocean view in Scarborough. Looking to do the same. I visited there earlier this year and loved it so much that I think I might go back for a year or 2 while I’m young and not stuck here because of a house (I refuse to pay these kinds of insane prices), and because I can. :-D

Hi, stay renting. REntal stock has been increasing and rents are slightly lower or at worst stable.

“Property repossession applications have more than doubled since 2007-08, during the height of the property boom, to a rate of nearly 25 per week.

Falling property prices amid the global financial crisis, as well as lenders taking stock of their riskier loans, are much to blame, with about one in 20 PERTH properties now worth less than their purchase price, according to RP Data’s annual Equity Report.


You may want to check out the daily headlines at


#186 TurnerNation on 05.24.12 at 8:36 pm

Bank of Montreal (BMO) is changing its residential mortgage rates, effective May 25, 2012.

“BMO continues to encourage Canadian homeowners to take on a mortgage amortization of 25 years or less. Shortening the amount of time you carry mortgage debt should be a priority for any homeowner, as it saves thousands of dollars in interest rates over the life of the mortgage and ensures Canadians can begin building equity in their home sooner,” said Martin Nel, vice-president, lending and investment products, BMO.

The new rates are shown in the accompanying table.

Fixed rates To Change

Five-year fixed closed 5.34% -0.10%
Five-year low-rate fixed closed 3.39% -0.10%

The interest rate for a fixed-rate mortgage is calculated half yearly, not in advance.

#187 Pr on 05.24.12 at 8:38 pm

You own real estate and plan to sell and see whats coming now. Please read my advise: The one who panics first panics best.

#188 Westernman on 05.24.12 at 8:45 pm

Turner Nation @ # 177&179,
Sorry, but you are the one who is wrong in this case.
The students in Quebec running amok are trying for a free handout – same as always from our fine French comrades… mean what else would you expect from Quebec? The formula of throwing a temper tantrum and then getting something paid for by the rest of the country has been working for them for at least 100 years – why stop now?

#189 TurnerNation on 05.24.12 at 9:24 pm

I want my free handouts! I’ve yet to see one…where-ever did they go.

#190 Westernman on 05.24.12 at 9:40 pm

Turner Nation @ # 189,
The free handouts are everywhere, but they aren’t for the likes of you and I, we are charged with the paying for them… quite an honor, no?
Seriously though, free handouts are for the classes of people who can some how convince our masters in Ottawa that they are “victims”.
“Victims” in Canada are groups like ” French Canadians”, ” Women “, ” Homosexuals ” ” Native People ” etc. etc. etc.
In short – just about everyone except people like you and I … is this a great country or what?

#191 Gun Boat denier on 05.24.12 at 9:50 pm

130 refinow – your calcs have shown the discount is
irellevant. You wind up subtracting it from both sides. Just use the posted rate for present and future.

So the bigger the better as far as the discount goes

#192 daystar on 05.24.12 at 10:40 pm

#130 refinow on 05.24.12 at 12:09 pm

Excellent point raised if you have to move and get out of the mortgage. I’m glad you raised it.


It illegal to charge IRD’s for longer than 5 years. (I liked where your brain went on that one though)

Its the time to sell, not own anyway right? No argument out of me there, buy low sell high is my motto but if you don’t have to move, don’t plan to and like where you are at like Mike is with a home that’s generating 10% annual returns on his digs plus providing a roof over his families head for free, its easy enough to see why Mike would want to keep this thing going for life and since thats the case the choice comes down to our best guess as to where rates will be 5 years from now meaning a crash course on macroeconomics.

Mike’s case is unique. It generates real income that more than pays for the mortgage while they live free and they like the spot. It’s obviously costing Mike less to own than rent (by a long shot) so keep the house, its a money earner that is more than paying for itself while and they like it there so why not live there for life when the energy is right? Right? Isn’t that what most of us really want?

Otherwise, anyone can look in the rear view mirror and proclaim that cheap rates are here to stay based on 09′ on, but my mirror goes back to 1985 (please adjust to 1980 on link for historical graph):


If one doesn’t understand what drives interest rates up or down, y’know, doesn’t have a good understanding of the fundamentals of macro economics, then it really comes down to speculation. Gambling. I’ve already tried to stack the deck in our favor looking for the answers through macroeconomics but thats not a popular subject for some so I can’t reduce the risk by talking about risk persay. I can’t teach what isn’t palpable so I’ll try another approach with a story.

I try teaching the odds with numbers in the hopes that my gambling buddy sees risk that way. Otherwise, we are flying blind and the only constant I know is that interest rates are at rock bottom and have nowhere to go but up.

Let me repeat that. I walk into the mortage casino and interest rates are at substained record lows at 1% with nowhere to go but up. I’ll say it again. Interest rates are near nero with nowhere to go but up. I take one last look at history… knowingly. We walk up to the 5/10 year mortgage table to place our bets.

I again explain the rules of the house to my buddy. Its not about winning persay, other factors involved in that one such as generating income and such but this game is about minimizing losses. We either bet on 5 year terms or 10 year terms, we can’t bet on both except that 5 year terms come up for renewal every 5 years and whatever the rate is, is the rate we are stuck with.

I then explain the numbers, the anti on both bets and why there is a 1% interest difference with 5 and 10 year terms with current house rules. If rates are only 2% (lets factor in a half point for the dutch itch contingency), scratch that, 2.5% higher after 5 years a 10 year mortgage does nothing (other than getting around OSFI regs, lets not forget about those) and the bet breaks even. If rates rise by less than 2.5%, we lose to the house but its likely marginal. If rates rise by more than 2.5% over 5 years, we are better off. Thats the gamble because it is a gamble when we fly blind. At worst if we don’t go with a 5 year term, we lose 2.5% assuming that rates stay frozen for 5 years and spreads don’t widen with CMHC gone from 100% insuring mortgages, which they will.

At the worst if we don’t go with a 10 year mortgage, we could renew with mortgage rates around 10% or we decide to go variable in the hopes that it goes down and it doesn’t, it just keeps climbing. Thats it in a nutshell. Its either a 2.5% loss at the absolute most because of the higher anti with 10 year terms vs 6+% losses or more if we don’t go long and we bet on Canada becoming the second nation in the world to freeze rates at near zero for over 8 years with governments that have leaders who either by ineptitude or design, want to push gross public debt to the point of offering little for services and much in the way of taxes so that the largest health insurance providers and banks of them all can milk Canada for all its worth.

Hmmm…. who wants to gamble?

#193 Stupesing in Cabbagetown on 05.24.12 at 10:42 pm

#105 – Mike “PS: I did a little research on rates…”

Hey Mike, watch out. I believe that ING offers collateralized mortgages that Garth previously warned us are like selling your soul to the devil.

#194 Mike on 05.25.12 at 3:59 pm

Mike here again.

Wow, think I can taste a little bit of schadenfreude, lol. But thank you to all who have tried to help! :)

#101refinow and #113 wopaholic –thanks for your comments. Very helpful to know that the IRD would be significantly higher and a risk for longer with a 10 year fix. It does seem like a good way for the banks to grab cash now to get people on to 10 years. Maybe they really think a lot of people will default, break and incur the IRD fee. That seems more likely then them thinking the rates will stay low, which just didn’t make sense to me. However, a few notes just for fun: we qualified with legitimate income, and actually had 125k in family income over 12 months soon after buying. A lot has changed since then, but we are still able to afford our house cashflow wise, its just I don’t know if we would requalify based on our new circumstances. Thats why we are considering an early renewal. The 10yr fixed is under consideration only because it is so historically low and we just want to pay the least possible, since I think rates will rise. Also, because our house works well as an income property, we wouldn’t anticipate a need to sell it even if it was significantly underwater. And actually, we have a 407 credit for accidentally overpaying $43. And I like tap water rather than kool-aide.

#120 Fred –rates really are a guessing game. And I do really just need to figure out making more money again, you’re totally right.

#121 TimV –odd circumstances we find ourselves in. The little lady is burnt out from working for a startup, so in every way she needs a break from working. I’ve got a business slowly brining in some money, but I really could use stable employment too. You’re right, even if it was minimum wage and I could keep the business going on the side we would be ok, since our mortgage and line of credit are relatively small.

#126 Arshes –yeah, have to play it smart by planning for worst case. That for us is less business income than expected. Man do I need a real job.

#130 refinow –Thanks for checking on the posted rates to back up your post. I’m planning on going with ING. I just called them and their current rates are the same as their posted ones they said. But if I went with one of the big boy banks and broke my mortgage, that is a great illustration of how I’d be screwed. It does really seem they want to lure you in with super discounted rates right now, just to get your business before the market crashes and so many lose out and have to pay the IRD. Starting to see this. I just called ING and the person I spoke to said 6 months ago all she would do is variable rates, now almost every one is 7 or 10 years. Interesting.

#133 TimV –Thanks. I do think locking in is best to avoid having to requalify at a bad time for us. What type of term really becomes the next question.

#134 daystar –Have a call with someone at the bank booked for Monday to get the details on the IRD. You make some great suggestions on negotiating: I’ll see what they can do on interest rate and/or penalty and report back. Very helpful analysis on what affects rates and their timeline. Thanks!

#146 Steve –Our property being a rental does change the way we have to look at everything. You prompted me to rerun a bunch of numbers on our place, because yeah, its good to consider what its like to rent instead of owning, you have to rule that out. And I don’t want to be in denial if it is a dumb move to keep it. The short of it is: we make enough from our place that it makes sense to keep it. It costs us only a little out of pocket to stay at our house, and if we rented somewhere else and kept the property it would subsidize a large part of our rent. (But because we don’t charge ourselves rent living here, its more tax efficient for us to live here rather than rent it out and rent somewhere else ourselves.) So overall, running the numbers again definitely reinforces that keeping this house makes financial sense, perhaps ever regardless of whether it looses equity. I know, probably not a normal situation at all.

#148 Dan in Victoria –Lots of cold ones to think this through on the weekend!! :)

#153 Mike used to be in Leaside –Good thoughts. I hadn’t originally thought about seeing if they could blend something up for me. I like that possibility, thanks. Those bond rates are so low!

#161 tkid –I’ll check out that book, thanks. Even when my wife stops working we’ll be able to get by, though squeaking. We’ve set ourselves up to live fairly low cost and the rental income is stable. Its just the business income I have to worry about. I think I need to get something to complement it to hedge the risk of less revenue from it.

#162 2centsCanadian –You are right on. Wifey keeping the job until next years renewal would be the preferred option. Then we can sort out so much. But as mentioned earlier in this post, just not going to be feasible for her to do that, and I fully support her in this. That said, maybe I can get a job to get us through to next year that would allow us to renew under the new rules with it. You totally see the picture with the value of the rental income (and its been steady and increasing between tenants for over 5 years). Our dream is to live a simple life and though not McD’s, we wouldn’t mind something that pays less but allows us a slower pace of life. Ultimately we hope that is my business.

#164 Arshes –I think I know wise advice when I see it, thanks. This sounds like a good roadmap for what to do based on our current situation.

#166 Rust Belt Buster –I’ll post from a public library.

#170 Van grrl –Yeah, most people thought (and some still think) we are crazy. We spent $75k total on renos. But we borrowed it all at low rates and the return from the rental income is huge. It seems odd at first, but the numbers work.

#171 AG Sage –Thanks. Cash is already flowing thankfully. But definitely requires access to a fair bit of money to keep things flowing. Access to capital is so crucial as you say.

#173 99% –I asked this of ING, and its the case: after 5 years no IRD, for last 5 years just three months penalty.

#174 Mike Rotch –Thank you for this analysis! Less douchbaggery and more solving of world’s problems on coffee breaks! Going the blend and extend route sounds like such a perfect option. Hopefully the person I speak with Monday is capable and fair enough to sort this out.

#192 daystar –Love it! Very well put about playing the mortgage rate game and the kind of return on our house. Like the idea of storytime. Here is another little one that I find interesting…. Someone walks into a bank and puts 5% down on dirt cheap house in nowhereville. With lawyer fees, the cash outlay is $10k. He pays CMHC insurance, but rolls it into the mortgage. He does purchase plus improvements and gets refunded the money for his first renovation. Then he borrows more to renovate the rest of the place. In total, its $75k to renovate it, and it is all borrowed. In total leveraging $211 with that $10k investment. Then this guy finds quality tenants because they love his place. He moves out and lives elsewhere and rents to the place. This new landlord is in a high tax bracket, at 40%, so he has to pay dearly on his rental income. At the end of the year he does his books for the place. After all expenses, after tax and the appropriate deductions for interest and services, etc, are included, he brings in $223/month or $2678/year. On a $10k investment that is an ROI of 27%. This is our story, except we live there in a small section (valued at $700/month), and our tax rates are not 40%. This place really does have good value to us.

#193 Stupesing in Cabbagetown –I had no idea! Thank you for bringing up this collateralized mortgage at ING, and for the link. Very interesting…

#195 Cliff Kule on 05.25.12 at 4:11 pm

Please see our editorial soon to be published on http://www.cliffkule.com disputing Garth’s assertions. It will be first posted on http://www.financialsense.com within the next couple days.

Garth Turner (Canadian author of investment books, former member of Parliament, former Business Editor of TV & newspaper) has been pounding the table on his blogsite, The Greater Fool (link). He says things like “There’s a 100% chance interest rates will be going up .. to deflate demand & values and create that melt that I keep telling you will be ..”(link). He also says that six years into the U.S. real estate implosion, “it just gets worse. The lie of a nation is that Canada escaped. We won’t.”

It seems like the whole world is saying: ‘Canadian Real Estate is in a Bubble That Will Burst’. We say: ‘Perhaps, but perhaps not.’ We also say that a general consensus is generally wrong, and ‘conventional wisdom’ is an oxymoron. Our point is that there may be forces at work that aren’t being seen.

Oooh. An editorial challenging me. Tremble. Now, buzz off. — Garth