The little F bomb (part deux)

More news: OSFI creams the cash-back mortgage

Well, this is shaping up to be one miserable week for moneyless virgins everywhere. The 30-year mortgage is in its death throes (see below) and now OSFI – the bank regulatory cop – has published those new regs I told you about back in March. They require a heightened level of diligence on the part of lenders, and disallow cash-backs (bribes) as down payments. Just be glad you are not selling condos in Toronto this week. Details are published here. — Garth

Now for last night’s breaking news.  The man who turned a humming but affordable real estate market with 25-year mortgages into a bloated bubble with 40-year loans, has come full circle. His work is now done. The average family has been priced out of the average home. Horse. Barn. F. Go figure. The 30-year mortgage is finished. So is the bubble.

And more: home equity loan maximums will fall to 80% (expect more soon), while Flaherty will also announce changes to CMHC.

Minister of Finance to Make Announcement

Minister of Finance Jim Flaherty will hold a media availability on Thursday, June 21, 2012. The media availability will take place at 8:15 a.m. at the National Press Theatre (use entrance from Booth Building, 165 Sparks Street), in Ottawa.

+ + +

Antonio is 28 and still lives at home. “Sad to say I never left the nest,” he admits. Despite this tragic character flaw, he seems like a nice enough guy. Kind to puppies, I bet. And he cares for his parents, who are now An Issue.

“Garth, here is my problem. My father has worked hard his whole life for his 4 kids (me being the youngest) and my mother has been a housewife all her life. Needless to say my parents are boomers, the ones you always talk about who put the majority of their net worth into a house. My parents have little savings because of helping out their four children with post secondary education, I would go on to say they probably have a little more debt then actual savings if you don’t count in their home equity into their net worth.

“Anyway I have been pulling my hair out trying to convince my father to give up the home ownership and sell right now while home prices are high, but he refuses and says renting is for suckers and home prices don’t fall. His home is paid off, worth probably $250,000 on the market today if it fetches what the neighbors have recently sold for (Waterloo, Ontario). My advice for my father is sell the house, keep some money for retirement (he plans to work until he is 70, so 5 more years and makes about 70k gross). However he is still helping my siblings pay off their debts as well so is barely scrapping by as is, what advice can you give him so he can believe it is better to sell the house before the value comes down? He doesn’t think the value will come down. My reason being is he can then finish paying off all his debts with the money from the house sale and just pay the $1300 a month rent which is far less than the debt/taxes he is paying a month right now and have some money in the bank at the end of the day.”

First, this is not an isolated thing, by any means. A shocking number of wrinkly Boomers have ended up in the 6th or 7th decades of their lives with diddly. Worse, tons of them are in debt and will be that way after they get kicked out of their jobs.

For example, a recent bank survey found a staggering 75% of people in their fifties have a mortgage, and 51% will still be making payments after they retire. That this has never happened before should be obvious. And scary. Life-long debt has just been born. Thanks to F.

In fact the average homeowner today doesn’t expect to be mortgage-free until almost 6o years old. So clearly they have little other wealth (or they wouldn’t be making amortized payments) and that piece of real estate is their retirement plan. (Remember that 72% of people have no corporate pension coming.) So when house prices correct and fade over the coming years, they are, to put it technically, screwed.

How could this have happened? Easy. Most people have pigged out on houses, and bought beyond their means thanks to cheap credit (and F). To afford those properties they have extended amortizations (thirty years is now the norm, so tomorrow’s announcement is all the more poignant) and borrowed vastly more than the previous generation, due to grossly swollen house prices.

More significantly, real estate prices have been supported by debt, not earnings. House values have outpaced incomes but instead of buying what they could afford, people have just borrowed more. And as they pay more per month, they save less. So the savings rate has crashed from 13% twenty years ago to 2% today (it’s actually negative in BC). No savings means no ability to pay down the home loan and save massively on interest. Also, no savings means no RRSPs, no TFSAa, no investment account, no cushion. See? Screwed.

Remember Jake from a few days ago who wanted to buy in High Park, and ignited a GreaterFool Spring Revolt on this pathetic blog when I told him he was financially unworthy? Well, Boomers heading into the golden age of cornea transplants and sneeze-induced floods, carrying mortgages and owning nothing but a house, are Jake thirty years hence. It’s a really bad strategy, and yet so many people try to justify it.

You know what I mean. ‘We’re pregnant and need a house.’ ‘We’ve a toddler who wants a back yard.’  ‘The schools are better there so we have to move.’ ‘This where I grew up so my family should, too.’

Of course, what families need most (after love and a dog) is financial stability. Kids should learn what debt-free independence means. Joint savings should finance education. Parents should retire in dignity. Mortgages should get trashed. Wealth accumulated. Increasingly this is impossible in a world where real estate soars, incomes are mired, priorities are skewed, politicians encourage borrowing and financial illiteracy abounds.

So back to Antonio.

I highly doubt you’ll be able to change your father’s mind at this point (especially since you sound Italian). He’s not going to sell and rent, dude, which means you have to still try and save him from himself.

If your folks have $250,000 in equity, and some debts outstanding, it might be cheaper to get a secured LOC (prime plus a half) than carrying the consumer debt (it could be at twice the rate). That will help monthly cash flow, especially since the LOC can be serviced with interest-only payments.

A good place for the extra cash flow would be TFSAs for both your folks. If they don’t exist, up to $40,000 can be invested, and form at least the start of a retirement plan. Remind the old man that tax-free savings accounts are not supposed to have savings in them, but investments instead. A nice diversification of ETFs, across four assets classes (REITs, equities, bonds and preferreds) would work as a five-year hold.

Make sure they’ve both applied for whatever CPP is due (your mother likely has none), and don’t wait until age 65. Mostly, though, get your damn siblings’ hands out of their parents’ pockets. After puberty, all obligations are off. Parents may have a hard time not being helicopters, but grown children should try being less selfish and entitled.

Speaking of which, Antonio, move out already!


#1 the word of reason on 06.20.12 at 8:54 pm

haha who da man

#2 sam on 06.20.12 at 8:59 pm


If F murders the 30 year mortgages will this have an affect on the OSFI rulings, and what else do you expect… would it be just the 30 years mortgages?

#3 Toronto_CA on 06.20.12 at 9:03 pm

Woah. I got goosebumps. That is pretty amazing news, if it’s correct. Thanks Garth.

#4 Nemesis on 06.20.12 at 9:08 pm

…”after love and a dog.”… Hon. GT

Poetry, OldPol. I was extraordinarily lucky in that regard… Love came with two Schutzhund trained Shepherds. FantasyIsland, no less… Living in the CapitalRegionalDistrict apparently escalates the paranoia…

#5 Patiently Waiting on 06.20.12 at 9:09 pm

I hope you are right on this one. This might be the needle that we have been waiting for. Especially for BPOE.

#6 vatodeth on 06.20.12 at 9:12 pm

Garth, do you know something that hasn’t been announced yet? I can’t find anything alluding to this!

F is my bud. Tells me everything. — Garth

#7 East Van on 06.20.12 at 9:12 pm


Should those who sold at the top and plan to buy at the bottom pay cash when the time comes, or should they borrow if mortgage rates are still reasonable?

#8 Doog Noog on 06.20.12 at 9:13 pm

Wonderful post Garth – been following your blog for a long time now and finally I’m really “getting it”. Holleee – fighting such deep-set beliefs is no task for the faint of heart.

Not a shred of remorse from F. Maybe we should send him away for a 30 day psychological assessment.

#9 Keeping the Faith on 06.20.12 at 9:14 pm

Hallelujah … All praise the Garth-onian One!
Our fearless leader and star in the dark sky!!
“Blood of my blood”

#10 Retired Boomer - WI on 06.20.12 at 9:21 pm

High Priced RE and Boomer kids up to their necklines in DEBT!!!!!!

Sure, murder the 30 yr. set a 20% down standard and a 20-25 yr max amortization, perhaps even a fixed-rate scheme, and knock 100G’s off the higher priced crap ASAP. Cut it to 15 yrs and you’ll have trimmed prices back a decade in GTA. Yeah, good luck with THAT one!!

Sounds good, but elected officials have usually not been endowded with the incredible shrinking testicle syndrome!
Too Bad, as these time call for drastic measures to save the idiots from themselves. Few would try, for the long term financial health of the country. The Good News, this too, will pass.

#11 Hailey on 06.20.12 at 9:21 pm

LOL 28 and still lives with his parents. What a loser!

#12 GTA housing prices to CRASH 50% on 06.20.12 at 9:22 pm

Talking to mortgage broker who heard a rumour about F going to make an announcement but no details of what it would be. If what garth is saying is true this housing crash will be hard and fast and Toronto condos are going to lose over 50%. This house of cards is going to come crashing down. Realtors must be in a panic!

#13 50% correction predictor on 06.20.12 at 9:23 pm

F has no choice.

US Fed is hell bent to pull down a country like Canada!

#14 eviee1973 on 06.20.12 at 9:25 pm

Already on the siteht

#15 phinny on 06.20.12 at 9:26 pm

C’mon Garth, that’s old news… CBC broke the “25 year mortgage bomb” 6 minutes ago.

Actually broke here first. But who’s counting? — Garth

#16 Bo Xilai on 06.20.12 at 9:29 pm

Globe and Mail confirms it…

#17 Bandiguile on 06.20.12 at 9:32 pm

No need to wait for tomorrow, the news is out already

The federal Finance Department is moving to further tighter mortgage rules to address concerns over high Canadian household debt.

The government announced Wednesday it will reduce the maximum amortization period for a government-insured mortgage, lowering it from 30 to 25 years, and also drop the upper limit that Canadians can borrow against their home equity from 85 per cent to 80 per cent.

#18 About time on 06.20.12 at 9:33 pm

Yeah, it’s about time. Next, a hike in interest rates.

#19 Soylent Green is People on 06.20.12 at 9:33 pm


#20 Toronto_CA on 06.20.12 at 9:34 pm

Wow it is true. Closing the barn door when the horse has already left the barn, but still very welcome news. Changing the HELOC limit to 80% too, should bring it down to 65%.

The plot thickens!

#21 detalumis on 06.20.12 at 9:35 pm

They can split the CPP so that the wife receives half, that will keep her in the bottom tax bracket. These aren’t typical boomers, very few boomer women were housewives, that is more typical of the previous generation.

I also would suggest a separation with the husband paying 50 percent of his income to his spouse in support money so they are both in the bottom tax bracket, this gives them more after tax money to invest. You don’t have to move out of the family home, it’s not your fault neither one of you can afford a place on your own.

#22 pathcontrolmonk on 06.20.12 at 9:40 pm

Is this really such a big deal? It is only a couple hundred dollars a month more on a $1 mil mortgage.

#23 Chris L. on 06.20.12 at 9:40 pm

Looks like a done deal:

Did you need a dying media to tell you that? — Garth

#24 Renter from Vancouver on 06.20.12 at 9:40 pm

Got to say I would like to see that as a preamble to CHMC’s ceiling not being raised as well.

The systemic (to the tax payer through CHMC) risk caused by those with distinct lack of financial education needs to be shifted back on those profiting from the transaction – the buyer and the lender.

This will remove moral hazard from the equation and naturally re-balance the market to where it is representative of a free market.

It is also a progressive and gradual process which ensures there will not be a “collapse” or “crash” but a correction and slow continual downward trend in most markets (not all as they are all inherently local).

House prices will have to come down and find the natural equilibrium with income and savings levels for the majority, still allowing for premium markets catering for the small minority who have clear cash wealth.

This will put a huge damper in the speculation / flipping (with on or offshore money) that is rampant.

Yes a lot of expectations will have to be readjusted but then again, should they have been set on the back of the current unsustainable model?

Do you still smoke and think it is not harmful? Back in the 70’s and 80’s many did, today there is no excuse. The tobacco lobby worked very hard at keeping that gravy train moving forward (see how they are expanding marketshare in china and india). But today we’re educated enough to make an informed decision on the matter – something that is not the case in the current home buying cycle.

7 G’s of the “G8” have realized real estate is not a singular strategy and it does have a downside.

Canada is the last to learn the lesson. Just like we learned that smoking is bad for you, it will.

Having recently visited the UK, where I sold before moving to Canada, you would be hard pressed in finding a person to have the same conversations that were ripe when I first bought.

The sentiment and confidence has certainly adjusted itself and there is a clear separation of valuations between the “elite top” and middle.

Back in the 2000-2005 time frame they were connected and every million dollar cash buy by bankers, offshore wealth and high leverage mortgage had a direct effect on pricing further down the food-chain where only local middle / lower middle classes bought with increasing leverage (supported by loose lending criteria).

The same outward expressions of leveraged wealth were visible there as they are now, high end leased luxury vehicles being driven by people with no income to support them. Super high leverage mortgages in the 10X income range (despite banks touting they stuck by the 3.5X max), a plethora of cashback and teaser mortgages, savings rates plummeting at the same time leverage grew, and people who appeared super wealthy, literally living paycheck to paycheck, where most of their real income barely covered the interest payments on the mountain of debt.

Now that the rules changed (especially in the definition of “affordability”) a multimillion pound purchase at the top end is seen with incredulity and skepticism – not as an evidence of an ever increasing market.

Debt is seen as hugely risky and deleveraging is very evident. Not a depression, no crash, no revolution, but clearly the entitlement culture is dissolving and real estate is no longer seen as the ultimate investment.

If F removes the artificial stimulus from the system, it will automatically adjust to the natural sustainable balance, where risk, reward and affordability work in sync.

That sounds like a great place to be, unless you’re one of those who lives off commissions from selling homes, mortgages, cars or has signed up to the liability that will arise when values fall below your buy price.

Ask an (these are not all G8’s) American, Italian, Spaniard, Frenchman, Japanese, Irishman, Portuguese, Brit (who bought locally or holiday homes all over the place), Dutchman and all those others who bought in another country, how it all changed… Forget the gabillionaires, ask the normal people…

They you will see what will happen where it has not happened yet…

#25 neo on 06.20.12 at 9:41 pm

Hmmmmm…The plot thickens…

#26 coastal on 06.20.12 at 9:41 pm

I think I can hear the sobbing of every arrogant agent and mortgage broker on the west coast. F’em ! ;)

#27 neo on 06.20.12 at 9:46 pm

Interesting that CIBC couldn’t find a buyer for their “sub-prime” mortgage business Firstline and is just closing it all together a day before this announcement. Firstline and it’s ilk would be where desparate fools would go to in events like tomorrow to continue their reckless live beyond their means path.

#28 Spiltbongwater on 06.20.12 at 9:47 pm

Garth, do you have any thoughts about RIM jobs?

#29 Kegpeg on 06.20.12 at 9:59 pm

What does 25 year limit mean? The mortgage limit the bank could offer you just dropped by ~10%.

#30 Oldmac on 06.20.12 at 10:00 pm

I think this Antonio’s story is all too indicative of how the rest of the country ‘invests’ in its’ future. As a twenty something – I can tell you that ALL the other twenty and thirty somethings that I know have gotten somewhere between 20-100K as a downpayment on their first home from their parents. Some of the parents could afford to do so, most cannot (whether they realize that right now is another story).

The parents see it as a sound investment because somehow the housing market always climbs; and the kids are more than willing to accept the gifts. The kids don’t have any savings, still have student and other personal debt; and their incomes are overshadowed by growing living expenses (as well as being used to living high on the hog). They might also see it as a sound investment, no doubt because they’ve put the same 20 minutes into researching it as their parents. “…but they said on Global….”

The parents don’t want to have the kids struggle like they did, and the kids want everything RIGHT now so they can keep up with the Joneses. They can also show their friends and coworkers how mature and reliable they are buy getting into a 30 year mortgage with no ability to save; or have any sort of a financial cushion when things go sideways. Throw a dog or two, a new car or two, and a new baby or two in there and you’ve got the picture.

To the new homeowners it feels like instant success. “New home, new car, new kid – success!” Now just find a way to pay for this lifestyle for 30 years with increasing expenses; stagnating wages and no financial backstop. That’s where the thinking stops. You’re thought of as a ‘negative Nelly’; anti-family or just plain jealous if you’ve got any sort of criticism. (To be clear, I feel sorry for these saps).

Those of us who have the wherewithal to see ahead 10 years know that 50% of these relationships will fail regardless of any sort of financial shocks in the market. After a mortgage renewal or two when people start to suffer debt fatigue and relationship fallout; will their ‘investment’ seem as sound? I wonder how long most will be able to extend the dog and pony show.

Having financial independence, being able to question your work environment; diversifying your skill set – none of these things have a place in modern society. Such traits no longer align with hard working independent thinkers. You’re now a ‘renegade’; not considered a ‘team player’. If you express other interests outside of your specified field you’re a ‘flake’. “GET ON THE TEAM DAMMIT” is a prevailing attitude. Put yourself firmly in one category so people can have an easier time figuring you out. Preferably the same category everyone else is in.

There are a few of us youngins’ who think it’s indignant to take such a sum from parents who should be enjoying retirement and the spoils of their labors. There are some that think that an able bodied adult should be looking after their parents, not the other way around. There are a few of us who would sit down with our parents and ensure their financial future is sound before blindly accepting a large sum of money. That would be the moral, prudent thing to do.

There is no doubt there will be long term negative side effects to the financial side of the equation. What I find most disconcerting, however – is the fact that boomers aren’t doing their kids any favors in the long term. The kids haven’t learned how to take care of themselves fully, without the aid of staggering debt. They are still kids, now playing house; making kids of their own with very little sound knowledge or advice to pass on. “Be dependent” is the only mantra they know. The lack of skills, knowledge and financial prudence will become the trademark of a generation. I will of course remain largely unscathed, other than the normal societal annoyances. For my peers – I pray.

#31 Walter Safety on 06.20.12 at 10:01 pm

sneeze-induced floods,

There are worse things than 25 year mortgages.

#32 timbo on 06.20.12 at 10:01 pm

Great post tonight Garth.

If this is true flippers are f%ck$ed. Man is it going to be a bloodbath in Vancouver and Toronto…….

#33 Chaddywack on 06.20.12 at 10:06 pm

Will people with 40 year mortgages be grandfathered?

#34 Editor on 06.20.12 at 10:09 pm

Should have done this a year ago. Policy makers always have such wonderful hindsight.

#35 TurnerNation on 06.20.12 at 10:12 pm

US FED (Ben Bernanke) said in an announcement today, no rate hikes ’till 2014!!! :-(

Unless he decides otherwise. — Garth

#36 Rhaegar on 06.20.12 at 10:13 pm

Any word on if they will ever end this rediculous practice of giving cashback mortgages that effectively let people put zero down? (or negative really, as garth pointed out a while ago)

OSFI will take care of that. – Garth

#37 Frank on 06.20.12 at 10:19 pm

So now you are back on the doom wagon?

The economy will end up in far better shape than most Boomers. — Garth

#38 Pr on 06.20.12 at 10:20 pm

…The 30-year mortgage is finished.. Good lord, thank you! Its about time! I still d ont believe they will have the b…. to go back to a mortgage 25 years amortization maximum. So i will pray tonight!

#39 NFN_NLN on 06.20.12 at 10:22 pm

Garth, “Joint savings should finance education.”?

You talk about debt fueling the housing bubble but still push going into debt for an education. Housing, education, etc… everything has an ROI.

We are in as much of an education bubble as we are a housing bubble. In fact, I would say tuition costs have inflated faster than house prices. When parents start having to pay tuition then the system has failed. Do you agree?

#40 ALBERTAGUY on 06.20.12 at 10:27 pm

If the past is any guide, these rules will likely come into effect at the end of summer….a few more months of binge buying before F shuts the party down

#41 Don't Believe The Hype on 06.20.12 at 10:28 pm

This is akin to that moment in movies at 30-minute intervals where the plot thickens and shifts gear. We’re 30 minutes in and F is about to grab the microphone and the resulting sound will be a chorus of gasps and gnashing of teeth from real estate agents from coast to shining coast. The developers will exit via the back door while desperately whispering “cancel the bid contract NOW!!” into their cell phones.

Please excuse me while I fetch a bag of steamy hot, salty, buttery popcorn: this real estate melodrama is about to get VERY interesting….

#42 bubble head on 06.20.12 at 10:29 pm

Do we know when the 25 year mortgage will take effect?

#43 DJB on 06.20.12 at 10:30 pm

The side effect will be when the mortgage comes up for renewal, the renewal will not be automatic based on a 30/35 year amortization. The borrower will have to requalify for a 25 year amortized mortgage and a new appraisal will have to be ordered.

If the value is not there then what? A top up? Sell?

Very interesting move by the F

#44 DJB on 06.20.12 at 10:31 pm

BTW it looks like more 28 year olds are headed back to living with their parents in the near future.

#45 Suede on 06.20.12 at 10:31 pm

Isn’t the HELOC max already 80% LTV?

#46 Smoking Man on 06.20.12 at 10:35 pm

Tony is typical, like I have been saying all along the herd is frighted of investment pro’s, we are a nation of immigrants, the im’s only know real estate, it’s never failed them.

So of their Tech savy and informed offspring are singing to deaf ears.

School could make the kids smart investors, but their agenda is to create obedient debt slaves, rather than free thinking entrepreneurs.

My son taught me a lesson tonight how he got a customer to cancel his service and go with him for more money. The guy loved him.

You see the deal, it’s not what it cost, or the value. The win is when the customer loves you.

I taught the tin man well. Now he’s teaching me.

#47 American Werewolf in BC on 06.20.12 at 10:35 pm

I wonder if there will be a spike in sales as the fools rush in before its too late for them to qualify

#48 Market Bull on 06.20.12 at 10:36 pm

Golly-gee! I wonder how the banks will counter this.

Can you say lower mortgage interest rates.

I knew you could. You can count on it.

#49 so it begins... on 06.20.12 at 10:37 pm

lowering the amortization to 25 is like raising the interest rate almost a full percentage point.

#50 Amazed on 06.20.12 at 10:38 pm

This will be a blessing in disguise for many. They won’t be able to borrow as much. Something has got to change. The market is slowing… Soon agents will be struggling. Ducks to get the listing’s and then lose them since the homes are on the market for so long. First on the full circle hit list are the agents that have been falsely driving the market.

#51 Amazed on 06.20.12 at 10:39 pm

#47 of course the fools will rush

#52 JSS on 06.20.12 at 10:45 pm


With your advice, you’re gonna make me mortgage free before 60.

I love you.

#53 Al on 06.20.12 at 10:49 pm

28 and living at home, sure why not be a teenager forever? I have met many of these types and they are not fully mature adults, despite what they claim.
Granted for some cultures that is a norm, and I know a South American family that needs everyone to live at home to pitch in for the bills. I admire them for it.
But to comment on your siblings getting help when you are 28 and have never left Dad’s house, well that is hilarious.

#54 Toronto_CA on 06.20.12 at 10:51 pm

The only thing is, when the 35 year mortgage left us (and the 40 before that), prices continued to climb. You’d have thought that would have made prices go lower, but it didn’t. I hope going from 30 to 25 will have an impact. It should curb the condo investors because their cash flow from rentals will become much less attractive unless the prices come down to match.

#55 NotAGreaterFool on 06.20.12 at 10:52 pm

So Vancouver down 12% already and NOW rule channges from F and OSFI comming? Getting my pop corn out and will watch the carnage. Toronto up next?

#56 Ty on 06.20.12 at 10:59 pm

Does this mean people renewing 40 and 35 year amorts will have it dropped to 25?

#57 T.O. Bubble Boy on 06.20.12 at 11:02 pm

So, mortgages are bascially being reset to the “normal” rules that were in place before F and H put their phony economics training to work in 2006…

Put 2% back on the GST, and this country’s finances might look respectable again!

#58 NFN_NLN on 06.20.12 at 11:02 pm

If someone was on a 40y and was pushed into a 25y, that is a 30% increase in payments (roughly)?

#59 NAM not HAM on 06.20.12 at 11:02 pm


Why do you dedicate so much time to this pathetic blog? Do you hate F,C, & H that much?

No, I love pathetic you. — Garth

#60 Realtors in a Panic! on 06.20.12 at 11:05 pm

They(realtors and mortgage brokers) are going to try and spin the quick 10% crash as borrowers will have that much less to borrow. Once that 10% crash hits more people will sit on the sidelines and maxed out people will try to sell in a PANIC before the house of cards comes crashing down. HAM has left Vancouver and will leave Canada for 50% less USA. Unemployment will shoot higher and more people will go bankrupt. Retailers will take a hit as people feel less weathly plus many are already maxed out on debt and the HELOC is being reduced. Morgage brokers and realtors will be posting in a PANIC all night and day as the housing crash become obvious to even the dumbest people. The FED is now going to take down Canada into the housing crash. Canada will suffer a US style crash. It`s was all planned. Look out below!

#61 Observor on 06.20.12 at 11:08 pm


Our failure to launch, Antonio is puzzled that his older and wiser father is not taking his advice from the over-grown junior…

Though it must be tempting to sell and move with Monm to a one bedroom apartment (with no couch either until Antonio is saffely in his own place)…

Number 33 Chaddywack, yes of course existing 40 year or 30 year and whatever mortgages will be “grandfathered”.

F never forced anyone to take out any mortage of any sort.

People made there own beds…

Winners win and losers lose, it has ever been so and ever will be so.

#62 Mr Buyer on 06.20.12 at 11:09 pm

#48 Market Bull on 06.20.12 at 10:36 pm
Golly-gee! I wonder how the banks will counter this.

Can you say lower mortgage interest rates.

I knew you could. You can count on it.
Irrelevant, we are marching towards the crash that follows all bubbles. It does not matter what the government or the banks do at this point (I say that with a greater than 85% hot air certainty). Can not flip it and can not afford it.

#63 T.O. Bubble Boy on 06.20.12 at 11:11 pm

@ #48 Market Bull

Golly-gee! I wonder how the banks will counter this.
Can you say lower mortgage interest rates.
I knew you could. You can count on it.

… not if they want to make any money. The spreads on these mortgages are already razor thin in many cases. And, with CMHC changing the rules on securitizing prime mortgages (i.e. banks dumping mortgages off their books to meet Basel III requirements), the cheap/risk-free money is getting harder to find.

#64 John on 06.20.12 at 11:12 pm

US FED (Ben Bernanke) said in an announcement today, no rate hikes ’till 2014!!! :-(

Unless he decides otherwise. — Garth

The Fed has a lot of comedy. I love hearing about buying “programs”. They say stupid BS baffles brains nonsense like, “We’ve decided to step up our buying progam through the purchase of mortgage-backed securities”.

The Fed isn’t deciding anything at all, much less raising
rates. That option isn’t a choice….and Ben Bernanke? Just a talking head.

#65 Cory on 06.20.12 at 11:15 pm

Finally they do something right. Should have been done long ago. When does the 25 year amort come into effect? immediately? Hopefully they do nto wait since it will cause a “rush” before it happens and then we will hear nothing but how the market is going up up up again and again and again….

#66 2centsCdn on 06.20.12 at 11:15 pm

The future ain’t what it used to be : ) This is going to be exciting. I hate to say it ….. but I know three or four cocky, spend thrift (and rub it in your face) couples who are going to have their ass handed to them in the next year or two and I will bite my lip hard to not laugh.

#67 T.O. Bubble Boy on 06.20.12 at 11:17 pm

$500,000 mortgage @3% w/ 30-yr = $2103/month
$444,400 mortgage @3% w/ 25-yr = $2103/month

That’s 12.5% less mortgage dollars available.
Any questions?

#68 Dan in Victoria on 06.20.12 at 11:17 pm

Garth, here is my problem.
Sure kid, a real problem.
I’m just sitting here shaking my head, are you sure you don’t make this stuff up Garth?
Kid get out in the real world.
As for Mom and Dad I hope you kids take good care of them.
Somehow I doubt it. Prove me wrong. Please.
And by the way, I would kick your ass around the block.

#69 American Werewolf in BC on 06.20.12 at 11:18 pm

In tandem:

Fed extends ‘Twist’ program to drive rates lower

#70 Concessionman on 06.20.12 at 11:22 pm

“Speaking of which, Antonio, move out already!”

Unless he’s paying rent to them….

#71 zeeman on 06.20.12 at 11:23 pm


Will this result have any impact. Payments goes up by a couple of hundread dollas on a 400-500k mortgage.

#72 Ralph Cramdown on 06.20.12 at 11:25 pm

The side effect will be when the mortgage comes up for renewal, the renewal will not be automatic based on a 30/35 year amortization. The borrower will have to requalify for a 25 year amortized mortgage and a new appraisal will have to be ordered.

If you’ve got CMHC insurance now, it’s portable for the life of your amortization, as long as you don’t do a cash out refi.

#73 Anon - GTA on 06.20.12 at 11:26 pm

Finally F is coming off his puberty – doing something that a responsible mature adult would have done a while ago!!! Though, are these cards just his attempt to save RE from falling this summer? By putting in a date in the future when his rules come in effect, this might just trigger(once again) those last minute(get in now or never) fools to once again get in bidding wars – and pump some new life into this RE baboon(Oops balloon)?

#74 daystar on 06.20.12 at 11:26 pm

Its about time. This bubble is over. Perhaps F finally heard Carney’s warnings and pleads of the CEO of TD and anyone else with common sense. He might have even heard himself. It comes ultra late of course, but is there really such a thing as too late? We can’t use the “its too late anyway” line to keep ourselves from making the right call even though 25 year terms were the wise call to make 6 years ago… and 5… and 4… and 3… and 2… and 1 year ago and 6 months ago and 3 months ago and last week, its still wise call now but my good God. How grossly indebted we all are.

Consumers are debt exhausted. The impacts of BoC rates at 1% to stimulate spending aren’t doing much anymore. How risky is that? Our government is out of options. A click on to “no more tricks up Canada’s sleeve” to find out why:

Some folks will blame the slowdown in housing and the economy on today’s decision. It’s damage control and needed. Our economy is in better shape in the medium and long term because of it but lets not fool ourselves. The true damage to our economy was done with CMHC regulations from the father of deregulation himself, Flarhety, 6 years ago and all along because they’ve created the RE/credit bubblish mess we now find ourselves in. Readers, there is no easy way out. Recession is the way out. Our government and our banks up and decided to create a credit bubble through extreme leverage loans in real estate, an asset who’s productivity is one off and limited. We had much better choices and you should all remember that this is the case on the up and coming elections of our corporate boards and our governments. Our banks had far better bets to play. Clearly, they should not be rewarded for the decisions that were made.

I would like to thank Garth and all the blog dogs out there who spent from hours to years trying to talk horny buyers down from the impulse to buy into this market’s inevidable conclusion. We’ve helped to save people from themselves and we can be proud of that but the work is far from over. Its time to help homeowners and debt ridden souls deal with the effects of loss… because thats what is next.

This housing market would have been toast regardless with no changes if CMHC would have kept their ceiling at $600 billion. With current regs, we were 7 to 8 months away from CMHC insuring no loans at all. What this does now is buy us a year… year and a half maybe of credit that was a few short months ago a flood, to today’s stream, to tomarrow’s trickle and drops. Within a year and a half, we may not see CMHC make another loan. Think about what will do to future credit going forward. Going from 30 to 25 will not be a subtle change at these valuations but at some point the party was going to end and its better that this ends now. We simply don’t want every last greater fool! Effectively, bidding wars are over in T.O. . The bubble is over and a new age, the age of high listings and later negative equity and inevidably, forclosure… and buyer’s market has begun. We have now entered the age of correction.

Whether we know it or not, there’s an old saying out there, an old bankers saying from the grey haired leaders behind the desk that have earned the gold watch and seen boom and bust more than once from a creditors view. “In good times, banks make bad loans. In bad times, banks make good loans.” We’ve had the good times. Now we’ll learn about the bad from the good and the good from the bad. (too bad we couldn’t learn it from observations south of the line)

#75 Rich in Calgary on 06.20.12 at 11:29 pm


This may be the best news I’ve heard so far this year.

#76 Observer on 06.20.12 at 11:39 pm

Thanks Jim. I pray for a return to sanity and affordability.

#77 Not 1st on 06.20.12 at 11:42 pm

“I have been pulling my hair out trying to convince my father to give up the home ownership and sell right now while home prices are high, but he refuses and says renting is for suckers and home prices don’t fall”

I guess he hasn’t heard about the pending announcement from F. Just wait, they will.

#78 Meh on 06.20.12 at 11:46 pm

Like Antonio, I’ve been getting no where in trying to convince my boomer in-laws to cash out now. Their house has almost tripled in value to almost $900K from when they bought 14 yrs ago. It’s payed off but they have barely $100K in savings and are already retired. They too scoff at the idea of renting or even downsizing from their massive Richmond Hill home. I’m pretty sure my wife and I will somehow be paying for their short sightedness in the future.

#79 Basil Fawlty on 06.20.12 at 11:48 pm

The real estate market was starting to crater back when F and H relaxed lending policies, interest rates and CMHC. They created this bubble and this should not be forgotten.

#80 Vangrrl on 06.20.12 at 11:51 pm

#30 Oldmac:

Wow. That was a great post- thanks for the insight to your generation. Hang in there and be true to yourself!

#81 disciple on 06.20.12 at 11:53 pm

F will make this announcement on June 21, the highest holy day in the occult calendar. Coincidence? Sacrifice of house virgins?

#82 Devore on 06.20.12 at 11:56 pm


If the past is any guide, these rules will likely come into effect at the end of summer….a few more months of binge buying before F shuts the party down

The last 2 mortgage rule changes were announced and took effect during the spring market, and no doubt helped to prop it up and bring in bullish numbers.

These will be summer changes, I don’t know how much guiding the past will provide.

#83 AprilNewwest on 06.20.12 at 11:58 pm

Why are these changes always announced months before they come in to effect. Another run up in buying and pricing???

#84 Nostradamus Le Mad Vlad on 06.21.12 at 12:00 am

“Worse, tons of them are in debt and will be that way after they get kicked out of their jobs.” — Hmmm. Jobs? See links. It’s all kinda tying in together now, all planned (Kannaduhhh is on the guillotine now) — 90 mln. workers won’t be needed by 2020, less than eight years away, here and here. These also go with the preceding and 5.8 Unemployed People for every vacancy. Ratio seems out of kilter, and Slaves For Now What of NAmerica?

However, #187 American Werewolf in BC on 06.20.12 at 5:26 pm is correct with this — “In any case, Garth is right about something: liquidity is what you will want going forward.” Not only the cycle change, but plenty of other cycles are ending or new ones beginning. Going on EI, SS, CPP, OAP, GIS etc.? We can afford it — NOT!

Antonio, don’t bother trying to change your father’s attitude, ‘coz it ain’t gonna work. He is too old and set in his ways.

Instead, build up your own nest-egg by not owning, staying liquid and rent. Don’t bother with us boomers!
Wot’s a buck worth? Difference between 1913 and 2012; Kissinger pic stating the obvious, and Kissinger campaigns for Romney, so it looks as if TPTB have spoken; Spanish activists Arresting banxters? And more Icelandic banxters arrested; JPM Derivatives Prop Up US Debt Dimon won’t be touched; Retirement This is a great country to retire, esp. if one is liquid; Beating A Recession; Cutting Costs Unless one is liquid and can afford it.

China slowing; Denmark Runs on renewable energy; Germany Unless they go back to the Deutschmark; Last Days of Pompeii? China doesn’t like these; Quebec Govt. corruption? All govts. are clean! 9:25 clip Boom boom bust? Twist Of The Knife for a lethargic economy.
Mexico and Canada invited to join. Wonder if this has anything to do with the NAU – SPP? Pakistan coup? Who controls the nukes? US – Israel would be a good bet; Ideas Four steps to destroy America. A good idea is far more powerful than a bomb; Apparently, the globalists have changed their tune. GW is gonzo; Monsanto Turn that billion into a trillion and they will be gone for good; McDonald’s False advertising? And McDonald’s Quantum; Eating Disorders in women 50 – 80; Seling Dope First Portugal, then Holland now Uruguay; Underwater in more ways than one; Cold Fusion A new paradigm?
disciple — Finally! The Pineal Gland (between the eyes) is the third eye, as Hindu women show.

#85 T.O. Bubble Boy on 06.21.12 at 12:02 am

@ #70 zeeman
Will this result have any impact. Payments goes up by a couple of hundread dollas on a 400-500k mortgage.

I believe that the lower maximum mortgage amount that someone would qualify for is the bigger impact here — 11% less cash available for someone who today can get a $500k mortgage.
(I typo’ed my calculation on my previous post: $444,400 is just under 89% of $500,000)

#86 CalgaryBoy on 06.21.12 at 12:04 am

YES!!! We need housing to be more affordable for average household income! Next step is to raise the interest rates! Lets see how this unfolds!

#87 Humpty Dumpty on 06.21.12 at 12:17 am

A Nigel F Bomb….

“EC president Jose Barroso is a delusional idiot and was a supporter of Chairman Mao”

Listen. The Whole Thing’s a Giant Ponzi Scheme!”

“At the end of the day, this whole thing is going bust”

“We have been led by a group of ex-communists to a total disaster”

“What we’re doing in Brussels with Barroso, and the other joker Van Rumpoy, is we are actually rebuilding a model of centralized undemocratic government run by bureaucrats”

#88 TRT on 06.21.12 at 12:19 am

F is reading this blog!

Contrarian to Garth….just when Garth mentions population pressures and demand areas…lol

Go figure. I don’t think Garth’s ever gonna be right when F reads his blog.

#89 T.O. Bubble Boy on 06.21.12 at 12:21 am

Not sure if anyone posted Garth’s Toronto Life article yet (I do see Smoking Man as the first commenter):

Garth – interesting title for the article – did you pick that, or Toronto Life? Since my handle is now used up, I guess I’ll have to buy some overpriced Leslieville Semi to get featured in the magazine?

#90 Phil on 06.21.12 at 12:22 am

Now the only people in Van who will be able to afford a house will be rich… Ummm… How do you say without offending anyone???… Ummm.. Newcomers to the country whose contribution I greatly value…

#91 TRT on 06.21.12 at 12:22 am

Now if housing holds up in 1 years time, then it wasn’t the 40 year amort that led to the bubble.

#92 citizen of convenience on 06.21.12 at 12:24 am

Take it easy on the guy, I see most of Canada is culturally programmed to see any child over 18 as burden, likewise they see you as a burden after you are 75.
I used to get mad when some senior driver does crazy things in front of me. Now I feel sad because he or she needs to drive even at 80 to get the groceries, visit doctor etc. because no relatives will worry about them seriously. In the end, everybody get what they deserve.

#93 citizen of convenience on 06.21.12 at 12:26 am

Here we go!

#94 TRT on 06.21.12 at 12:27 am

All 40, 35, 30 year mortgages are grandfathered. 25 years only apply to first time buyers…lucky you:)

#95 Renting In The GTA on 06.21.12 at 12:28 am

Finallly……… but it should have never been raised to begin with…

#96 This is Wonderland on 06.21.12 at 12:39 am

#22 pathcontrolmonk on

Is this really such a big deal? It is only a couple hundred dollars a month more on a $1 mil mortgage.

Seriously, you’re kidding right?

#97 Loan money to anyone on 06.21.12 at 12:46 am

Thank-you F for tightening the mortgage rules.

I’m a parent of 2 kids and, as all parents know, there are many bills to pay every month with children. Families need lots of space and good neighborhoods as well. Having affordable real estate is essential for healthy families and communities.

#98 patiently waiting on 06.21.12 at 12:58 am

Saw this today – Offering a $50,000 bonus on top of the regular commission . . . this market is toast LOL . . .

Earn $50,000 BONUS! (plus full commision)
by Joe Manhas (P.R.E.C) and Onkar Bhatti

7756 Heather Street, Vancouver West

Top of the line custom built newer home for sale in popular Marpole (NO HST). This impressive home boasts modern features including air conditioning, heat recovery ventilation, steam shower, central vacuum, radiant heat, security alarm & intercom & more. Superior finishing: hazel wood hardwood flooring, granite countertops, marble flooring, spectacular fireplaces, lots of crown mouldings & upper end fixtures. Functional home with a total 7 bedrooms + den (including 3 bedroom basement suite). 5 washrooms & theatre room. Close to Churchill High School, walking distance to skytrain, community centre & Oakridge Shopping Mall. Lane way house could be built as mortgage helper (not included in purchase price).

MLS# V956996

Call Onkar Bhatti for more info:

Seller is offering $50k bonus on this property to agents*** (Subject to Court Approval)

#99 Only The Bankers Laugh on 06.21.12 at 1:01 am

All quiet on the Western front. Talked to my old hockey buddies tonight in Van City. They are seeing something scary in the air and I mention Whistler and they said it’s toast. This is from one guy who made his fortune there in Whistler and has been building in North Van for years from one house to the next. He’s done building and selling and will wait it out for a couple of years.

On 25 yr amort, I would absolutely love to track F’s real estate investments from 2006 until now and see if he cashed in on his own little bonanza and pulled out in past 2 years. Just curious. Garth, since you are great buddies, could you BBM him and find out?


#100 Michelle on 06.21.12 at 1:01 am

@ #30- OldMac

Very good summary of an inter-generational problem. I whole-heartedly agree with you!

#101 truth hammer on 06.21.12 at 1:11 am

Had the ZIRP and subsequent hyperinflation in consumer prices not kicked in a lot of retired persons would not be too bad off with $250,000 in equity. In five years this amount has been boiled down to sustenance and in another five years it will be chicken feed. If Antonio’s parents have little more than OAP & CPP they may be moving in with the kids before they see the light at the end of the tunnel.

Sadly, Garth is right…they’re screwed and should not/can not risk a sale and the rental risk at this point in their lives.

The fact is that the reason for the creation of hyperinflation of real estate assets was to juice government revenues to pay for the legacy support of the civil service contracts. Antonio can thank the unions and appointed bureaucrats for the impoverishment of his parents.

Understand that the government needed money…..they were desperate for union peace during the last election that Harper need to push him over… in the back rooms of Ottawa are dark indeed. The unions had the crap scared out of them when the precedent of contract negation had been set in BC under Gordon the Great. The Cons promised the status quo and the unions have been quiet during Harpers reign….ever wonder why?

Of course the castle is crumbling…but H & F will be sailing the Med between lucrative jobs at the UN afloat on fat pensions long before the country crumbles under an NDP voter backlash against structural reform by the forces enraged by 100% taxation…..civil war in Canada is likely within a few short years as the classes of the entitled and the debt slaves clash.

Lets face facts…..100% plus plus of major ministries such as education and health care are consumed by wages and benefits for the elites. This forces the taxpayer to borrow for capital expenses like equipment for the childrens hospital and school supplies.

BTW’s the height of cynicism for the BCTF to say that they are seeing kids come to class without proper supplies when in fact their parents cannot afford supplies due to the outrageous taxation that they are burdened with to pay for teachers salaries and pensions…..Hutzpah I think it’s called……something of a virtuous circle drawn in hell.

But the unions want the taxpayer to fund additional billions because there is not enough in the budget to provide them with added benefits… what’s the call from the union reps….”Raise Taxes”……as I said…open rebellion is possibel when food, roof and school no longer are within the reach of the average worker.

Ditto woth health care…….100% plus plus goes to fund wages and benefits…..nothing to fund improvements in the system……except higher taxation.

You see kids…..John Keynes the economist darling of the liberals said in the 40’s that if you only increased the revenue by 2% per year that the government could expand perpetually. The trouble with Keysian mathematics is that Mr Keynes and the politicians who loved the sound of an ever expanding candy box was that he and they couldn’t do simple sums. This is why debt to GDP in western economies is now over 100% . 2% x’s 50 years is 100% ….and thats where socialist economics hit the wall. Even if they government wants to raise taxes…….well darlings ….as they say…”you can’t get blood from a stone”.

Thats why they’re squeezing the last drops of blood from the seniors…homeowners, business owners, tax payers……….the crap HAS hit the fan…..and now the elite are trying to misdirect the guilt onto someone else while they run away with the perks they’ve finangled.

#102 Smartalox on 06.21.12 at 1:19 am

Wait…. I thought that OSFI was going to limit HELOCs to 60% of equity in a home. Or maybe that was 60% of value (which could equate to 80% of equity)

#103 Theworstone on 06.21.12 at 1:23 am

#11 Hailey on 06.20.12 at 9:21 pm
LOL 28 and still lives with his parents. What a loser!

That’s not the worst part… The worst one is the other OLDER siblings still in LACTANCY stage, sucking resources from their parents!

I personally know a similar situation of one old lady in my office. With a failing health, at 65, she still has to put up at work. During the last three years had used her LOC to pay more than 100K in credit cards and education loans for the two kids. Daughter, 30, dropped out of university and now is taken care of the boyfriend and 3 dogs. This “doubter” still doesn’t know what she wants to do in life, and the golden boy, 28, has changed career twice and decide to go from business school into music!

Garth, I think you need a couple of good sociology articles about what went so wrong with the boomers. What worry me now more is all the attitudes and values of the Gen-X (your Jake from last article). But my big hope hope is to be dead myself when Gen-Y (the video game generation) takes control of public and business matters.

#104 B.Anchor on 06.21.12 at 1:23 am

Note the 20% down requirement for insured mortgage. This is the real killer for flippers and first home buyers, they now need to stump up 4x as much in cold hard ready cash to get the cheap loan (insured). Do not think for a second that uninsured mortgages are going to be at record low rates as well in a softening market. Whilst bank risk managers have repeatedly demonstrated that en mass they are not that smart, once historical losses pop above zero, the mainstream banks will avoid uninsured high LTV loans. Losses go straight to equity and bite very hard. Capital allocation to uninsured loans will shrink rapidly. That leaves limited capital, for what was a core lending growth segment. Rates for such loans will drift substantially higher over time to compensate for the portfolio loss due to defaults and lower home prices. For all those complaining, better this than rampant home speculation fostered by government sponsored banks resulting in a shattered country and 25%+ unemployment (aka Spain). So all you mortgage brokers, the free ride is over, but as you shed your tears about having to once more actually work for a living, be grateful you don’t live in Spain. Better a ruined industry and modest drops in home values, than a ruined country. Welcome back to normal, please enjoy your stay.

#105 Canuck Abroad on 06.21.12 at 1:40 am

Antonio if you are not paying rent, or your share of the grocery bills and utilities, then you are part of the problem and as much of a cash drain as your siblings.

You should butt out and not tell your father what to do with his money. He earned it; it’s his. Your father’s financial mismanagement should only be an issue to you if you expect you are going to have to cover his bills when he runs out of money. On the other hand if you have been living on your parents dime for the last ten years, not contributing rent, grocery or utility money, and if your mommy is still cooking your meals and washing your clothes, then it sounds like maybe your should just suck it up and pay the bills when he runs out because you owe them.

Advice: move out. Pay your own way. You may find out without four children sucking them dry of all their cash that they will get by just fine.

#106 A in Vancouver on 06.21.12 at 1:58 am

$500,000 mortgage @3% w/ 30-yr = $2103/month
$444,400 mortgage @3% w/ 25-yr = $2103/month

That’s 12.5% less mortgage dollars available.
Any questions?

It is correct.
30 yr to 25 yr is only for the people who pay less than 20% down payment.

Is anybody know what the percentage of people who pay less than 20% down among all buyer?

Thanks a lot.

#107 DondWest on 06.21.12 at 2:05 am

If I’ll be allowed to play devil’s advocate for the peers of my generation for just a second. . .

Going along with the theme presented in this article and that of yesterday, there’s a very good reason why the majority of my generation opted with the herd and indebted themselves with real estate. Because while the cost of being a conformist is high; the cost of being a contrarian is EVEN HIGHER.

If Garth were to morph into a 20 something today, he would soon discover that being a contrarian means not having a college degree. The colleges have a way of weeding out “the rebels” rather quickly. Without a college degree, he would struggle with low wages. Maybe he could use some of that financial knowledge to avoid debt and slowly but surely build a nest egg, but he would have to work a series of very difficult jobs that wouldn’t generate much respect. His social standing would also suffer.

There’s a reason why Garth’s clients who earn 100k+ can’t think outside the box when it comes to investing. That reason is these clients have earned 100k+ by THINKING INSIDE THE BOX. Corporations reward conformity. They reward the people who collect the degrees, do as they’re told, and who embrace the corporate culture. The more you meet the manager’s checklist and get the metrics; the quicker the promotions come and the more money you make. Contrary to what the Ann Rand devotees will have you believe, modern day wealthy individuals are incredibly conformist, there’s not an innovative bone in their bodies. How can you expect these people who have made big income “playing by the rules better than everyone else” to suddenly rent and get a REIT instead of just buying a house?

I’m a contrarian and the result was simply jumping from slummy rental to slummy rental, scrimmaging cash, wrestling a series of unsatisfactory jobs since age 16, and living a nomads lifestyle with no chance at family. Being a contrarian has also made me a lot of enemies.

Yes I have 120K in cash at age 30 with no debt while my peers may be in debt up to their eye balls, but was it worth it? No. My peers have families, got college degrees, got meaningful work, and close friends, etc. I’m left with just a fiat cash pile that when given perspective doesn’t buy that much. . .

The truth of the matter is I’m the loser here who wasted away his youth; not the kid who partied throughout his 20’s and took out a million dollar mortgage. So this is why my peers buy the bloody house. . .

#108 Don on 06.21.12 at 2:06 am

@ oldmac
Dan in victoria

AMEN to both of your posts.

I can’t wait to hear this one, “Well! Nobody could have predicted this collapse, don’t feel so bad, at least you are not married to him anyone, too bad about the house, oh well… you are better off”

Sad but true.

#109 Terces on 06.21.12 at 2:10 am

#28 as I am picking myself up off the floor with tears running down and my side aching I realize you have just taken this blog to a new low. Hahahahahhah

#110 JR on 06.21.12 at 2:19 am

#30 oldmac
Great post you hit the nail on the head about the younger generation. But I would add that kids are a product of their environment. Not everyone can break away from their mold and become an independent thinker. There are large societal pressures at play here and indeed the tough road to take in the last few years has been the right one by not getting caught up in this bubble orgie.

#111 Freedom First on 06.21.12 at 2:28 am

Excellent post tonight Garth, and also, the comments have said it all. I have nothing to add, except for, “Oh Canada!”

#112 Crash Callaway on 06.21.12 at 2:41 am

Ha Ha! Since 2008 F’s been pulling raw meat out of his pocket and force feeding the house horny.
Now he’s going to order the fatted calves to step away from the banquet table.

What is it with politicians and their constant deliberate manipulation of society into chaos.

#113 Crash Callaway on 06.21.12 at 2:51 am

After taking a closer look at that F pic
Notice the conrail sign just above his shoulder?
Con em & railroad em… is this a subliminal message?

Also if you look even closer at the document the alleged individual is reading you will notice that he ran out of blue crayon and had to finish in red.
Should politicians even be allowed to carry crayons?

#114 Crash Callaway on 06.21.12 at 2:52 am

Also notice the wet spot on ground by feet.
Is he excited about what’s coming down or what!

#115 Ziggy on 06.21.12 at 3:03 am

With Home Equity Lines of Credit (HELOCs) set to fall and a negative savings rate in Vancouver, my question is how many people have been using HELOCs to bridge the funding shortfall?

#116 LB on 06.21.12 at 3:09 am


The next step is to make politicians accountable and liable in court,both nationally and internationally,for implementing policies which have caused negative ramifications for their citizens (financial and otherwise) by mispresenting the best interests of those who voted for them, in favour of other, special interests of a minority. The only recourse for this presently is through the justice systems. We are currently witnessing this in Britain, where David Cameron et al are defending themselves against accusations of representing the interests of Rupert Murdoch and his empire over the interests of the electorate. Our justice systems are the only means of recourse by which individual politicians can be made personally accountable for their actions retroactively, and this should be clearly understood by all from the outset and consistently invoked.

Another, more important, option is for us to acknowledge that our current third party representation system is outmoded, ineffective and constructed to become inevitably corrupt. It is proving to have outlived its original purpose and intent.

It is time to circumvent this system altogether and incorporate technology to go DIRECTLY to citizens for input and decisions on issues, and to allocate resources according to these results. This process has already begun and will render the current political system,along with individual politicans,as unnecessary and obsolete.

From an economical and efficiency standpoint, and to evolve a truer and more streamlined democracy, the sooner the better.

#117 Aussie Roy on 06.21.12 at 3:47 am

Aussie Headlines

THE crisis in the state’s home building industry has deepened with the commencement of new houses sinking to a 60-year low.

The number of new homes started in NSW last quarter plunged 37.4 per cent to a seasonally adjusted 5158, the Bureau of Statistics said. That is less than half the number in Victoria and significantly fewer than in Queensland, a state with about a third less populous than NSW.

New housing starts in NSW are now more than 40 per cent lower than a year ago.

Australia’s era of flipping houses in a rising market is well and truly over with the latest data showing homes are now changing hands at the slowest pace since at least 2000.

In case you missed the throw-away statement on Q&A last week, here’s what the PM had to say about negative gearing.

”We think that, you know, an abolition of negative gearing would cause distortions to the property market that we didn’t want to see.”

So there it is.

Negative gearing, a multi-billion dollar incentive scheme that encourages investors to buy housing assets but offset their losses at a cost to taxpayers, doesn’t create market distortions but actually prevents them.

Of course, holding such a view involves simultaneously ignoring all that we’ve come to know about negative gearing.

Forget the Henry Review, decades of domestic and international experience, the massive cost on the public purse and all the inconvenient evidence suggesting the policy is far more a hindrance than a help.

To get at the heart of what the PM was really saying, replace ”distortions to the property market” with ”radioactive political fallout”.

Clearly our PM is delusional.

#118 Buy? Curious? on 06.21.12 at 4:30 am

Guido’s parents are from the old country. They know what they’re doing. He doesn’t know that his parents have a stash of gold and/or cash hidden in the backyard or something. His Papa probably bought the house for under $10k in the 60’s and is doing side construction jobs for cash ever since. Does he water his driveway?

Garth, (and wannabe economists), with all due respect, I know you probably get asked this a lot by your groupies, riding up to you in their mobility scooters, but what I want to know is, how long do you intend people to rent for, “get liquid”? Rents go up over time. Landlords are a fickle bunch. They jack up the rent to “keep up with inflation”. Have you ever had to take the day off work to go to arbitration?

#119 george on 06.21.12 at 5:01 am

“The world needs a long and deep depression in order to purge itself of excess debt and the distortions, inefficiences and misallocation of capital resulting therefrom, and it is going to get it, QE and hyperinflation first or not. All the daily noise in the media about the Greek election, or any elections, or the hyped up Fed meetings and pronouncements, or what Mrs Merkel thinks and says etc is just irrelevant fluff, detail and distraction for the unthinking masses, and ultimately is not going to avert the grim outcome of this appalling mess. Not until all this debt is repudiated and the world has gotten the usurious banking system off its back, with its tentacles reaching deep into government everywhere, will the world be able to move forward again. Then at long last we will be able to hail the return of true capitalism and the free market.”

#120 Buy? Curious? on 06.21.12 at 5:04 am

Never bet against ah’Merica!

#121 Deb on 06.21.12 at 6:00 am

The changes announced by the Department of Finance will not be effective immediately. Based on the previous three reductions in amortization periods, going back to 2008, it appears that the details of yesterday’s announcement will not be effective until approximately sixty days from now. This will mean, roughly, by September 1.

Between now and then, expect a summer of considerable activity in the real estate industrial complex as the old “buy now before it’s too late” line will be trumpeted beyond belief. Those who fall for this nonsense will be crowned the greatest fools of all. After Labour Day, the OSFI announcement on CMHC changes. This goose is cooked.

#122 Keeping the Faith on 06.21.12 at 6:10 am

Hey #79 Tim on 06.18.12 at 11:50 pm

You still making stuff up?
I’m sure the 10,000% increase in house prices in Vancouver won’t even be affected by a 25 year mortgage guideline … everyone is soooooooo smart there! IDIOT!!!

How do you like me now??!?!?!?!?!?

#123 Keeping the Faith on 06.21.12 at 6:21 am

#30 Oldmac

Great post.
Well said.

#124 John on 06.21.12 at 6:43 am

Daystar wrote:

“The true damage to our economy was done with CMHC regulations from the father of deregulation himself, Flarhety, 6 years ago and all along because they’ve created the RE/credit bubblish mess we now find ourselves in.”
This isn’t true.

Your argument doesn’t rest on original causes or an understanding of systemic dynamics. Are you not aware of this? Still?

Why not build a real argument. Your post is no longer relevant. The reality you try to flesh out doesn’t exist.

#125 jshun on 06.21.12 at 6:50 am

I hope the change goes into effect immediately on the day of annoucement, otherwise another bubble will start from peope trying to get in

#126 T.O. Bubble Boy on 06.21.12 at 6:54 am

$400,000 –> $355,500
$300,000 –> $266,600
this is fun for everyone!

#127 neo on 06.21.12 at 7:07 am

May China Manufacturing PMI 7-Month Low, Sharpest Decline in New Export Orders Since March 2009.

Now how much of the decline in new export orders are a result of the implosion in Europe and how much is coming from their biggest customer, the U.S. We’ll find out soon enough when U.S. trade data becomes available.

#128 JO on 06.21.12 at 7:17 am

Finally about time. After easing rules to goose the bubble back in 2005/06, the gov’t is doing what they do best, act after the fact and ensure the ensuing market collapse accelerates.

No worries there. Many people driving the prices/market over the last 6-7 yrs are gamblers/speculators who for the most part are broke and using taxpayer subsidized debt (it is the legislated issuance of knowingly unaffordable debt really = CMHC) to borrow 10-15 to 1 and inflate prices for most of us.

Time to put them into paydown mode and for some, bankruptcy.

Don’t worry, if the housing market tanks fast and furious, these rules will likely be loosened in 2014 at the latest – just in time for the market to react and go back into bubble mode before the next Federal election.

#129 pbrasseur on 06.21.12 at 7:33 am

F’s Graal is the elusive “soft landing”

What he really wants is the borrowing to continue to sustain the market and its related activities while prices come down a bit to diminish the amounts borrowed and ultimately households debt levels.

Not sure how this can work because if prices come down, event by a small amount that would instantly kill a portion of the market, that is all recent buyers now under water would be sidelined.

Yet with the ownership rate already at a record 70% and with the new tougher rules new buyers may not be in sufficient numbers to compensate. You also have to consider maket psychology, usualy people don’t buy in a falling market…

Either way this market is in for a long tough slug and I don’t think this move is that significant, this is surely no “bubblicide” especially considering F leaves the (insane) HELOC almost intact.

#130 bigrider on 06.21.12 at 7:39 am

It’s a happy day that is for sure.

I’m surprised no comments on bank shares today. I would certainly avoid them for the forseeable future as these mortgage changes will impact profitability and loan growth( preferred’s fine but not the common)

Garth ,get ready to deal with all the new housing business beoing pulled forward, a continued hot RE market for the rest of the year, a pile of ‘your a dolt’ commentary from your board posters until the changes actually get traction.

Anyway, I for one will be doing something to celebrate today’s announcement.

#131 timbo on 06.21.12 at 7:49 am

“Madrid sold 2.2 billion euros in medium-term bonds, with demand stronger than at last month’s auction, but yields on 5-year paper rose to a 15-year high of 6.07 percent, a level regarded by analysts as unaffordable for any prolonged period.”

unaffordable is a political term for kicking the ponzi can down the road, one more time……..

“China’s factory sector shrank for an eighth straight month in June as export orders sentiment hit its weakest level since early 2009, according to a survey that indicates the country’s economic trough may extend well into the third quarter.”

Without Europe buying things they do not need China will be forced to deal with reality, unless it decides to build another 5 ghost cities to keep up demand………

#132 fancy_pants on 06.21.12 at 7:53 am

holding his down head in shame? na, that’s likely the suduko game he couldn’t wrap up during the last parliamentary session.

There. banks have filled their quota of life-long money slaves and it was time to turn down the tap again. Just enough to suppress but not completely crush. Slavery by another name. Shameful. just shameful. Is it mandatory for one to retire his sense of guilt 8 years earlier than his a$$ as a Canadian MP? just following the dots

#133 F Not Totally at Fault on 06.21.12 at 7:55 am

“And scary. Life-long debt has just been born. Thanks to F.”

As much as I know you dislike F Captain Garth, he is not totally to blame. The masses who have borrowed their brains out have overlooked the fact that even at low interest rates, the money has to be paid back. For those who knew how to take advantage of the low rates, money could be made on the low rate of interest loans they could acquire. That is the 1% mindset, not the “borrow our brains out” mentality of the conspicuous consumption crowd. In the case of Antonio’s father, the problem was and is a single income and modest one at that (it would be different if he was hauling in 100s of k a year). It was not F that caused Antonio’s problem but rather a low family income.

#134 jess on 06.21.12 at 7:56 am

Too little too late

The Jobs Act? ” or the boiler room legalization act.”

Congress’s Genius Jobs Plan—for Fraudsters, Shills, and Wall St. Analysts
by Jesse Eisinger
ProPublica, March 14, 2012, 12:14 p.m.

crowd-funding provision, which would let private companies raise money from mom-and-pop investors over the Internet. The bill loosens decades-old investor protections.
Read more:

Belfort had a motto: “No one hangs up the phone until the customer buys or dies.”

,,,”Everyone who was being thrown out of the securities industry was becoming one,” he says, his voice rising in disbelief. “Anyone could be a mortgage broker. Even me.” After the drugs and the madness, a final sobering thought from Mr Wolf.

Belfort was earning $50 million a year, once reportedly making $12 million in three minutes. In the ultimate compliment, the Mafia were sending people to Stratton on “work placements” to learn how it was done.

#135 Nonno Nicola on 06.21.12 at 8:01 am

#130 Bigga Rider

“Garth ,get ready to deal with all the new housing business beoing pulled forward, a continued hot RE market for the rest of the year..”

Hiya Bigga Rider. Firsta, I hopa you gonna be cheering on da Italiana soccer team on Sunday. Second, Nonno can tella you dat a housa not fara from where he liva in south Etobicoke droppa $150k in da lasta montha cause they no can sella da damn propertia. Da bubble, she a bursting Bigga Rider, I see it wid my own occhi.

#136 realist on 06.21.12 at 8:02 am

They changed the rules from 0-40 to 5-30 and what happened? The market has continued to move higher to obcene levels. As long as the interest rates remain low, I bet the banks and the RE industry will find a way getting around these new rules.

#137 Gypsy Kid on 06.21.12 at 8:03 am

Too little, too late…

#138 fancy_pants on 06.21.12 at 8:08 am

…ok, I suppose we can give F a sticker for implementing measures to correct the mistake even though being deserving of a detention for creating it.

Garth, is he not just a puppet to the Con. party as a whole? Is it not H really making these decisions? You would know how this political arena functions. and being a member of the F fanclub.

I’ll ask him tonight. — Garth

#139 House Horny Housewife on 06.21.12 at 8:17 am

Hey Antonio,

If you want to help your parents out, why don’t you start paying them rent ? Hopefully you are helping them out with the house expenses like food, utilities and property taxes, right ? And what in heaven’s name are your parents doing still paying off their “childrens'” debt ?! ARE YOU KIDDING ME OR SOMETHING ?!

How old are the four of you ? If your dad is 65, you must all be in your thirties or older, right ? Holy smokes, cut the umbilical cord already. Aren’t these “children” ashamed of taking money from seniors ? What the &?%$!

Not only did I work to put myself through university but in high school I had a job at the local library and bought my own clothing and stuff !! I thank my parents with all of my heart that they taught me about proper budgeting and how to take care of my finances as this has enabled me to do anything I want to do as an adult. I cannot even imagine taking money from them at this point.

Antonio, the reason your parents have no savings for retirement is glaringly obvious and it has absolutely NOTHING to do with buying their house. Heck, I would say that that is the one and only thing that will at least bring them some money back since their offspring is still sucking their bank account dry.

This absolutely INFURIATES me. When grown adults feel that their parents still owe them anything after they have fed and raised them to healthy adulthood. I sometimes have to watch my own in-laws take advantage of their parents (you wouldn’t believe some of the things I see .. and the parents simply do it out of love … or suckerdom .. or something ..). Some of my own cousins in Europe who are unmarried actually own their own apartments but sleep and eat at home. Their single mother feeds them and does their laundry ! This is utterly ridiculous (and not just the child’s fault but also the parent’s).

When you hit adulthood it is YOUR turn to help out your parents. If your hands aren’t broken then you need to go out and work just as hard as they did and then put those hands in YOUR pocket to help THEM out.

Antonio, if you are already helping out your parents with expenses and other things then good for you. If you aren’t paying a cent, then shame on you. No one gets a free ride in this world … NO ONE ! The four of you should get together and open up a bank account for your parents, fill it up with cash as a retirement nest egg and hand it to them for their 65th birthday.

What the heck kind of debt are they helping your siblings to pay off at this age anyway ? .. and please, please, please don’t tell me it’s for a house otherwise, you are telling the wrong people to sell then aren’t you ?

If all your parents want is to live in their modest little house in Windsor in peace and quiet then let them for heaven’s sake. Move out and live your own life and if your parents need help with the finances then instead of pressuring them to sell their home, it is up to you four to help out by paying them back any way that you can.

Garth, in addition to having people still paying off mortgages in their fifties and sixties (keep in mind that this is also because our lifespan has increased and many people are not retiring at the age of 65 like they used to … many healthy older people actually LIKE their jobs and retirement is no longer defined the way it used to be … but I digress), you are also forgetting that these days we are seeing a lot of 30 and 40 somethings who are still living with their parents.

Things are different in modern times and our society’s financial structure has also changed to reflect this. Looking at it through the eyes of the 1950’s is not going to foster any long lasting solutions. There is more and more pressure for retirement age to be moved to 70 or even 75 years of age because more and more people are still active and vibrant at this age, thanks to modern medicine and healthier lifestyles.

People also don’t remain in the same job for an entire lifetime anymore. Many 50 and 60 somethings end up changing careers for a variety of reasons (many times by choice) and they begin a new phase of their life at this age rather than begin to wind down. Work for some is not necessarily “work” (like my mother in law who is still teaching biochemistry to university medical students part-time at the age of 75 ! God bless her).

Oh, and there are people who are contributing to their RRSP’s and also paying a mortgage so assuming that just because someone has a mortgage they also have no savings is not quite accurate. Heck if someone can get a return of 6% from one of your ETF’s or preferred share dividend payouts and pay off their mortgage debt at a cost of 3% (in addition to say deferring their taxes with an RRSP deduction), then why not ?


#140 bigrider on 06.21.12 at 8:19 am

#135 Nonno Nicola-

Same thing around Richmond Hill, not so much price drops but sitting longer.

I look forward to the ‘housing always goes up” mentality to change

#141 AokakesuDigital on 06.21.12 at 8:24 am

I was hoping for F to tighten the thumbscrews a bit more than a 80% HELOC limit. Although I feel that the current action will wipe out the most over-leveraged flippers out there (You flippers know who you are – you who put glass tile backsplashes in new Ikea kitchens while ignoring the leaky cast iron plumbing. You who make swiss cheese of ceilings with Home Depot pot light kits while ignoring the knob & tube wiring)

With F’s mild move down against HELOCs, I feel it’ll be eight to ten months before that flipper froth gets scraped off the top of the current unreal estate market.

#142 bigrider on 06.21.12 at 8:24 am

I think the biggest rule change is the change to CMHC mortgage backing limit to homes of maximum 1million.

Maybe Leaside and High Park going to be more vulnerable to price declines than you think Garth.

Perhaps, but I don’t expect there are many high-ratio loans requiring CMHC insurance for over $1 million in those areas. We’ll see. — Garth

#143 The real Kip on 06.21.12 at 8:28 am

It sounds like the old man is going to be sorry for ever having kids. 28 and still living at home, really.

In 1973 my father kicked me out, I was 15 years old. Best thing he ever did, been standing on my own two feet ever since. Thanks dad.

#144 Ralph Cramdown on 06.21.12 at 8:29 am

New rules take effect July 9th. Mortgage brokers, start your engines! There’s still time for a quick close on a vacant condo!

#145 jess on 06.21.12 at 8:34 am


…”Luxembourg has historically offered a wide range of international and offshore services, particularly banking, fund administration, global custody services and hosting holding companies. It is the world’s second largest mutual fund market after the U.S., with over 3,700 registered funds holding €2.2 trillion euros in assets in June 2011; it is the biggest private banking centre in the Eurozone and the biggest captive reinsurance market in the European Union; and the Luxembourg stock exchange is the biggest in Europe for the listing of international bonds, with over 40 percent of the total. The landlocked country even has a shipping registry.
Banking secrecy is based most importantly on the secrecy of professional lawyer-client relationships; however other forms of secrecy are provided. Currently the Luxembourg Bankers’ Association (ABBL) is lobbying (p23) for a new private foundation regime for
philanthropic foundations that would allow founders “to access capital placed in a foundation” – a common secrecy and tax evasion facility – and to allow for the creation of trusts under Luxembourg law.
Hosting large tax-evading and other criminal assets from around the world, Luxembourg has flown under the radar, attracting far less criticism than Switzerland. Luxembourg has a well resourced lobbying network that has actively sought to undermine criticism of its role as a secrecy jurisdiction, with repeated claims that it is ‘not a tax haven’ and sometimes repressive moves against its few domestic critics. TJN’s director John Christensen has called Luxembourg the “Death Star” of financial secrecy inside Europe because of its leading role, in close political partnership with Switzerland and Austria, in fighting against information-sharing schemes in Europe….

#146 Ralph Cramdown on 06.21.12 at 8:43 am

“I just hope Canadians will reflect before they jump into the market at the high end.” — F.

#147 Canadian Watchdog on 06.21.12 at 8:47 am

I have to give credit where it’s due. Good call Garth.

Yesterday you told me I’d lost it. — Garth

#148 Smoking Man on 06.21.12 at 8:54 am

Nice F. Good move 25 ams. Now what do you all think will happen over the next 3 months with all those pre approved 30 y ams. They will panic buy with no inventory of sfh in GTA can you say. INSANE BIDDING WARS. Before the softening

#149 john on 06.21.12 at 9:02 am

#27: Firstline was not just subprime fyi. Prior to selling, I had a $400k mortgage on $200k income with a 775 credit score through firstline

#150 CrowdedElevatorfartz on 06.21.12 at 9:09 am

Antonio is a 28 year old man still living at home trying to tell his father how to manage his money????

And he’s complaining about his older siblings using Dads’ money to pay their debts?


Time to move out and cook your own meals and wash your own clothes bambino?

Pisanne, get a life .


#151 Toronto_CA on 06.21.12 at 9:13 am

Smoking man, rules take place July 9th, not over next 3 months. He is moving quick, which surprises me.

This fall is going to see the end of the bubble. Good riddance.

#152 timbo on 06.21.12 at 9:14 am

“Retail sales declined 0.5% to $38.9 billion in April, more than offsetting the gain in March. Lower sales were reported in 8 of 11 subsectors, representing 78% of retail sales. ”

What? Canadians are tapped out?…………

“Unemployment: The number of job losses in the U.S. chronicled in this stunning image”

That is breathtaking……….

#153 Ralph Cramdown on 06.21.12 at 9:15 am

Now what do you all think will happen over the next 3 months with all those pre approved 30 y ams.

People will discover that they’re not worth the paper they’re written on? If you haven’t paid the CMHC premium, you’re not insured, so if you don’t have 20%, or can’t close by July 9th, no money for you!

#154 lilyflor on 06.21.12 at 9:17 am

what does it mean for the Vancouver market (and Toronto as well) that the CHMC will no longer insure mortgages over $1m? there are over 3,500 homes for sale over $1m in Vancouver (greater area?). is this going to be a problem?

#155 Peter Goesinya on 06.21.12 at 9:19 am

“#28 Spiltbongwater on 06.20.12 at 9:47 pm

Garth, do you have any thoughts about RIM jobs?”


#156 Canadian Watchdog on 06.21.12 at 9:19 am

“Yesterday you told me I’d lost it. — Garth”

That was regarding what I stated. This is just the beginning.

#157 Ralph Cramdown on 06.21.12 at 9:21 am

I stand corrected:

“The new measures will apply as of July 9, 2012. Exceptions will be made to satisfy a binding purchase and sale, financing or refinancing agreement where a mortgage insurance application has been made before July 9, 2012. While the changes come into force on July 9, 2012, any mortgage insurance applications received after June 21, 2012 and before July 9, 2012 that do not conform to the measures announced today must be funded by December 31, 2012.”

Looks like a lot of agents will be working on the long weekend, poor sods. Let’s take a moment to be empathetic.

#158 Andrew Toronto on 06.21.12 at 9:31 am

I don’t think this move will do much, most that have a home with 35yr ART or 30yrs are locked in for 5yrs , only say first time homebuyers might feel it more .. but I I bet the banks will somehow work something out for the first time home buyer . worst case they wait a few more months to have a bigger downpayment to make the numbers work..

by the way it didn’t help when it went from 35yrs to 30yrs.. so why is everybody so excited this time round ?

#159 john on 06.21.12 at 9:35 am

So are people who have 30-year am mortgages pre-approved but with no closed deals going to have it pulled out from under them? I sold in late may and agreed to an august 1 close… If my buyer is stretching themself and using a 30-year, will she still have the mortgage come Aug 1 if she was pre-approved then??

#160 Ret on 06.21.12 at 9:37 am

Antonio, tenant or clingon? That is the question.

At 60 yo, some of my high school buds are still at home contributing zippo to their parent’s finances or household. They sleep, alone I might add, in the same room that they have had since coming home from the hospital. Amazing.

Hopefully Antonio is contributing cash, cutting the grass, washing Pop’s car, doing some painting etc. to help his parents out.

#161 neo on 06.21.12 at 9:41 am

#142bigrider on 06.21.12 at 8:24 am
I think the biggest rule change is the change to CMHC mortgage backing limit to homes of maximum 1million.

Maybe Leaside and High Park going to be more vulnerable to price declines than you think Garth.

Perhaps, but I don’t expect there are many high-ratio loans requiring CMHC insurance for over $1 million in those areas. We’ll see. — Garth


The effect on the 416 for the million dollar cap remains to be seen. But Vancouver is officially toast. A million is still to high but it’s a start. That change is a bigger deal than the 30 to 25 year rule change. Two other notes. It starts on July 9th instead of three months down the road so F isn’t giving those greater fools aa chance to ramp this market up furthur in the meantime. Second, having the the debt service ratio at 39% to a maximum of 44% won’t grab the headlines. That that reduction in the ability to leverage along with the other moves is going to stick a pin in this bubble. F is hoping for a soft landing. Problem is the global economy is slowing so this isn’t happening in a period of economic strength. Once confidence starts to wane along with prices it will feed on itself.

#162 Steven Rowlandson on 06.21.12 at 9:44 am

I seriously doubt that dropping 30 year mortgages will make real estate affordable. If they did a 90% roll back on prices that would help but short of that you will not see affordable housing in Canada any where near a job that is fit to live in and not even a glorified garden shed.
Glorified garden sheds are too small , too expensive and probably lack the amenities needed to make them fit to live in. The lack of space would drive anyone cuckoo.

#163 Realtors in a Panic! on 06.21.12 at 9:46 am

Smokingman there will be no bidding wars and watching the news last night you have realtors already making excusses as to why the GTA market has stalled. The excuss given was land transfer tax. The housing in the GTA is going down and the 25 year mortgages will make it that much worse. The TOP has been hit and nothing but down hill. Sorry realtor smokingman.

#164 Toronto S on 06.21.12 at 9:48 am

I decided to play with RBC’s mortgage affordability calculatory today. While today’s changes are not reflected in it yet, some previous changes from the past year are. Despite my annual income growing $13K over the past year, the amount of money they’d lend me has almost dropped 100K. I can barely afford a 2 bedroom downtown condo at this rate, despite making almost $100K/year. Jeezus – if I need a real estate crash, then the “average” household definitely needs one.

#165 john on 06.21.12 at 9:52 am

#157- woo hoo. That answers my question. I have no idea how my buyer is funding her mortgage but unless she decides to forgo her deposit, her mortgage is there on closing day!

#166 T.O. Bubble Boy on 06.21.12 at 9:56 am

@ #124 John:

This isn’t true.

Your argument doesn’t rest on original causes or an understanding of systemic dynamics. Are you not aware of this? Still?

Why not build a real argument. Your post is no longer relevant. The reality you try to flesh out doesn’t exist.

Are you trying to argue that keeping mortgage at a max of 25-yr amortizations in 2006 wouldn’t have avoided some of the bubble conditions that exist today?

If “Mr. Prudent” F had instead tightened the rules in 2006 (say to 10% down instead of 0% and to 20-yr instead of 40-yr), and put caps on the maximum mortgage amount (as is done in many other countries) this wouldn’t have kept the market more stable?

Near-zero interest rates (which I agree didn’t come from F directly) COMBINED with lax lending standards (set by F) COMBINED with Government guarantees on the mortgages (set by F via CMHC and backing of Genworth etc.) COMBINED with the “Economic Action Plan” that encouraged HELOC and Mortgage Debt (created by F and Harper) COMBINED with lack of foreign investment rules for HAM money (F and Harper again) COMBINED with the general herd mentality of the population made this all happen.

So – please explain why you would suggest that the current situation was not tied to the decisions of our elfish Finance Minister?

#167 Dom on 06.21.12 at 10:00 am

#66 T.O. Bubble Boy on 06.20.12 at 11:17 pm $500,000 mortgage @3% w/ 30-yr = $2103/month
$444,400 mortgage @3% w/ 25-yr = $2103/month

That’s 12.5% less mortgage dollars available.
Any questions?

Talked to my mortgage buddy and yes the drop will be a fast 12.5-15% drop in RE prices . Buddy seems more worried about the HELOC being reduced since they do alot of those type loans.

#168 Nonno Nicola on 06.21.12 at 10:01 am

#140 Bigga Rider

Da housa I am referring to in south Etobicoke is 5 minutes from da subawaya. Da casa in Richmond Hilla, dey no on da subawaya at dis tima. If a housa dat is 5 minutes from da subawaya go downa 150k in only one montha, Richmond Hilla buyers are completely cuckoosky iffa dey buya anywhera neara da asking prica. BTW(dat stands for Bring Tonino Wid da booka)Tonino is reading me da newest booka by Jack Schwager. It is called Hedge Fund Market Wizards. Tonino he is a getting sicka from all dis reading for Nonno but I keepa telling hima, I only wenta to da Grada 5 and he is already in da Grada 6.

#169 Rich Renter on 06.21.12 at 10:03 am

“F” you reap what you sow.
The horse left the stable along time ago.

#170 People will borrow until they are bankrupt on 06.21.12 at 10:07 am

“Retail sales declined 0.5% to $38.9 billion in April, more than offsetting the gain in March. Lower sales were reported in 8 of 11 subsectors, representing 78% of retail sales. ”

What? Canadians are tapped out?…………

Canadians are so maxed out on debt. Many will have to sell their overvalued homes to pay it off or go bankrupt. The housing ponzi is going to come crashing down.

#171 Daisy Mae on 06.21.12 at 10:10 am

Well, well, well….I’ve just read the news.

Congratulations, Garth! You were right all along….as usual.

Damn this government. Be glad you’re no longer a part of it.

This is YOUR day! I’m delighted for you.

It’s sad that so many have and will suffer because of the ‘cons’ stupidity, however. (They don’t even deserve caps…)

#172 Nonno Nicola on 06.21.12 at 10:12 am

I tinka Antonio is a Portugese. There are lotsa Portuguese in Kitcherer/Waterloo, not many Italiano. Either waya, you needa to getta outa da casa Antonio. You are 28 yeara olda. Nonno already had a famiglia and a housa almosta paid offa at dat age!

#173 CalgaryRocks on 06.21.12 at 10:14 am

Antonio’s dad should stop his kids from mooching off of him. The youngest is 28 for God’s sake.

Antonio is a 28 year old living with his parents. I am going to go on a limb here and assume he is neither paying market rent nor doing his own laundry, cooking, etc…

His OLDER siblings are still taking their dad’s money to pay off THEIR debts. Great little family we have here.

Yes, for sure Antonio, your dad should sell his one and only Asset so that he can pay off your guys’ debts. For sure. That’s the answer.

How about you 4 losers get together and figure out how to pay off your dads debts instead?

#174 rosie on 06.21.12 at 10:22 am

Interesting Toronto Life article Garth. Your company might be in for a lot of investor interest after todays announcement and the pending ruin faced my so many. Mind you, the readers of Toronto Life are the Greater Fools about to be ruined, but you never know.

#175 Canadian Watchdog on 06.21.12 at 10:22 am

I think I just seen Market Bull’s properties get listed on MLS.

#176 Bond junkie on 06.21.12 at 10:28 am

Flaherty to the rescue… 1MM $ cap is suuuuuuuper BAD news for High Park and Leaside. There are some very highly levered players in those neighbourhoods Garth, trust me on that. Rosedale, not so much. Personally, I can’t be happier about this news. Still keeps my place bid since it’s comfortably inside a million and now makes the 1-1.5MM out of reach for jonny ave. so no more insane bidding wars when it’s time to trade up in a couple years. OHHHHHHHHH YA, come to papa.

#177 Dorothy on 06.21.12 at 10:31 am

F isn’t doing this to deflate the housing bubble, he’s doing it because he knows the bubble is going to deflate anyway and he’s trying to protect the banks bottom line.

The fact that he’s lowering the max one can borrow against equity tells me that he’s anticipating a drop in price that’s more than 15% but less than 20% in the bubbliest markets (Toronto, Vancouver, and possibly Saskatoon). While such a drop is bound to have an emotional impact on housing markets across the country, at least in the short term, I suspect that those markets with least bubble like prices now will soon recover, as their initial drop will simply be an emotional reaction to what is happening in the larger centres. Once people get over the shock, and fundamentals kick in, those more reasonably priced markets should stabilize.

As for the return to the 25 year Amortization, while this will make housing a little less affordable for those who probably shouldn’t be getting into the housing market in the first place, it won’t have an impact on the rest of us. Again, I don’t think F is doing this to prick the bubble, I think he’s doing it because he knows the bubble is already deflating so, with lower prices and low interest rates, the reason he increased amortizations in the first place no longer exists.

Anyone who lives outside of the larger, more “bubbly” centres has known for a while that RE prices are on the way down. Not crashing, as some would like, but definitely softening. It’s been going on in my ‘hood for over 2 years now. And anyone who’s been around as long as I have, knows that this is a normal part of the RE cycle – what goes up will eventually come down.

I’m 56 and this is the second such drop that I’ve seen since I turned 20, only the one I saw in the 80’s was a much bigger and faster and unexpected drop than what I’ve seen so far this time. The biggest difference this time is that because RE had such a good run up for such a long period, there are young people around today who didn’t realize such price drops are inevitable at some point. Whereas we older folks know better, having already lived through such scenarios. And if we didn’t know any better, then we SHOULD have, because history always repeats itself at some point.

And it is BECAUSE history always repeats itself that people don’t need to panic about the inevitable price correction. Because while it is true that what goes up will eventually come down again, the reverse is also true. So don’t sell out at the bottom if the market has already fallen in your area. Sit tight and wait. The only people this price correction will affect are those who HAVE to sell for some reason, and those who are unable to meet their debt obligation when interest rates rise. But it looks as though higher interest rates are not going to be an issue for at least another two years.

So my advice is, if you don’t HAVE to sell into a falling market, then don’t.

#178 The American on 06.21.12 at 10:35 am

At #16: 50% Correction Predictor, come on now. You can’t blame the U.S. FED on the Canadian housing bubblr and melt (or is it going to be a crash now?). Canadians did this to themselves. Nobody forced Canadians to issue “emergency rates” back in ’08, for Canadians to become house horny, for Canadians to run up record amounts of household debt, for Canadians to pay little to nothing down on artificially inflated asset values, for Canadians to take out 5-year money on rates which will eventually reset higher. Well, actually it was fueled by the Bank of Canada, Canadians’ “we’re different” attitudes, and Canadian programming like HGTV and the CBC. Take a little responsibility for yourselves, would you?

#179 The American on 06.21.12 at 10:39 am

At #28: Spiltbongwater, I have some thoughts about RIM jobs, but I thinks it is best reserved for a completely different forum and blog site.

#180 bigrider on 06.21.12 at 10:46 am

#142 Garth to Bigrider- On the issue of CMHC insured loans over a million in Leaside and High Park.

I know of two households personally in Leaside that have mortgages of north of 500k on homes worth over a million.

Now, they are not CMHC insured, nor are these households in anyway over-leveraged and I know they would have the ability to withstand both a shock to interest rates or household valuation ,but my point is the need for these people to be in the ‘toniest area’ has caused these individuals to bet heavily on the RE market as a percentage of their household net worth.

These two households are certainly not following the “90 minus your age rule” for exposure to RE.

Although my anecdotal information is by no means
statistically relevent to broad brush an entire area, I would bet that there are some really big mortgages in Leaside and High Park ,as those individuals there try to be in the “elite’ crowd. I would take a side bet, that recent buyers to the area has looked at CMHC as a way to get in and that the rule changes will cause new buyers to mitigate, thankfully.

#181 Doug in London on 06.21.12 at 10:53 am

So the question that deserves to be asked is, why did F wait so long to change the rules in order to keep the bubble under control? Isn’t that like locking the gate after all the cattle have escaped?

#182 edmonton mortgage broker on 06.21.12 at 10:57 am

no time to comment….too busy sending in mortgage apps for the greatest fools. ugggh, getting cramps in my fingers. it’s hard out here for a pimp.

#183 Alex n calgary on 06.21.12 at 10:57 am

Thanks for sticking with us Garth, means a lot to a lot of us!
Over for dinner last night with one of our fav couple friends, usually people who look at us with sadly as we’re renters, it doesn’t affect me, but these guys, well it hurts!

They thought we were not planning on staying in Calgary as we hadn’t bought yet, couldn’t figure out why we hadn’t bought a house…who can blame them, lots of people over the last 5yrs making this big paper gains.

Things are already looking depressed, things are gonna get fiesty real soon.

#184 Mr. Lahey, Sunnyvale Trailer Park Supervisor on 06.21.12 at 10:57 am

#107 DonDWest

“Without a college degree, he would struggle with low wages.”

There is such a thing in Canada as skilled labour, that does not require a college degree. I have a friend who quite high school in grade 10, became an electrician, started his own company and now has over 100 employees. Many overlook the skilled trades and even look down upon them in this fair land. We need to rethink this mentality many of us have. Now if only Ricky could parlay his grade 10 into a successful company…

#185 Brian on 06.21.12 at 11:00 am

The move from 30 to 25 has a much greater impact on affordablility then moves from 40-35, or 35-30. Each of those moves increased monthly mortgage payments by 6.75% and 8.6% respectively on an equivilent amount. The move from 30 to 25 is much more significant, increasing payments by a whooping 11.5% per month.

Working all the back from 40 year amortizations to 25 today, represents an increase of 29% per month! This market is going down…that is, unless, rich parents are willing to give their kids a larger downpayment.

#186 coastal on 06.21.12 at 11:05 am

Looks like F’s mortgage rules change and new OFSI changes is considered NOT news in Victoria. The local crap rag the TC has it nowhere on it’s website, don’t want the local dummies to worry it will actually kill their over borrowing capacity would we.

In the Land of the Fairy Dust, the TC once again shows it’s bias to the real estate industry and whose paying their wages.

#187 poiuy on 06.21.12 at 11:09 am

F increased the debt service ratio. from 32 to 39 for GDS and from 40 to 44 for TDS. This may cancel out effect of the amortization term reduction.

#188 In Garth Not God, Flahery, Harper We Trust on 06.21.12 at 11:10 am

#58 Ham not Nam

“Why do you dedicate so much time to this pathetic blog? Do you hate F,C, & H that much?”

Are you friggin serious dude??? The bearded mystic oracle, all knowing, all wise, all seeing, reader of financial tea leaves, financial prognosticator without equal, main speaker at the FASTPGFBDCParty and future main speaker at the SASTPGFBDCParty, denouncer of parliamentarian peckerheads and peckerettes, former minister of national revenues, New York Times bestselling author, lone voice of financial reason in the HELOC infested wasteland of Canada is the modern day prophet warning the masses of the impending bubble bursting financial cataclysm that is going to befall this great nation! Does that answer your question? Sheeeesh!!

#189 Willa on 06.21.12 at 11:18 am

You said that since so many people in the 50s still have a mortgage, that means they have little other wealth.

Not so. Why pay off a mortgage at 2.5% when we can invest it? We are deliberately not paying off our mortgage (7 years left, we are 49 and 50, it’s our first house and only mortgage) BECAUSE we’re investing.

We have $750G in non-house investments (earning 5-7%), and only $55G left on our house (subtracting 2.5%). We have no debt, but also no pension and two kids heading to university soon.

If my friends are any indication, it’s the people who have rushed to pay off their mortgage, putting every dime into their house, who have nothing else.

Why not pay off the amortized mortgage then borrow back the funds at simple interest, which is fully tax-deductible? You are not thinking this through. — Garth

#190 Buy? Curious? on 06.21.12 at 11:22 am

UK Banks are failing!

#191 vic_guy on 06.21.12 at 11:24 am

The impact of going from 30-25 is bigger than 35-30 and will affect 40% of mortgages :

Robert Kavcic, economist, BMO Capital Markets

The reduction to a 25-year from 30-year period is equivalent to about a 0.9 ppt mortgage rate increase (assuming a 3.3% 5-year fixed rate and a $290k mortgage after 20% down on an average-priced $363k home). Notably, the impact is bigger than the switch from 35- to 30-year mortgages, which at current mortgage rates, would be equivalent to about 0.6 ppts of tightening. It’s also important to keep in mind that the amortization change won’t impact affordability across the entire market, but rather those that would be taking a 30-year amortization—according to the Canadian Association of Accredited Mortgage Professionals, that made up 40% of mortgages for purchase during 2011/12 (up to May).

#192 Daniel on 06.21.12 at 11:28 am

Wow – these changes are going to have an effect.

Particularly no CMHC over 1 million. This will have a ripple effect. Although not a lot of houses over 1 million have CMHC (I’m guessing), if even 30% do, that’s a 30% decrease in sales.

30% decrease in sales will lead to price declines and you can bet houses that would have been priced at 1,050,000 will now be 998. So a house that was 998 is not 949, etc.

Plus the 25 year mortgages will have an effect, probably only 5- 10%, on a good day. But with everything else this could be the catalyst for the 15 – 20% decline (or more) across Canada.

#193 mousey on 06.21.12 at 11:34 am

Was speaking to a seasoned real estate agent specializing in Maple Ridge commercial and residential properties. I asked about the recent spring market. She said there wasn’t one. I asked how properties were moving for her and she said they weren’t. I asked why the informaiton from the real estate board was that we had a balanced market and she said that the board was mainly agents, what did I expect. There you have it.

#194 45north on 06.21.12 at 11:41 am

Renter from Vancouver: It is a progressive and gradual process which ensures there will not be a “collapse” but a correction

I would say that it supports a gradual process which is the best I could hope for.

#195 25 yr vs 40 yr amortization on 06.21.12 at 11:43 am

So, what happens now to people renewing their 40 yr amortization?

Will they be forced to renew at 25 yr?

If not–they should be.

#196 Questioning RE in Calgary on 06.21.12 at 11:44 am

I believe Garth has quoted 7% as the average down payment these days and 9/10 mortgages need CMHC insurance (less than 20% down).

Found this interesting: Fannie Mae and Freddie Mac were leveraged about 35:1 when the meltdown began down south. CMHC is leveraged about 50:1. Tell that to people at the water cooler to stir up some sh*t! Haha, are banking system is so much more responsible.

#197 ANONYMOUS on 06.21.12 at 11:49 am

(Thank God)

#198 Jim on 06.21.12 at 11:52 am

So that’s how those annoying Italian guys afford their 300 series BMWs with chrome rims and fancy shoes… they live at home until they are 36.

#199 Dave on 06.21.12 at 12:09 pm

Great news…. and about time!! I can see the realtors shaking already.

#200 Canadian Watchdog on 06.21.12 at 12:14 pm

Financing the Global Transition by Mark Carny

“Austerity is a necessary condition for rebalancing, but it is seldom sufficient. There are really only three options to reduce debt: restructuring, inflation and growth.

Whether we like it or not, debt restructuring may happen. If it is to be done, it is best done quickly, and on a sufficient scale to restore sustainability. Policy-makers need to be careful about delaying the inevitable and merely funding the private exit.”

Get ready.

#201 LuckyRenter on 06.21.12 at 12:22 pm

Going from 30 to 25 years amortization is equal to 0.9 interest rate increase.
Welcome to ” we are not different here”!!

#202 Blue Monster Lover of Meats and Vegetables on 06.21.12 at 12:29 pm

#100 truth hammer on 06.21.12 at 1:11 am

I couldn’t agree more!

And on the news last night there was a study done on the number of sick days taken in the public sector, it think it was federal, they get 15 sick days a year plus 3 more for long term disability. It’s said that on any given day there are move people off from work sick than there are working at Ford and GM combined!

The worse thing that’s not reported is that the days they are at work they don’t do anything then either!

Canada’s doomed.

#203 Keswickian on 06.21.12 at 12:32 pm

Vince Gaetano, a principal at Monster Mortgage, applauded the new rules and expects it will cut back on bidding wars on the high end because people who go over $1-million will not be able to get insurance.

He added that new rules on the maximum gross debt service ratio to be set at 39% will hamper how large a mortgage a consumer can get. It was 44%.

“What does it mean in real dollars? If I had a client with $100,000 household income, I can no longer use 44%, that’s five grand. In mortgage amount, based on 3.19%, that’s about $90,000 less mortgage they can get,” said Mr. Gaetano.

#204 Fabrega on 06.21.12 at 12:35 pm

“The middle class has a gut feeling they are being screwed by somebody, they just can’t figure out who to blame. The ultra-wealthy elite keep up an endless cacophony of propaganda and misinformation designed to confuse an increasingly uneducated and willfully ignorant public while blurring the facts for those educated few capable of understanding the truth. They have been able to keep the masses dumbed down through government run education; distracted by sports, reality TV, Facebook, internet porn, and igadgets; lured by mass media messages of materialism; and shackled with the chains of debt used to acquire the goods sold by mega-corporations. We’ve become a society oppressed by a small faction of ultra-wealthy masters served by millions of impoverished, uneducated, sedated slaves. But the slaves are getting restless and angry. The illegally generated wealth disparity chasm is growing so large that even the ideologue talking head representatives of the elite are having difficulty spinning it. Even uneducated rubes understand when they are getting pissed on.”

The Burning Platform

#205 Fabrega on 06.21.12 at 12:36 pm

It is too late. The damage has been done.

#206 Suede on 06.21.12 at 12:39 pm

OSFI newly published guidelines:

#207 Observor on 06.21.12 at 12:41 pm


Don’t count a drop in house prices as a done deal.

Interest rates have continued to fall which may offset this latest news.

Houses may plop and they may not.

The market, like the Lord (except it’s more powerful … and it actually, you know, exists) works in mysterious ways.

In any event it is all in the category of entertainment for me.

#208 coastal on 06.21.12 at 12:49 pm

Had to laugh at the BNN guest who said unlike Americans, that Canadians will “rob the bank to pay their mortgage” and not walk away. This guy is clueless to today’s youth who have helped fuel the last 7 years of this bubble.

The youth today who have little skin in the game are a product of our “throw away” society where they hopscotch cell phone companies and other consumer items and don’t care if they rack up bad credit. Some will be credit worthy but most won’t live up to the pressure and once marriages fail it’s game over. Bankruptcies are about to sky rocket and it’s not like it wasn’t predicted by many here. F was so late to the game it’s a joke.

#209 Al on 06.21.12 at 1:02 pm

Just got an email from a Mortgage Broker saying finance now before F’s changes take effect !

#210 Dorothy on 06.21.12 at 1:04 pm

I get a kick out of all the fuss over the reduction in GDS and TDS rates, because even WITH this most recent reduction the percentages are still much higher than they were when I was young.
30 years ago Gross Debt Service Ratio (Principle, Interest and Property Taxes divided by Income) was around 32% and Total Debt Service Ratio (PIT plus the total of all loan payments divided by Income) was around 37%.
Ditto for downpayments and amortizations. Back then, one had to have a minimum of 10% for a CMHC insured mortgage, and it was against the rules for banks to lend you any of that downpayment. And the maximum amortization was 25 years.
Despite all that, the world did not come to an end as we know it, and life continued on. That was true then, and it will still be true now. Tightening the rules and returning to a more prudent environment is a good thing, not a problem. For those just entering the housing market, it means homes will become more affordable and the financial strain will lessen. For those already in the housing market it means nothing, unless you have to sell. And for those who are selling one house to buy another, if we assume the new house has dropped as much as the one you are currently selling, it is simply a “wash”. The ONLY people who will be negatively impacted by these recent changes are the flippers, the speculators, and those who can’t really afford to be in the housing market in the first place.

#211 gentleInvestor on 06.21.12 at 1:06 pm

If F. just dropped to 25 years from 30 the effect probably would have been small.

The $1 million limit is the key. Why? It DESTROYS Vancouver. Vancouver will be all over the news. People across the country will get cold feet, emotion will reign, market is toast, bubble pops.

Watch it.

#212 Junius on 06.21.12 at 1:06 pm

#200 Canadian Watchdog,

You said, “Whether we like it or not, debt restructuring may happen.”

I have said for a long time that it is inevitable. Countries such as Greece, Spain and Italy should go the way of Iceland immediately.

The banks and their bondholders should be taking a massive hit as they bear a huge portion of responsibility for the financial crisis and our current malaise.

I don’t see why we would not “like” it. Instead of socializing the losses through bail-outs we need some serious write-downs on a global scale or there will never be growth.

#213 Jaydee on 06.21.12 at 1:10 pm

#30 Oldmac
Couldn’t have said it better myself.

#214 Junius on 06.21.12 at 1:10 pm

#178 The American,

Well said. As F tries to make himself appear “conservative and responsible” the reality is that he is the one who opened the barn door 4 years ago. All he is doing now is returning the system to where it was before he started tinkering with it then.

This was such an irresponsible and calculated move on his part. It makes me ill to see him now act like he is being prudent.

#215 truth hammer on 06.21.12 at 1:13 pm

The F Bomb turns out to be a little lady fart………and accomplishes nothing of any substance….we still have 5% down…so whats the effect?

#216 TRT on 06.21.12 at 1:13 pm


If Jane were to buy one of the following after July 9th, on which would she get a better, if any, interest rate on a 5 year term?

$1.1 million house, 21% down.


$600,000 house, 5% down.

#217 TRT on 06.21.12 at 1:15 pm

Based on the above…could HAM lood the sub- $1 million dollar maket?? a possibility!

#218 tkid on 06.21.12 at 1:16 pm

Firstline news …

#219 Aussie Roy on 06.21.12 at 1:17 pm

Prof Steve Keen

Upcoming talks in Toronto

I’m currently at the Fields Institute in Toronto, working with mathematicians here to develop my monetary models. I am taking part in some “no maths barred” seminars every Tuesday:

But I will also give two rather more accessible talks while here. The first is on the private debt bubble and its implications for Canada:

The Continuing Debt Bubble: What It Could Mean for Canada

Please join the Canadian Centre for Policy Alternatives’ Ontario team for an evening of wine, cheese and cutting-edge analysis about the risks in Canada and worldwide from the continued expansion of debt – featuring renowned Australian economist Steve Keen.

The Continuing Debt Bubble: What It Could Mean for Canada

Thursday, June 28, 2012

7:00-9:00 pm

The Arts and Letters Club

14 Elm Street, Toronto ON

Sponsored by the Canadian Centre for Policy Alternatives’ Ontario office, the Progressive Economics Forum, and Ryerson University’s Department of Politics and Public Administration

The second is a talk on the global crisis:

Why the crisis is not over

July 5, 2012 at 5 p.m

Garth, hope you don’t mind me giving Steve Keen a plug.

#220 Blue Monster Lover of Meats and Vegetables on 06.21.12 at 1:19 pm

Contrary to what the Ann Rand devotees will have you believe, modern day wealthy individuals are incredibly conformist, there’s not an innovative bone in their bodies.
Whoa, hey! You got that wrong, Ayn Rand’s ideal is the entrepreneur, not the conformist. Any one who knows Ayn Rand would know that. Now go read Atlas Shrugged on stop making wrongful statements.

If you don’t like reading you can watch Atlas Shrugged part 1 and part 2 is coming soon! I can’t wait. It’s so prescient!

#221 earlymidlifecrisis on 06.21.12 at 1:25 pm

“Our government has encouraged Canadians to borrow responsibly,” Flaherty said. “Most Canadians have done so.”

How does lighting a fuse = above? Oh we shall have to party when this government is gone. They are disgracece to democracy and the sad thing is we shall all have to pay for thconsequenceses of their omnibus bill and not just the ignorant who voted them in.

#222 Junius on 06.21.12 at 1:25 pm

#204 coastal,

Apart from Re: Bears there is nothing more obnoxious in the press these days then the “Canadians are different” crowd. Naive and stupid. There is really nothing more to say.

#223 Canuck Abroad on 06.21.12 at 1:25 pm

Why not pay off the amortized mortgage then borrow back the funds at simple interest, which is fully tax-deductible? You are not thinking this through. — Garth

Agree with your comment, but Willa’s mortgage rate is only 2.5%. Surely that is better than any rate she could get if she re-mortgaged now?

Amortization. And why not make it deductible? — Garth

#224 earlymidlifecrisis on 06.21.12 at 1:27 pm

WTF? Spell check done. obviously broken. Can spell, just not type. . . ha

#225 Investx on 06.21.12 at 1:27 pm

I was surprised to read what Flaherty said, as per the Toronto Star:

“He said less than five per cent of would-be buyers will be affected by the latest tightening of mortgage lending.”–flaherty-set-to-announce-tighter-mortgage-rules?bn=1

What? That’s it?

I always suspected that our subprime market was smaller than it was in the States and not as significsnt and Garth has always made it out to be… but I’m surprised to see that the new rules are expected to affect so few.

#226 Blue Monster Lover of Meats and Vegetables on 06.21.12 at 1:29 pm

The truth of the matter is I’m the loser here who wasted away his youth; not the kid who partied throughout his 20′s and took out a million dollar mortgage. So this is why my peers buy the bloody house. . .
Just read the rest of you post after the Ayn Rand section.

No you’re not a loser, you sound a lot like me! I started a business in my early twenties and have suffered more than you have and I’m in the same boat, just further down river. All my friends worked, married and had families while I toiled endlessly in the poor house under tremendous stress at times, many times.

Now I’m succeeding and as a guy we can have families late in life, especially if we’re smart and wealthy, no problemo! So suck it up and be strong, make a plan to stay on track and increase your wealth while also looking for Mrs. Right and you’ll turn that frown up-side-down!

#227 Dupcheck on 06.21.12 at 1:30 pm

Maybe is time for the kids to help the old man out. It is easy to tell him to sell his home which he probably spares no money on maintenance as most of the Italians overdo just because they want to look better than the next door neighbor. Hey but itsa beutiffuul gardennn.

Aside that, dude move out, and tell your siblings to all of you help your parents set a retirement fund as Garth advised you. It is time for you all to give back and not to take. After all a 250K home in Waterloo will not feel the pinch of home prices going down as much as the 1 Mil $ CrackShack McMansions in GTA or Vanpoover will. Cheers….

#228 cramar on 06.21.12 at 1:32 pm

Bill Mann is nuts! He’s picked up the “Canada is a great place to retire” news and has run with it. He says Yanks could come up here to retire, and he says that Vancouver/Victoria is THE place to B!

“Sleepy Victoria is Canada’s retirement mecca. … Canada’s version of God’s waiting room is lovely and pleasant….”

Neglects to mention the cost of housing there. Perhaps he is a lobbyist for those owning houses there and want to get out.

In the comment section I put in a link to this pathetic blog!

#229 Realtors and mortgage brokers in a panic! on 06.21.12 at 1:33 pm

look at them kicking and screaming in the media and on Garth’s blog. Alot of worried people who will lose their nice cars and maybe might even lose their homes in this coming housing crash storm.

#230 jess on 06.21.12 at 1:47 pm

banker admits his guilt…
In his statement, Mr Gribkowsky also said: “It took me a long time to come to terms with what I have done and to admit even to myself: Yes, it was bribery and yes, I should have paid tax… Still today I have troubles accepting this as a reality.”

Bernie Ecclestone
HMRC to review Ecclestone’s £27m payment over sale of F1
UK authorities are set to investigate Bernie Ecclestone’s involvement in bribery and tax evasion claims playing out in a German court
Helia Ebrahimi and Jonathan Russell
9:00PM GMT 05 Nov 2011

LOL …The banks didn’t know they were pumping up a bubble?

#231 EdmontonJim on 06.21.12 at 1:48 pm

The insurable limit needs to drop further I think. $1 million is still very rich, and further tightening will limit CMHC insurance to those who actually need it.

The ‘ownership society’ was not only an epic failure, it was engineered life support for an economic experiment on credit that died over a decade ago. It’s time to pull the plug and move on with our lives.

Maybe Canada can be the contrarian of the world, by being anti-austerian:

Tighten mortgage restrictions severely by requiring 40% downpayments. Implement anti-usury laws that crack down on irresponsible lenders and borrowers. Drop the key lending rate to 0%, but make much harder for people without money to get personal (non-business) loans.

At the same time strongly encourage provinces to raise minimum wages to among the highest in the world.

Raise taxes on non-depreciating assets and capital gains while lowering personal income taxes on low wage earners and maintaining TFSAs. Increase government spending on labour intensive infrastructure projects and education until you have full employment.

Remove subsidies on natural resource related industries, and put them on innovation and service related industries.

These together effectivly F’s the baby-boomer generation for the benefit of the next generation. But since the baby-boomers F’d themselves anyway, no net loss. Tie this to a vast expansion of senior benefits and you’re golden.

The net effect will be a redistribution of wealth by targeted inflation/deflation. The value of the things rich people make (rents, financial products, IP) will deflate, while the value of the things poor people make (goods and services – especially non-transportable ones) will inflate.

That got ranty. I’m sorry about that.

#232 Blue Monster Lover of Meats and Vegetables on 06.21.12 at 1:52 pm

#116 LB on 06.21.12 at 3:09 am

You got it Pontiac!
The freest most effective system of democracy is one with extremely limited government and the only votes that count are the ones when you SPEND YOUR MONEY in a free market.

Marking an X in ballot during elections only directs money stolen from the productive private sector to fund god-knows what stupid ideas and lazy no-good people in the public sector.

This is the crux of the problem.

So wake up people and realize that our politicians are all corrupt, and usually only the best, most devious liars and knivers win the elections. And Stephen Harper is a master deceiver. He’s a psychopathic autocrat.

Most of the politicians world-wide should be hung for treason.

#233 Frank le skank on 06.21.12 at 1:53 pm

#28 Spiltbongwater on 06.20.12 at 9:47 pm
“Garth, do you have any thoughts about RIM jobs?”

LOL…..I think a lot of people will be getting RIM jobs!

#185 Brian on 06.21.12 at 11:00 am

That’s a good breakdown.

#234 Toronto_CA on 06.21.12 at 1:55 pm

Carney saying he may still raise rates, despite what the Americans do.

I think a .25% point rate bump would be a good signal. Can’t do much more or our dollar will go through the roof, however and manufacturing’s slow death would be given the Dr. Kevorkian treatment.

#235 Canadian Watchdog on 06.21.12 at 2:00 pm

#212 Junius

Those were Carney’s words, not mine. If history tells us anything, governments will attempt to repay their debt by austerity, but usually end up reversing course due to social unrest.

Great video on this here if you’re an economic nerd:

#236 Silver on 06.21.12 at 2:01 pm

You must be kidding…

… someone who can buy a $million dollar home needs
“Taxpayer Backing”
… from CMHC?????
… for granite counter tops…
and I pay tax’s to cover that shit…..
….tell the entitled losers to buy the shack they can actually afford

… now… I want to smell the burnt toast
…. while i sit back now and drink coffee in the Garden….
…. big smoky amounts of burnt toast…
… and the wailing of their homeless useless kids to round out the joyous symphony of my senses while I relax… amongst my flowers….

#237 American Werewolf in BC on 06.21.12 at 2:17 pm

#225 Investx on 06.21.12 at 1:27 pm
I always suspected that our subprime market was smaller than it was in the States and not as significsnt….


The sub-prime Canadian talking point is simply bullshit. Its a useless distinction.

In Canada, anything with a heartbeat can get approved for a mortgage in the system currently (so no subprime market is needed). With these low rates and terms, no one was locked out, so demand soared and drove up prices.

Back in the states when sub-prime markets started booming, the prime rate was around 7%. People opting into subprime could qualify for ARMs starting at 5% (which isn’t a terrible option if you are planning on selling in 2 years, as many were). So higher interest rates made it more difficult (and less desirable) for people in the States to qualify conventionally.

BUT, it doesn’t mean that sub-prime borrowers in the States are any less worthy of loans than conventional borrowers in Canada (being that conventional loans in Canada at 3.5% are easier to qualify for than those in the states were at 7%).

Canada simply has all their “sub-primers” (unworthy borrowers) mainstreamed, so their tidy little definition of “sub-prime” doesn’t encompass many people. But there are as many, if not more, “unworthy borrowers” in Canada now as there were in the US at the top of the bubble.

Canadians are playing semantics to feel warm and fuzzy inside about their banking system and their own ability to qualify with such sound, strict standards (sarcasm of course). You are all comparing your apples to their oranges, and coming to false conclusions.

#238 Blue Monster Lover of Meats and Vegetables on 06.21.12 at 2:29 pm

Don Campbell from the real estate investment network Vancouver was just on BNN. He said these mortgage rule changes will only affect a small number of people and they are just a blip on the radar.

Wasn’t the plane that dropped the a-bomb on Hiroshima also just a blip on the radar prior to the result? And we all know how that blip turned out! lol! :-)


#239 TNT on 06.21.12 at 2:32 pm

Under the new regime (39%) Canadians can borrow more money against the same gross family income.

#240 Century Park Renter on 06.21.12 at 2:35 pm

The ‘F’ Bomb = The Alpha & The Omega

My Y generation are screwed. They want but can’t save, don’t know how to work their butts off, and don’t know how to discipline themselves. Blame it on the parents…didn’t want to smack their kids because they were afraid it would knock some sense into them.

I understand we have one life to live, but what good does it do anyone if we pass this world to future generations in complete disgrace, with no morals or DRIVE! In the end it’s Darwinism at it’s finest, the stronger will survive…

#241 Questioner on 06.21.12 at 2:43 pm

I’d sure like to know what percentage of homes sold in Vancouver at over $1 million required mortgages. Of course there’s the private mortgage market but the increased cost makes it prohibitive. Is this the death knell or a minor detail?

#242 Junius on 06.21.12 at 2:46 pm

#220 Blue Monster,

Ayn Rand was a hypocrite. Her philosophy has been debunked on multiple levels. Get over it.

#243 Paolo on 06.21.12 at 2:53 pm

The train wreck has begun…

#244 MPM on 06.21.12 at 2:55 pm

Sad, Flaherty and Harper have ruined a generation. But being Conservatives, they will still delude themselves that it was the fault of the Liberals. Beautiful.

#245 Don on 06.21.12 at 2:56 pm

Re- Realtors and mortgage brokers in a panic! on 06.21.12 at 1:33 pm
look at them kicking and screaming in the media and on Garth’s blog. Alot of worried people who will lose their nice cars and maybe might even lose their homes in this coming housing crash storm.
Obviously you own nothing and have nothing and no family or friends in construction or retail sales they must be on assistance as well

#246 timbo on 06.21.12 at 2:57 pm

the future is red……

“We’re expecting a big downgrade of global banks by Moody’s after the close of the US markets, but Robert Peston believes we may have news sooner.”

bailouts for everyone to save the bondholders!……

#247 Observor on 06.21.12 at 3:02 pm


The cut to the home equity limit now at 80% of house value may hurt the most.

I mean how are people supposed to make their mortgage payments nd all the other payments if they can’t borrow to do so?

Ah well, there is always the credit card. I just had my CIBC gold card limit increased to something over $30k.

The idea is to always pay everything on time (frequently borrowing to do so). The bank’s computers will see you as a srong credit and raise your limits.

Then one day when you owe say a million dollars and have run out of borrowing room it will be your option to go bankrupt. Be sure to hide lots of (borrowed ) cash money first.

#248 Herb on 06.21.12 at 3:03 pm

#202 Blue Monster etc.,

“It’s said that …” Now there is evidence!

#249 Timing is Everything on 06.21.12 at 3:04 pm

#228 cramar

Keep down, please. I’m napping here.
#226 BMLofMV – “…as a guy we can have families late in life…”

Careful. You’ll may just embarrass yourself and your kids. You may not have the ‘energy’ required. Will they ‘know’ their grandparents? Adoption is always an option.

“You truly have to take care of your children’s mother, because you know that some of the high demand years are some of the years that you are going to have to be at your absolute best in order to cope and companion them through those times.
“Prepare your child for the eventuality of your death. As morbid as it sounds, you have to take your death into consideration because your chance of death between 55 and 70 is a whole lot higher than it is between 40 and 55.”

#250 Davey Boy on 06.21.12 at 3:06 pm

Garth, what are the circumstances, if any, that buying a condominium makes more sense than buying a house. Assuming no RE bubble at the time.

#251 jess on 06.21.12 at 3:29 pm

Yeah, right!…

“The expression of skin-related Youth Gene Clusters is responsible for the signs of aging on our skin. Through ageLOC science, Nu Skin has the ability to RESET THESE GENES to behave more youthfully, helping to restore a more youthful balance in the skin for a younger looking appearance.

Some Blemishes on a Beauty Business
Nu Skin skirmishes with founder’s ex-husband and renewed regulatory scrutiny

#252 Realtors and mortgage brokers in a panic! on 06.21.12 at 3:39 pm

Debt-fuelled economy running on fumes, warns Carney

The house of cards is going to crash and crash hard and every realtor and mortgage broker knows it. They were part of the criminal problem.

#253 Not 1st on 06.21.12 at 3:41 pm

I am picturing Garth sitting with his feet up today with a look of satisfaction on his face. He called it, he was right. This was the peak and its down from here starting with Vancouver carnage and the GTO to follow shortly.

These rules will take at least 25% of the new mortgage applicants out of the market right off the bat. Then with the lowered demand in housing, prices will fall, and many who were in before will go underwater. Lots of rental opportunities coming up. Watch vacations, cars, RVs and discretionary purchases dry as well as many of these were bought with HELOCs. And, maybe just maybe, RRSPs and equity investments cashed in.

#254 cramar on 06.21.12 at 3:44 pm

When our two sons were in high school, my wife told them that if they go to college and finish or enter a trade, as soon as you start working there will be two rules:

1) You start to pay rent
2) You have one year then you are must move out and find your own place!

#255 daystar on 06.21.12 at 3:48 pm

#124 John on 06.21.12 at 6:43 am

Regulations have nothing to do with RE/credit bubbles? You might want to rethink that one John.

#256 X on 06.21.12 at 3:48 pm

That is a good start in protecting the public from unknowingly taking on too much debt. Unfortunately most only realize it when it is far too late.

Ending the 0 down mortgages I am sure will be next.

#257 Andrew on 06.21.12 at 3:52 pm

Get out of Waterloo before RIM inevitably goes bankrupt. Once this happens, thousands of people will be out of work, flooding the market with houses (since RIM is by far the largest employer in Waterloo) and the only potential buyers will be people who work in the GTA commuting 1-2 hours *each way* on the 401. Inevitably the 401 will have to be made collector express all the way from Hurontario Street to Highway 8, which inevitably will not actually relieve congestion at all because Waterloo will become yet another bedroom community of Toronto with few jobs of its own.

#258 Mixed Bag on 06.21.12 at 3:56 pm

The tragedy is the parents paying the kids’ debts. Have they no shame? Why don’t they pay their own debts? The parents paid for their school as it is, while they likely had no schooling of their own. Antonio is the youngest at 28, so his siblings are thirty-something-year-olds. Just disgusting.

I understand the stay-at-home-until-you’re-married culture, but the corollary is that the adult child helps around the house with work and expenses. The parents take care of the children first, then the children take care of the parents later on. Sad to say, some people have adopted a quasi-North American attitude, where only the latter goes out the window and the parents are put into a home, while the kids keep up with the Joneses (which they have no business doing based on their financial means).

End of rant.

#259 neo on 06.21.12 at 3:59 pm

What were you lecturing on understanding risk?


The bond market are the grown ups in the room. They have been accurately accounting for macroeconomic risk.

The equity markets are the equivalent of an adolescent girl with all the associated mood swings and highs and lows.

Eventually, the grown ups are correct despite the insistents from the teenager that they know what they are doing.

By the way, you seem to ridicule shorters in the market but what you didn’t say is that many of the rallies since Oct. 2011 have been short covering rallies. If you keep burning shorts and they refuse to play then you actually leave the markets even more vulnerable as an air pocket down happens and equities make a swift move down. That isn’t what is happening today. But that “risk” is still present. Shorts have a function in capital markets.

Tempus Fugit…

#260 Realtors and mortgage brokers in a panic! on 06.21.12 at 4:03 pm

I am sure smokingman understands what is happening and why. The Canadian government has got orders to crash the housing market. They are doing this now as they slowly change the rules one by one. The rug is being pulled so Canada can join the rest of the world in an economic depression. Of course they will never call it that…they like to call it slow growth. Mexed out Canadian can not pay back their debts. The house of cards will come crashing down back to earth. Realtors and mortgage brokers hate the free and open markets.

#261 Mixed Bag on 06.21.12 at 4:07 pm

#173 CalgaryRocks on 06.21.12 at 10:14 am

” Antonio’s dad should stop his kids from mooching off of him. The youngest is 28 for God’s sake.

Antonio is a 28 year old living with his parents. I am going to go on a limb here and assume he is neither paying market rent nor doing his own laundry, cooking, etc…

His OLDER siblings are still taking their dad’s money to pay off THEIR debts. Great little family we have here.

Yes, for sure Antonio, your dad should sell his one and only Asset so that he can pay off your guys’ debts. For sure. That’s the answer.

How about you 4 losers get together and figure out how to pay off your dads debts instead?”

Calgary Rocks, great response. This is one case where the old man should NOT sell, because after his kids get through his money – and they will, the old man and his wife would be on the street!

#262 $$$BPOE#1 on 06.21.12 at 4:07 pm

Excellent news. This clears the way for the pros. Love it! I’ve been crystal clear Canadians have no business buying in BPOE. Weak bids going to be mopped up. Looking great.

#263 Saskatoon Housing Bubble on 06.21.12 at 4:08 pm

A little history on CMHC and mortgage rules.

1954-1990- Somewhere along this time, 10% became minimum down payment.
1990- 5% was introduced as a trial run, then officially accepted in 1999.
2001 – Genworth (GE Capital) enters the Canadian mortgage insurance market
2001 – CIBC offered below-prime mortgages.
Pre-2003 – CMHC: 5% down with price limit depending on area, 25 yr amortizations, no price limit if 10% or more down
Sep 2003 – CMHC: 5% down, 25 yr amortizations, removed all price ceiling limitations. Now any mortgage would be insured regardless of the cost.
Mar 2004 – CMHC: Flex-Down product allows 5% down to be borrowed and 1.5% closing costs to be borrowed (essentially zero down, but 95% insured)
Mar 2006 – AIG enters the Canadian mortgage insurance market
Mar 2006 – CMHC: 0% down, 30 yr amortizations (Genworth announces 35 yr amortizations)
Jun 2006 – CMHC: 0% down, 35 yr amortizations, interest only payments allowed for 10 years
Nov 2006 – CMHC: 0% down, 40 yr amortizations, interest only payments allowed for 10 years
Oct 2008 – CMHC: 5% down, 35 yr amortizations, investors need 5% down.
April 2010- CMHC did some minor tightening of their guidelines, investors need 20% down.
March 2011- CMHC only allows 30 yr amortizations, some restrictions on pulling equity out
July 2012 – CMHC only allows 25 yr amortizations, insured mortgages limited to $1 million, home equity refinance drops from 85% to 80%.

I guess I will be adding OSFI’s rules as well.

#264 Keith in Calgary on 06.21.12 at 4:12 pm

Well, I thought they’d never do it………but maybe F reads this blog and took my advice……heh.

#265 Two-thirds on 06.21.12 at 4:17 pm

Holy trifecta of events, Batman!

1 – F’s bomb

2 – C’s admonition on unsustainable “debt-fuelled economy”

3 – TSX’s triple-digit drop

Concerning the minister’s announcement, something that is sure to impact markets with high valuations is the provision for capping insured mortgages at $1 million.

Surprising news, to be sure, even more surprising that the changes were not limited to the ammortisation period, and the unbelievable part is how fast they will come into effect: June 9, 2012.

Very unexpected move by F, never thought I would see this day.

#266 Tax-Deductible Mortgage Loan on 06.21.12 at 4:25 pm

“Why not pay off the amortized mortgage then borrow back the funds at simple interest, which is fully tax-deductible? You are not thinking this through. — Garth”

Silly question–but how are the subsequent borrowed funds tax-deductible?

I know that when you borrow money to invest in equities/business…the interest on a loan can be considered tax deductible.

But a loan used to pay off a mortgage?

My error – I confused this situation with another. The advantage here is simple interest payments as opposed to amortized payments. You are correct, there would not be deductibility. — Garth

#267 Blue Monster Lover of Meats and Vegetables on 06.21.12 at 4:28 pm

#242 Junius on 06.21.12 at 2:46 pm

#220 Blue Monster,

Ayn Rand was a hypocrite. Her philosophy has been debunked on multiple levels. Get over it.
Junius my little Marxist friend, we’ve been over this before, I remember it well. No need in rehashing our disagreements over again.

Some of us, like my an Mrs. Rand, believe in freedom and the individual. Collectivists don’t. So take your little group of commies and move to Russia.

#268 Patsan on 06.21.12 at 4:30 pm

Saskatoon Housing Bubble,

It’s not the insured mortgages limited to $1 million, it is the house price for insured mortgages is limited to $1 million.

#269 truth hammer on 06.21.12 at 4:33 pm

I muttered a few days ago that ‘Mr Market’ would not rally under an Obama administration…nor will it…even if it takes another 4 years after the election……this is a war of attrition….the rich guys will win…they alway do.

The smart money is looking at any marks against the book between now and November could be explosive for the market if they unhinge the Obamatons.

“1000 point rally if Obama care is overturned in the Supreme Court?

Should be a dismal time for investors if the socialists rally at the ballot box…..after all you can’t expect the people with money to give the opposition any ammunition……so…jobs numbers will stay depressed…housing and general economy ditto…..for as long as 5 years if the socialists are voted back in.

Can you imagine what would happen to CDN mutual fund values if the NDP got in? Institutional money running away would cause an all out depression in the TSX stock market.

#270 Canadians to borrow until bankrupt on 06.21.12 at 4:35 pm

Observor #247
“Be sure to hide lots of (borrowed ) cash money first.”


Many mortgage brokers know this to be 100% true. People with no money have borrowed crazy amounts of money and living off that money with no intentions of paying it back. When they reach their limit which seems to have happened now they will try to sell or go bankrupt.

#271 Observor on 06.21.12 at 4:40 pm


neo at 259 says:

The bond market are the grown ups in the room. They have been accurately accounting for macroeconomic risk.


Explain please how a 1.8% 10-year government bond provides compensation for the risk of higher interest rates (which would lower the market value of the bond although it would still mature at face value ultimately) and how it compensates for the risk of inflation (which would lower the purchasing power of the coupons received each year and notably of the principal received in 10 years.)

Explain same for 30-year bond at 2.4%.

Warren Buffett views long-bonds as extremley risky due to risk of inflation. He views a basket of S&P 500 equities with P/E say 14 (the S&P 500 index) and an earnings yield of 7.1% ( 1 over 14) (and growing) and with a dividend yield of about 2% (and growing) as far less risk than your long bond over a the 10 years or 30 years.

But what does he know?

Set him and me straight, please.

#272 ShockednAwed on 06.21.12 at 4:41 pm

I thought the OSFI was even more toothless than the UN. Can they enforce these rules upon our “Banks Gone Wild”

#273 Shane on 06.21.12 at 4:41 pm

Garth, with these mortgage changes do you think the housing market will correct faster?

#274 Tony on 06.21.12 at 4:44 pm

Pay cash because taking out a mortgage never makes any sense if you don’t need one. You’ll save a lot of money in other fees if you pay all cash.

#275 Stop the insanity on 06.21.12 at 4:44 pm

#24 Renter from Vancouver

“Do you still smoke and think it is not harmful? Back in the 70′s and 80′s many did, today there is no excuse.”

What a crock of poo! You’re trying to make it sound like smokers did not know it was bad for them in the 70s and 80s. They knew exactly how bad it was then, and they know today but still choose not to quit for a variety of reasons. Some people make bad decisions – that is their choice. (* had you said smokers from the first half of the century did not understand, I may have agreed with you)

#276 DonDWest on 06.21.12 at 4:44 pm

Gold/silver are getting hammered. . .

#277 TRT on 06.21.12 at 4:49 pm

I’d hate to own an investment condo today. Worst if you already signed up and bought a pre-sale (unbuilt).

for a condo that generates $1200 rent…max I would pay for a condo is $200,000. A psychological shock is coming…

#278 TRT on 06.21.12 at 4:52 pm

#263 sask housing bubble,

good job posting that at an appropriate time!!

#279 Hicksville Alberta on 06.21.12 at 4:53 pm

With oil now at 78.39 (per Kitco) we have a serious breakdown and since the energy sector has been a major economic driving force in all of Canada it doesn’t take much of a stretch to think the TSE could evaporate another 1,000 points or so in the short term and as well the Canadian Dollar take a serious whacking.

Wonder how the new Liberal Premier of Alberta, Alison in Wonderland will be taking this as so far she is trying to spend the Province into prosperity (bankruptcy).

Wonder how the Liberal Mayors in Calgreedy and Edmonton will be taking this as well as they too are eyeball deep in the trough of prosperity (bankruptcy) with all the pumping, spending and micromanaging one could almost but not quite yet envision.

As for the country as a whole, maybe H, F, and C are starting to realize that if the global bond vigilantes start eyeballing Canada the interest rates here could soar as per a somewhat Greece, Spain, Italy type unwind develops here in response the gross fiscal and financial mismanagement at all levels of Canadian Governanace.

#280 Observor on 06.21.12 at 4:58 pm


P.S. to neo at 259

If bonds were pricing in macroeconomic risks they would have higher yields, not record low yields.

The lower the yield, the lower the perceived risk.

#281 Observor on 06.21.12 at 5:01 pm

P.P.S. to neo

What bonds are suggesting, it seems, is a near certainty of deflation and certainly no inflation.

(Only) under that condition a 1.8% yield on ten years might be acceptable to a rational purchaser (Keep in mind that many traders are irrational — almost by definition — and certainly central banks are not investing when they buy bonds rather they are attempting to control markets)

#282 jess on 06.21.12 at 5:14 pm

In a speech in Halifax, Carney said, “Our economy cannot depend indefinitely on debt-fuelled household expenditures, particularly in an environment of modest income growth.”

= Labor market weakness


#283 Herb on 06.21.12 at 5:17 pm

Who would have thunk that our Little Leprechaun was that powerful: he opens his mouth and North American markets nosedive! Now if he had only said the right things six years ago …

#284 KW T800 on 06.21.12 at 5:22 pm

Things are going to get ugly I know many boomers that have gotten themselves into trouble with debt. There will be many others besides boomers that are in even deeper in debt. Oh man is it going to get ugly especially for the younger generation. The local comunity gov’t knows there is a problem they can’t do anything.

I’am 35 I live in the family basement what choice do I have live in a tent ? Places to rent are very slim, you are paying 1200-1400 a month before utilities. Almost 98% of the houses in the area are owners living in their houses. Anything that is does come up for rent is gone in hours, even in minutes. What ever else is for rent isn’t fit to live in or grossly over priced. Homeowners know they can get away with charging 150 to 300 dollars a square foot. Some shacks are 900 dollars for a 600 square foot house.

I’am looking at buying a travel trailer and living in it on the side of the road. It is that that point now that people that work in the area can’t afford to live in the area. The retired boomers have pushed the working class people out. The whole thing selling high priced realestate backfired. The people responsible for it realize it now. Funny how greed works it always comes back to bite you in the ass.

The people in the area that work in construction industry are finished there are companies that have been in business for 30 years say they are done. No work left nobody is spending any money. Tradesmen are done they are all fighting for work now wonder how they are going to survive.

I ended up with a steady job 7 years ago in a different career when I seen the construction industry heading for the toilet. Today anybody in the construction industry kiss your career good bye.

My current job is gauranteed income but it gives me so much stress I’am physically ill most of the time. Stress kills a person I know it may end up with a heart attack I hate it. I have a job I’am lucky to have job the way things are going. Watching my friends in the construction industry struggle and loose what they have worked for. Tradesmen will be working at grocery stores stocking shelves for 10 dollars per hour pretty soon.

I clear 2400-2500 a month it still isn’t enough most of my fellow co-workers work two jobs. My second job was self-employed in the construction industry that is long gone now. You loose your job good luck on finding another one nobody is hiring. To even get a minimum wage job at a grocery store you are on a waiting list.

My parents see what is happening they don’t care if I live in the basement. I do 99% of the maintenance to the house and acreage. I pay for 80% of the food, I work for the family company for free when I’am needed. Do I like my living arragement no but what choice do I have ? I deal with what I have.

British Columbia is in serious trouble the Liberal gov’t has this province in a mess. Many small towns and comunities will suffer big time.

Many small towns in this province were sold on selling “recreational” or “retirement” properties. Both of those are done, the developers that cleared acres of land are suffering. The build it and they will come never worked. There are some empty building lots sitting on the market for 8 years now.

Going to be interesting it maybe another 10 or more years for the area I live ever sees a realestate boom again.

Will I ever own property “no” it isn’t worth it and never will be.

#285 jess on 06.21.12 at 5:24 pm

Times investigation newspaper sent an undercover reporter to a tax seminar which outlined a scheme known as K2

The Times said K2 was being used to shelter £168 million a year off shore from the taxman.

Under the scheme, an employee resigns from their company and any salary is then paid to an offshore trust. The individual then receives a small amount of that as salary and the rest as a loan which does not attract tax.

Carr who has lampooned bankers for failing to pay their tax, protects £3.3m a year by channelling cash through the Jersey-based company K2,

#286 jasonturbo on 06.21.12 at 5:35 pm

Great post Garth, with the exception of

“After puberty, all obligations are off. Parents may have a hard time not being helicopters, but grown children should try being less selfish and entitled”

Dumbass babyboomers should have raised there children to be more independent by giving them the tools they require in life, the basic understanding of things like “planning” and “money”. The outcome of all these current and future gen “x and y” losers are a direct result of the babyboomers parenting skills, I should lack of parenting skills. It was the parent’s choice to have children; it sure wasn’t the choice of the kid, in my eyes children are the parent’s obligations till the day they die. I assume most babyboomers will not agree with this post and will have some lame excuses why back “then” it was harder for them to get ahead. (When houses were only 3 times your income vs. 6, 7, and 10 times your income)

Now I have great respect for babyboomers, as my father is one, but man o man most failed miserably in the category of “life skills”. Sure they raised gen “x and y” as decent human beings but most are indebted beyond reason.

just my take

#287 daystar on 06.21.12 at 5:40 pm

The link below is TD economist’s spin on tighter CMHC regs. It really saves me alot of time trying to say the exact same things:

I would add that the overall concensus is a 10 to 15% correction over the next 2 years. This assumes that interest rates will not rise or if they do, rise very marginally (.5%). Its what happens in 2015, 2016… 2017 that worries me. There will be a melt after this correction and rates are the trigger.

#288 VICTORIA TEA PARTY on 06.21.12 at 5:48 pm


Where does one start, sifting through today’s market and economic wreckage that rattled the world’s economic system?

In Canada, the TSX dumped more than 350 points. Banks and resources took the major hits, meaning every investor got seriously side-swiped. The real estate industry took a giant Ottawa-planned hit.

European boulevardiers travelled to Greece to talk about that country’s problems. So what? Cutting some slack? Who cares, it’s a dead zone anyway.

In Spain five-year bond yields hit a record high.

In China, industrial output continues downward for the eighth straight month because of Europe’s woes which include word today that Germany’s economy is now declining.

In the US, the world’s biggest banks are all downgraded by a major credit ratings agency. But in afterhours trade they all explode north because ratings resets are good for business!


Back in 2008, massive money printing was instituted saving the Too Big To Fail banks, the same ones that were downgraded today! ALSO, the stock market was saved by March of 2009 and was thus able to help keep up the illusion of wealth accumulation by the vital now largely-former middle classes.

But that act has run its course. Thus, we have the origins of today’s market downturn: Wednesday’s comments by US central banker Big Ben, who essentially told the world that the QE3 “bullet” will be saved for later this year if needed.

That’s an untruth. Ben, and the rest of us, know that more money printing will not help anything and that tough “medicine” THEREFORE lies ahead. We’re outta ammo!

Tomorrow should be interesting.

Already the Dow futures index is pointing upward, as if today’s alarming turn of events was a one-day wonder.


Our economic system has been so corrupted by the incompetence of these wise-guy bankers and politicians that it leaves one wondering what will be the ultimate outcome.

Certainly, little Canada had a very bad day what with the nascent collapsing of the real estate market, along with whatever lies ahead for investors in banks, oil companies, utilities and hi-tech stocks. Oh, yes, and Mr. Carney hinted that interest rate hikes are approaching!

Is the stock market still safe? Why, yes. It’s the ONLY investment hope for the masses which is why it’s kept alive with chicken wire, glue, duct tape and contemptible brass from our equally scared-as-Hell “betters.”.

#289 Global TV on 06.21.12 at 5:58 pm

We had our mortgage expert on the Noon News today to explain these new rule changes. Her advice was to hurry up and get a new mortgage before the rule changes come into effect in early July. She also smuggly added that these changes are for the people who can’t make the 20% down payment, you know like the hobos, protesters and homeless people…

#290 ANONYMOUS on 06.21.12 at 6:04 pm

Here’s the reason why the stock market sold off so much today, and why it will probably continue to fall a little bit tomorrow too ( its because Goldman Sachs told everyone to sell in an e-mail.):

#291 Paul on 06.21.12 at 6:12 pm

225 Investx on 06.21.12 at 1:27 pm

Condo King Brad basically said the same thing today on BNN. He’s not worried.

#292 Stupesing in Cabbagetown on 06.21.12 at 6:19 pm

People at work were talking about the new mortgage rules today. One woman bought last year with a 35 year amortization. Another bought three years ago with a 40. They’re shocked, and worried. They both acknowledge that they’ll probably be in debt for the rest of their lives. Very sad.

#293 truth hammer on 06.21.12 at 6:26 pm

#202 Blue……It’s not just a matter of uselessness and redundancy…but the practice of ‘banking’ sic days in lieu of a raise is skeazy and immoral

Why should the taxpayer be gouged for an additional billon dollars a year for what amounts to a porky perk?

Another sad sleazy practice of the civic servants is the practice of ‘bonuses’ when no wage raise is offered….they have started to give each other ‘performance bonuses’.

There are tens of thousands who suck the life out of the taxpayer directly as CUPE members…tens of thousands more in crown corps and quango’s, services etc…….making the bloodsuckers the largest pool of workers in BC….more people working for the government than taxpayers to support them….and you wonder why we have to tax 100% AND borrow……this cannot last……..without destroying us all.

#294 ozy - retard on 06.21.12 at 6:44 pm

Typical kanatian? changes unnecessary implemented and discarded, from 5 cents bag, toronto vechicle plates tax, amortization 25-40-35-30-25-30-35-40 etc

DISGUSTING – the public in this country does not have a vote opinion for those flipper-ministers? national policies should not be changed on a corporate lobby left or right, north or south, fellas. Grow a spine or you’ll sooner than expected, you’ll loose this country to the USA.

#295 Inglorious Investor on 06.21.12 at 7:01 pm

Since it’s all been said, I’m going to be a real shameless troll today and work my way up the comments list:

#267 Blue Monster Lover of Meats and Vegetables on 06.21.12 at 4:28 pm

“Some of us, like my an (sic) Mrs. Rand, believe in freedom and the individual. Collectivists don’t. So take your little group of commies and move to Russia.”

Why kick them out of Canada? Wouldn’t Devon Island do?

#263 Saskatoon Housing Bubble on 06.21.12 at 4:08 pm

#257 Andrew on 06.21.12 at 3:52 pm
There’s so much more to Waterloo than just RIM. There’s… Uh… There’s… Uhhhhhh… OK, maybe you’re right.


#250 Davey Boy on 06.21.12 at 3:06 pm

Don’t buy a condo. Condos violate two basic rules of RE investing: 1) No land. The real value of RE is the land. 2) Unlike land, condo supply can be increased very easily, depressing values.


#240 Century Park Renter on 06.21.12 at 2:35 pm
The ‘F’ Bomb = The Alpha & The Omega

“I understand we have one life to live, but what good does it do anyone if we pass this world to future generations in complete disgrace, with no morals or DRIVE! In the end it’s Darwinism at it’s finest, the stronger will survive…”

Sounds like business as usual to me.


#237 American Werewolf in BC on 06.21.12 at 2:17 pm

“Canadians are playing semantics […] and coming to false conclusions.”

But at least we’re not American, eh! And don’t you know that every bad thing that ever happens in Canada is America’s fault? Geez, get with it, will you.


#232 Blue Monster Lover of Meats and Vegetables on 06.21.12 at 1:52 pm
“And Stephen Harper is […] a psychopathic autocrat.”

That’s an insult to psychopathic autocrats!


#231 EdmontonJim on 06.21.12 at 1:48 pm

Mr. Jim, don’t apologize. We need to hear thoughtful opinions. (unlike what I’m doing right now)


#229 Realtors and mortgage brokers in a panic! on
Don’t sound so pleased.


#219 Aussie Roy on 06.21.12 at 1:17 pm
“Prof Steve Keen. Upcoming talks in Toronto”

He’s not going to suggest giving free money to Canadian moose to pay off debt is he? Canadian moose carry very little debt in the first place.


#208 coastal on 06.21.12 at 12:49 pm
Had to laugh at the BNN guest who said unlike Americans, that Canadians will “rob the bank to pay their mortgage” and not walk away. This guy is clueless […]”

Agreed. He compared today to 1980. People in 1980 were practically a different species from today. Today, people look for ways to screw creditors, not pay them back. Deliberate bankruptcy will become part of the financial plan for an entire generation.


“Why not pay off the amortized mortgage then borrow back the funds at simple interest, which is fully tax-deductible? You are not thinking this through. — Garth”

And Willa thought Willa was so smart. More smug.


#177 Dorothy on 06.21.12 at 10:31 am

“F isn’t doing this to deflate the housing bubble, he’s doing it because he knows the bubble is going to deflate anyway and he’s trying to protect the banks bottom line.”

Yes, Dorothy. It’s all about the banks. If it weren’t, they would have taken steps to stop the mania much sooner. Horses. Barn doors, and all that.


Enough trolling.

#296 John on 06.21.12 at 7:01 pm

T.O. Bubble Boy wrote:

“So – please explain why you would suggest that the current situation was not tied to the decisions of our elfish Finance Minister?”

Start over. The bubble was caused by global derivatives and a collection of special interests seeking the best path to get rich quick and extend a ponzi scheme.

Do you know the name of the finance minister of Australia? Did he cause that bubble? Who’s the leader of Australia? When did he get in and what’s his ideology? Exactly. You don’t know the answers because it’s irrelevant. So too for Canada. Admit you drank the koolaid and move on.

Politicians in a fake representative democracy just align and spin and align. That’s it. Can you argue that? Why would you? Good question.

You have to start over. Literally from the beginning.

#297 jess on 06.21.12 at 7:10 pm

Ron Paul Admits He’s On Social Security, Even Though He Believes It’s Unconstitutional

The libertarian-leaning Republican and former presidential candidate admitted Wednesday that he accepts Social Security checks just minutes after he called for younger generations to wean themselves off the program, in an interview on MSNBC’s “Morning Joe.”

#298 CrowdedElevatorfartz on 06.21.12 at 7:19 pm

@#262 BPOE
Got news for ya, you closet rascist.
We’re ALL Canadian !
As for HAM, who cares. They’re a small portion of the fools that have purchased on the run up “Bubble Mountain”

Enjoy the slide back down the mountain, my crass, materialist, weasel beaked, real estate pumper…..

you cant avoid the worsening stats no matter how hard you try and spin it.

Blitheringly Painful Obnoxious Enema

#299 greed on 06.21.12 at 7:21 pm

#300 syd on 06.21.12 at 7:40 pm

The government believes less than five per cent of home buyers will be affected by the clampdown

Read more:

#301 Nostradamus Le Mad Vlad on 06.21.12 at 7:45 pm

#80 disciple — “F will make this announcement on June 21, the highest holy day in the occult calendar. Coincidence?” — There are no such things as coincidences. Everything happens for a reason, known or unknown.

#112 Crash Callaway — “What is it with politicians and their constant deliberate manipulation of society into chaos.” — Out of chaos, order (the NWO or BdB’s mantra). Politicos take the front line, lobbyists the second, but stronger empires than Rome have fallen.

The link last night, about 90 mln. jobs gone by 2020 plus boomers retiring in 2015 — there simply will not be enough social services to cover these people with the basics.

That is why perpetual war is one of the necessary evils, along with the cycle change.

#151 Toronto_CA — “He is moving quick . . .” — Why is he moving quickly? Who ordered him to ramp this thing up? Just asking.

#169 Rich Renter — “F” you reap what you sow.” — Actually, sheeple will reap what F sowed. He may get away with the coming debacle, but karma is a bitch!

#211 gentleInvestor — “It DESTROYS Vancouver. Watch it.” — BPOE, prepare to meet they maker!

#232 Blue Monster Lover of Meats and Vegetables — “Most of the politicians world-wide should be hung for treason.” — Couldn’t have said it better myself!

#260 Realtors and mortgage brokers in a panic! — “The Canadian government has got orders to crash the housing market. They are doing this now as they slowly change the rules one by one.” — Great way of explaining it, and I ‘spose this is what Harper meant when he said you won’t even recognize Canada etc. a few years ago.

#302 Superman on 06.21.12 at 7:47 pm


Hereeeeee weeeee goooo


Let’s see…

– TSX down almost 3% today
– Fed crushes the hopes and dreames of homeowners
– Fed says we are screwed and close to a recession
– TSX’s biggest company (RY) gets the BOOM lowered on it

Everything plunges tomorrow… gold… oil… stocks… housing… bonds…

Royal: old news. We knew this February 15th. — Garth

#303 Bill Gable on 06.21.12 at 7:52 pm

OTTAWA — Canada’s relatively healthy economy has been largely based on borrowed money but the situation cannot go on indefinitely, Bank of Canada governor Mark Carney warned Thursday.

The central bank governor’s stern words to a business audience in Halifax comes just hours after Finance Minister Jim Flaherty moved to clamp down on household lending by reducing the amortization period on mortgages to 25 years from 30, and by limiting home equity loans.

Carney makes clear that he endorses the moves, calling them “prudent” and “timely” to support the long-term stability of the housing market and guard against financial excesses.

And although he repeats language used in the past, Carney also suggests he has no patience for the view that instead of raising interest rates his next move will be to cut the trendsetting policy setting from the current one per cent, where it’s been since September 2010.

#304 Esoteric on 06.21.12 at 7:59 pm

For all those wondering if people renewing 40 or 35 yr mortgages will get pushed to 25 years the answer is no. Renewing a mortgage does not mean you have to reduce your current amortization.

However, if you want to refinance at all then YES, you are considered as having broken your contract and you can only have amortizations that are CURRENTLY allowed.

These new changes (welcome changes) while significant aren’t going to throw thousands of people our of their homes. (I wish.)

It will however make new buyers that much less able to manage the monthly payments and that should help bring this retarded market on ice.

#305 tkid on 06.21.12 at 8:07 pm

So, the remote control failed whilst I was channel surfing and I was stuck on the CBC watching for 3 brief minutes The Oleary Lang Show where 3 beserk lunatics told one gentleman that Canada needs to rescue debt-ridden Europe and the IMF.

One chick was making an impassioned plea about how the money will be paid back and how it wasn’t real money in the first place.

The whole thing kickstarted the ‘hell no’ reaction in me.

What are they talking about, Garth, and should Canada rescue the IMF and Europe?

#306 Frank on 06.21.12 at 8:12 pm

I am not happy for the state of RE in Canada. Many people on this blog take delight on the stupidity of their fellow Canadians. I am very angry with this government for bringing the zero down 40 year and then resetting everything back, I call this bad government and lack of vision, which in the end hurts all of us and not just the idiots that bought into this crazy RE market.

#307 gb on 06.21.12 at 8:31 pm

It’s over. Even in New Brunswick the real estate market is going stale. Next…decline.

People should have been prepared for this.

#308 Country Girl on 06.21.12 at 8:34 pm

#187 Poiuy

I agree. It seems the new rules may allow people to borrow more because the max GDS ratio of 32% (as per CMHC website: is increased to 39%.

#309 Pr on 06.21.12 at 8:46 pm

I am so happy! Unbelievable! Finally some hope.

#310 AprilNewwest on 06.21.12 at 8:48 pm

Paul #291
It’s not worth the time of day repeating what people in the RE industry say regarding mortgage changes if they think they might negatively effect RE. They’ll spin their comments to suit their agenda. They are not to be trusted.

#311 Pr on 06.21.12 at 8:55 pm

Now, the cash down!

#312 tkid on 06.21.12 at 8:56 pm

Antonio, here’s my advice.

Pay the old folks rent, but when your old man threatens to bury you in the back yard when you offer up the money, quietly put the dough aside into a separate account for ’em.

Then track down insurance for ’em. There is insurance available, or there was 10 years ago, where the insurance pays them money if they retire in the poor house but you pay the premiums. The insurance is for your benefit – peace of mind. I cannot for the life of me remember what it was called.

Try to get the siblings to stop using Mom and Dad as a bank, but there is only so much you can do there.

Good luck!

#313 thinker on 06.21.12 at 9:02 pm

We have seen this before, interest rates are low and going lower, house price will stay firm and go higher.

#314 xyz on 06.21.12 at 9:17 pm

#263 Saskatoon Housing Bubble

Great timeline, if someone has the data to chart those changes against price changes, say in Vancouver it would be pretty interesting :)

Not surprising I bet but pretty darned interesting :)

#315 Mr. Anderson on 06.21.12 at 9:28 pm

#250 Davey Boy

What planet are you from? If you’re in Vancouver, Calgary, Toronto, hell anywhere, you don’t want to touch a condo with a 39 and half foot pole.

#316 TRT on 06.21.12 at 9:45 pm

hold on to your horses…

mortgage broker says I will be able to qualify for a larger mortgage after the new rules go into effect…WTF?

#317 disciple on 06.21.12 at 9:47 pm

#301 Nostra… check out what happened when I published info on Noory on my blog… another site exposed…

#318 deja view? on 06.22.12 at 2:06 pm

It makes sense that the RE bubble would have been created by cheap credit.. and yet house prices tripled in Vancouver within 24 months of 1980 even with already high interest rates rising weekly. It only stalled when mortgages hit the high teens thus killing housing, established businesses and the whole decade.

But back then consumers were flabby and undiciplined.
Maybe ParticipACTION is part of gov’s plan. It’s imperative that the workforce stay fit.
For those boomers sporting 30-40 yr mortgages, don’t forget the arthritic meds. Now bend over & touch yer toes. ahhh!
Next stop.. Freedom 90.

#319 TurnerNation on 06.22.12 at 8:43 pm

Oil prices appear to be bottoming out here. Just in time for summer long weekend gas pump hikes. :-<

#320 TurnerNation on 06.22.12 at 8:44 pm

325th? Blog dogs gone wild. In a feeding frenzy over new mortgage rules.