The squeeze

Travis choked a little when he opened the envelope with the green logo upon it.

“Got this in the mail today,” he told me. “TD is putting the squeeze on Lines of Credit. When I first signed up for this it was (wait for it) 2.99% (Total) – a mere 18 months ago. Now it’s 11.45% !!!”

Yup, true. What’s happening to mortgages is also whacking all lending rates. Secured and unsecured LOCs are now the scenes of exploding interest charges. Not only has the bank prime rate jumped by well over 3%, but the line-of-credit premium over the prime has doubled. Yikes. From p +3% to p +6%.

This means when the Bank of Canada bumps its benchmark higher next Wednesday by 75 bps (a certainty, it seems) Travis’s LOC will rocket north of 12%.

So here’s what the envelope contained:

Source: TD Canada Trust; click to enlarge.

Events continue apace. When this year began the yield on a Government of Canada 5-year bond was 1.1%. On Friday it was just a few hairs below 4%. As mentioned, the CB rate flies higher again next week, and once more in early December. Some people think our guys might add a full 1% at the next setting, and meanwhile the US Fed is being given 100% odds for a three-quarters point jump in two weeks.

Five-year fixed-rate mortgages are hitting 6% and the federal finance minister is bluntly informing the country of hard times to come. “Some people will see their mortgages rise,” she said. Talk about understating things. The stress test at the moment is a withering 7.25%, and will increase in a few days. It was wisely put into place to guard against newbies over-borrowing and ending up with negative equity, drowning in debt when rates popped. And here we be.

The chicken-and-egg question of the day is whether 12% LOCs and 6% mortgages will protect new borrowers from themselves, or suck off so much disposable income from existing ones that a recession rolls in.

The answer: both. As a society we’re about to reap the harvest of FOMO, recency bias and financial illiteracy.

Realize it’s not just here, either. You can hate on Trudeau, Freeland and the Tiffer. But they didn’t invent this mess. Inflation is higher in the US (8.2%) and crazy in the UK (10.1%). In Europe prices are rising at the rate of 10.9% and in poor Russia at 12.4%, where the bank rate is now 7.5%.

Because the pandemic was global, CBs everywhere dropped rates to avert economic disaster as society shut down. Assets values jumped in response, then the supply chain fell drastically behind demand, spurring shortages and spiking costs. Of course, Putin invaded Ukraine, spiking energy prices, causing food insecurity for millions and causing huge public expenditures on weapons (each Russian cruise missile costs $6.5 million, all those destroyed tanks are worth $3 million a piece and the US has pumped in $3 billion).

So inflation is global and 90 central banks around the world are jacking rates, restricting credit and tightening monetary policy to stomp it down. The reason Liz Truss blew up in the UK was her attempt to thwart this by lowering taxes and increasing spending – throwing fuel on the inflationary pyre. Mr. Market did her in swiftly. The same fate would befall our leaders, were they to be so utterly foolish.

In short, there’s no quick solution to this. Pierre Poilievre would be as feckless as T2 in countering the runaway cost of living, or making mortgage rates retreat. The very worst thing our leaders could do now is try to soften the blow, insulate families from the storm or sweeten the harsh taste of the BoC’s meds. Rates must swell more. The economy has to slow. Debt piggies will be forced to live with the consequences of their actions. And real estate is a long ways from the bottom – both for sales and prices.

Will Travis be borrowing money from his shiny new 11.45% bank line of credit?

Is Drake a great talent? Will the Leafs take the cup this year? Will I start using pronoun preferences?

Nah. Fuhgeddaboudit.

High rates are meant to squish demand and change habits. Maybe we’ll come out of this mess understanding that real estate is where you, like, just live. What a rad thing that would be.

About the picture: “Hi, Garth. Thank you for the years of acerbic wit about the Canadian property market,” writes Richard. “Here in the UK it looks like we have finally clunked and jolted our way to the top of the rollercoaster and the sickening lurch is imminent. No doubt the next lot in power will announce yet another stamp duty holiday, but no one will hear it above the screams… This is my dog Ruby. She has scant regard for the consequences of her actions. In this case, rolling in the damp remains of a bonfire.”

130 comments ↓

#1 Tom on 10.21.22 at 1:26 pm

True, inflation is less in Canada than other developed nations, but Trudeau has allowed a housing bubble to happen. We don’t know who owns half of the most expensive homes in Vancouver. Why? because we allow money laundering to happen. We have international agencies warning on this, yet Trudeau enacts toothless measures. Why do we have almost a third of properties being bought by those who own multiple properties? Because the governments won’t tax speculators enough.

#2 Captain Uppa on 10.21.22 at 1:26 pm

MSU: Great post and hair!

Question: Garth, do you think there are some opportunities arising anywhere with those of us who are already investing in balanced ETF portfolios and have no debt besides mortgage? Is there a post coming on how to carpe diem??

#3 KNOW IT ALL on 10.21.22 at 1:29 pm

RE and the demand for stuff is inverse of IR….

OK. WE GET IT ALREADY!

#4 The General on 10.21.22 at 1:30 pm

Doesn’t Ruby remind us all of our inner child. Pure innocence.This is what makes this blog GREATER than all others. Not sure about the toad, though. Do toads sit on command?

#5 Inflation on 10.21.22 at 1:32 pm

Garth: “Did the Liberals give Britain 10% inflation, or the Americans 8.2%? – Garth”

Yes, they did.

Just because ‘liberal’ big government, big spending, money printing policies are adopted by every party in all every country does not absolve them from blame.

Yes, Republicans and the CPC have widely adopted the same ‘debt doesn’t matter’ philosophy, although with some reluctance.

At least they prefer to leave money in the hands of those who earned it, as opposed to bureaucrats who didn’t.

The ruling political/economy ideology of the world is every larger government and more spending which cannot be funded except by increasing debt and money creation.

Marx and all the socialists who followed him are to blame, which are the falsely named ‘liberals’ of today.

#6 Gone For A Long Long While on 10.21.22 at 1:34 pm

Music to my ears.

Enjoy your weekend Garth.

#7 TurnerNation on 10.21.22 at 1:37 pm

This is normal. Natural gas is down 50% from August highs.

https://finviz.com/futures_charts.ashx?t=NG&p=d1

—– Oh thank you Rulers, slip us a bone. $500 — may we have another?

.Inflation to trigger bump in TFSA room in 2023. Next year’s limit can be calculated using CPI data released Wednesday. (investmentexecutive.com)

—-No, thank YOU masters! So generous. Just. Keep. Jabbing.

https://www.reuters.com/business/healthcare-pharmaceuticals/pfizer-expects-price-covid-vaccine-110-130-per-dose-2022-10-20/
Pfizer expects to hike U.S. COVID vaccine price to $110-$130 per dose

————-
Control over Food Supply, kicked off also March 2020.
You will eat bugs and be happy? Mainstream ‘news’ begins the sell job.

https://www.ctvnews.ca/sci-tech/nutrient-rich-algae-could-help-meet-global-food-demand-cornell-researchers-1.6117300
“The study’s authors say marine algae-based aquaculture could produce more than the total global protein demand projected for 2050, offering “a better source of high-quality nutritional protein, essential amino acids, and other micronutrients relative to terrestrial plants.””

#8 Vancouver Keith on 10.21.22 at 1:41 pm

Thanks for the picture Richard, what a beauty. Happy to see a damp doggy when the rain is falling properly here for the first time in months. Drought is unpleasant, and we can breathe the air again.

#9 Dr V on 10.21.22 at 1:46 pm

Ruby’s a dirty girl! But so cute.

“TD is putting the squeeze on Lines of Credit. When I first signed up for this it was (wait for it) 2.99% (Total) – a mere 18 months ago. Now it’s 11.45% !!!”

Yes, but they are only jacking Trav’s rate, not the prime.
It’s now a 6% spread. What did he do??

“As mentioned, the CB rate flies higher again next week, and once more in early December. Some people think our guys might add a full 1% at the next setting, and meanwhile the US Fed is being given 100% odds for a three-quarters point jump in two weeks.”

Go Tiff! Yay Jerome!

#10 SlantySemi on 10.21.22 at 1:47 pm

Just checked…

My HELOC with Tangerine (on which I owe zero), has a much more moderate interest rate of 5.35%.

Unlikely for an unsecured LOC, as that is the prime rate. – Garth

#11 Shawn on 10.21.22 at 1:48 pm

Central Bank Memo to Consumers adn Businesses and maybe governments too.

Cut down on spending.

Don’t borrow

Repay debt

That is vote with your wallet against higher prices.

Unless you prefer inflation to stay high.

#12 Ian on 10.21.22 at 1:50 pm

As for the “debt piggies”, they were greedy and eventually pigs get slaughtered.

#13 Overheardyou on 10.21.22 at 1:54 pm

I still don’t get why I am getting unsolicited cheques from the government…won’t that just add to the inflationary pressure?

#14 Old Boot on 10.21.22 at 1:54 pm

#131 The General on 10.21.22 at 1:21 pm

By the way, troll hunters: Running to father and demanding cancel culture should dwell here and suggesting the printing of I.p. addresses is a desperate move. Usually when you know you’re losing. Cheers!

————-

” A mean woman —> choose from the following list to complete this sentence:

– who won’t smile at me
– who won’t defer to my superior analysis of complex systems
– who made me feel ‘unsafe’
– who said words I didn’t like

—> should be burnt as a witch.

All I ask is that you light my cigarette before the kindling at my feet.

#15 Old Boot on 10.21.22 at 1:59 pm

About the picture: “Hi, Garth. Thank you for the years of acerbic wit about the Canadian property market,” writes Richard. “Here in the UK it looks like we have finally clunked and jolted our way to the top of the rollercoaster and the sickening lurch is imminent. No doubt the next lot in power will announce yet another stamp duty holiday, but no one will hear it above the screams… This is my dog Ruby. She has scant regard for the consequences of her actions. In this case, rolling in the damp remains of a bonfire.”

———

Love the sooty pupper.

Just like a filthy dog, neither should BoJo be allowed back in the House.

https://www.bloomberg.com/news/articles/2022-07-01/johnson-weighs-50-year-mortgages-that-children-can-inherit?leadSource=uverify%20wall

#16 Grumpy Cat on 10.21.22 at 2:07 pm

Good!

#17 ogdoad on 10.21.22 at 2:11 pm

Well, here we are whizzing through space…the only cool people (people that have their own spaceships), the pinnacles of the pinnacles of 4 billion years of evolution, are collectively looking down at the rest of humanity while we wrestle for molecules of power…and write on blogs…We’re all winners tho, right?

Anywho, while all you rich, successful, witty blog dogs, with such amazing lives that you can spare what few, precious moments you have to grace us with words of pure nectar and wisdom (ummm like lots actually – keep it up!), eat grapes from the navels of your daily virgins, please, remember the little people. You must have enough to share….lots of hurtin’ people out there. Record numbers at food banks.

Happy Friday!

Og

#18 dave on 10.21.22 at 2:14 pm

China continues with Zero covid policy – is this a passive way of hitting the West with inflation?

Biden just took away all of China’s semi-conductor business – China will counter will more inflation for the West!

#19 omasare on 10.21.22 at 2:17 pm

So, if I understand this correctly, the plebs should accept things?

The coming winter in Europe will be most interesting with yellow vests movements ready to ignite.

Canadians are too docile to rebel, until…

I hear there’s nice wooden benches that burn quite well in parliaments.

#20 Sail Away on 10.21.22 at 2:24 pm

Well, the markets will just need to take care of themselves for a while as I blip off the grid here.

Had a pleasant nighttime drive through the west listening to big sky country radio. Were you aware that God has BIG PLANS for you? And Jesus is the answer? 67 radio stations can’t be wrong.

Adios for now.

#21 Cash is King on 10.21.22 at 2:27 pm

CANADA’S HOUSING MARKETS ARE BLOWING UP

Turn your backs on the markets and wait for the bottom of the cycle and the lowest prices in decades before buying or even looking

#22 Ponzius Pilatus on 10.21.22 at 2:30 pm

#11 Shawn on 10.21.22 at 1:48 pm
Central Bank Memo to Consumers adn Businesses and maybe governments too.

Cut down on spending.

Don’t borrow

Repay debt

That is vote with your wallet against higher prices.

Unless you prefer inflation to stay high.
——————————
Good advise.
But, repay high variable interest loans, and keep low fixed ones.

#23 The General on 10.21.22 at 2:30 pm

Dear faron: Where in God’s green earth did you assume I’m on Yandex? Why does it matter? Is Yandex on your paranoid cancel list for apparent trolls? Will you plead your case with father also? Oh, look! Some commie sympathizer Canada geese are funneling nearby. Cool.

#24 Søren Angst on 10.21.22 at 2:30 pm

If you have debt, the bone crushing has just begun.

Be not amazed.

————————

Off Topic

Draghi speech today in the last few hours of his Gov inspiring. I will miss him. *

Meloni has taken over Gov Italia hours ago and has already shown her mettle.

Geriatric past his due date Berlusconi on a radio show still blamed Zelensky for his BFF Putin invading.

Well, she TUNED HIM IN fast yesterday …

https://twitter.com/bsant54/status/1582996164248752128

Today Silvio falling over himself smiling at Giorgia, standing next to her as if her “right hand man”, Tweets extolling the new Centre-Right Gov, etc.

Today at the Quirinale new Gov announcement, Silvio standing next to her but a few inches … she wouldn’t even look at him and while he was painfully trying to get a pat on the head from her.

———

I am loving Giorgia already.

Crack that whip girl!

[Proof even at 86 yrs of age Italian men are still Mamma’s Boyz and go all fetal position with “IL SGUARDO” from Mamma]

* He said Italia at full capacity and exporting her Nat Gas surplus at a profit. Good for Italia. Good for Europa. Maybe why Berlusconi still sucking up to Putin to keep that backdoor Russian gas flowing to Italia.

#25 Dragonfly58 on 10.21.22 at 2:34 pm

This point on, about the only things I will be buying new /retail, would be food , gasoline , socks , underwear. Pretty much everything else will be thrift stores, Craigslist , swap meets, etc or simply do without. Investors may want to take note. I am probably not the only retired person putting every expense under the microscope. With the inflation vs pension payment situation being as black as is these days , what other choice do many of us have ? Rapid downward mobility . Some are going to do fine, but a good many { most } are not.

#26 Ponzius Pilatus on 10.21.22 at 2:37 pm

#18 David
Biden just took away all of China’s semi-conductor business.
———————-
All?
Not even close.
And Biden should focus on the American economy.
About 80% of Americans cite the “Economy” as their main concern.
And mid terms are around the corner.

#27 AEJ on 10.21.22 at 2:42 pm

Is that just a pure cash grab by TD then making it prime +6% when it was previously prime +3%? Or is it them trying discourage anyone from actually using their LOCs while also making a lot more money off people with outstanding balances? It certainly seems that the banks will be making some record profits right now.

#28 Kurt on 10.21.22 at 2:49 pm

#132 Old Boot on 10.21.22 at 1:27 pm

I understood his point perfectly. He’s saying that you make lengthy, frequent posts in bad faith in order to get attention. Did you not understand that, do you disagree but are unwilling to say why, or do you agree but fail to see the relevance?

My money is that you will refuse to answer the question, or respond in a way that preserves your self-image as an innocent victim.

#29 Dogman01 on 10.21.22 at 2:52 pm

Emergency Act Public Inquiry

So far on display:
– a generally competent Civil Service
– Reasonable Policing Services, an early evaluation by CSIS that their was no foreign actor involved in protest fund raising. Some hesitation on part of police as situation looked to be open for an initial political resolution vs a policing resolution.
– Confusion between levels of Government all not sure whom was the “shot caller”.
– A Political Class at the Local Ottawa area aligned to the Federal Liberal interests (at least they are in Testimony and I assume all decisions they made at the time of the protest were via that Lens.)
– A group of Protester leadership with willingness to ameliorate impact but not having direct line of control of all elements of the protest.
– A media edifice clearly creating a narrative.

So far zero reason on display for calling on the emergency act.

#30 Nonplused on 10.21.22 at 2:56 pm

“Of course, Putin invaded Ukraine, spiking energy prices, causing food insecurity for millions and causing huge public expenditures on weapons (each Russian cruise missile costs $6.5 million, all those destroyed tanks are worth $3 million a piece and the US has pumped in $3 billion).”

Actually most of the tanks lost on both sides weren’t worth much more than scrap value before they got blown up, and they still retain most of that value. It’s mostly old Soviet equipment that isn’t up to modern standards. It is similar to asking what a 30 year old car is worth. Unless it’s a classic, not much. Chances are it is not even worth fixing if something goes wrong with it.

Modern missiles do in fact cost $6.5 million and more each, but how many has Russia fired so far? 200? Something in that ballpark. So $1.3 billion worth? Let’s say maybe it was 400 missiles so $2.6 billion. I dare say Trudeau spent a lot more on CERB. And you can’t count the Iranian drones (whether they be Iranian or Russian built, which we don’t know) because those are cheap.

And these missiles are extremely economic, both in effectiveness and minimizing loss of life. A missile flies in and takes out precisely the target, and not much more, and the loss of life is contained to those in the immediate vicinity. Compare that to trying to drive a tank column within 20 miles so you can use artillery, or say the carpet bombing used in WWII. The cost of the old way in money was many times higher, and in lives lost immeasurably higher.

You can say what you want about the evils of the Russian invasion, and it is evil no doubt about it, but for sure they have minimized the potential number of civilian casualties, if for no other reason than to save money.

I think “the US has pumped in $3 billion” should read “per month”. That doesn’t look to end anytime soon, and is probably only a fraction of the real number. They never report the real number. Everything reported by either side during a war is a lie. It can be no other way. It is good to keep that in mind.

Anyway the war is pretty much over. Russia has already pulled back to the annexed territories and likely won’t try to go any further. Those territories are friendly to Russia and hostile to western Ukraine, so reclaiming them will be a blood bath on both sides. It only remains for everyone to get used to the situation and the fighting to die down. The energy and food situation, however, is dire, and there doesn’t look to be any short term solutions to that. We’d be looking to replace 10% of the world’s energy supplies with wind and solar, something that’s taken us 30 years to get to maybe 3%. And that isn’t counting demand growth, which up until the present day has continued to outpace wind and solar no matter how fast we’ve built it. This will take many years to resolve. Russian energy will never again flow west. That bridge has been burned. Russia is a client state of China now.

And the Saudis don’t look like they plan to play ball, assuming that they could. What reason could they possibly have to try and suppress oil prices now that a major competitor is out of the market? Why would they sell more oil for less? No, I think we can count on them to study the situation very carefully and then do whatever promises to make them the most money. It is wishful thinking to believe otherwise. Besides, we keep telling them that wind and solar are going to put them out of business shortly, so they really have no incentive to invest in new production. The only economic thing to do is milk the existing infrastructure for all it is worth while they can.

It’s a good time to buy all the things. That includes insulation for the home, and one of those new high efficiency furnaces if you don’t already have one (and can get one). And a motorcycle. Motorcycles get great mileage. But not a European motorcycle. As with European cars, there will be no parts. I’ve got my eye on one of those new Harley Pan-Americas. Hopefully they are more reliable than their other models. If you are going to have to save money on gas, you may as well do it in style.

You could also buy an electric car I suppose. But gas is going to have to go a lot higher to justify replacing a battery, so remember the thing is only good for 7-10 years and then it is junk. Sort of like a cordless drill. Don’t get me wrong, I love my cordless drill, it is so damn handy. But every ten years I buy a new one because the batteries are caput.

#31 Parksville Prankster on 10.21.22 at 2:57 pm

Meanwhile, according to a Vancouver realtor, a riot may break out over an under priced listing

https://beta.ctvnews.ca/local/british-columbia/2022/10/20/1_6118290.amp.html

#32 Victor Llearna on 10.21.22 at 2:58 pm

Central Banks finally teached those stupid debt piggy sheep a lesson. Only problem is its a decade or 2 too late, especially in hellhole toronto. Article other day has Toronto pegged at worst bubble city in western world.

#33 Jens on 10.21.22 at 3:02 pm

#27 AEJ on 10.21.22 at 2:42 pm

Is that just a pure cash grab by TD then making it prime +6% when it was previously prime +3%?

You could argue that TD is reassessing the risk of default on unsecured credit lines (I suppose it is unsecured, with a spread as high as 3% in the first place) and hence slapping a higher premium on the interest rate.

But going from prime+3 to prime+6 is just shameless.
It’s just another event in the recent chain of corporate cash grabs (think credit card fees and return-to-store fees) which I believe more and more to be the real main cause of the ongoing high inflation rates.

#34 Søren Angst on 10.21.22 at 3:03 pm

#19 omasare

… yellow vests.

—————–

That’s the perpetually malcontent French. They b!tch about EVERYTHING. Are happy about NOTHING.

When you see the Germans storm the Reichstag and the Italians storm Palazzo Montecitorio … then I would worry BUT not before.

EU agreed today to an in essence price cap on energy. Different for each member state due fuel types.

Germans have a €200 billion subsidy program. Italy to do something similar, probably not that rich. Same with Spain. The rest are p!ss ant countries that don’t matter.

France. Who cares. No matter what their Gov does they will still b!tch.

Still, if you want/expect acrimony this Winter watch France 24 English on YouTube or translate/read Le Figaro on the web.

#35 The General on 10.21.22 at 3:03 pm

May I reveal my investment strategy?
•Faster horses
•Younger women
•Older whiskey
•More money
And I dwell on wheels.

#36 West New West on 10.21.22 at 3:09 pm

Its not just inflation, its prices overall. Just spent a week in Chicago on business, sharing Airbnb with two European business partners. After grocery shopping a few items for the week, they were so overwhelmed at the prices that they laid the groceries out on the counter, took photos and sent them back to friends and family in Europe, along with the receipt. It used to be that Europe was super expensive compared to Canada and the US, now its reversed.

#37 alex on 10.21.22 at 3:13 pm

did you say trudeau’s policies had NO effect on inflation??

I said what I said. – Garth

#38 Linda on 10.21.22 at 3:19 pm

At least Ruby waited for the flames to be doused before she got down & dirty:) Smart pup!

# 27 ‘AEJ’ – in case you missed it, Canadian banks have apparently figured out how to generate profits every quarter. Hence Garth recommending one owns bank shares.

The BoC will reveal its latest increase next week. Since inflation hasn’t yet been tamed into the target range I figure the pundits who are calling for a .75 increase are most likely to succeed. I think the BoC is going for tough love rather than channelling their inner Dirty Harry.

#39 Surprised on 10.21.22 at 3:24 pm

Check the fine print on the HELOC. We signed up for a $25,000 HELOC about 30 yrs ago, just in case we ever needed it. Never used it but it was a backup plan. Fast forward: 5 yrs ago we sold our large home and downsized to a smaller (but more expensive) bungalow, funny how that worked out… more money for less stairs? Anywho, our lawyer tells us we will have to pay the bank a discharge fee of about $400 to close the line of credit we had on the first house. What? Never touched it! Needless to say, after several discussions with [email protected] it was waived but be warned, most stuff has a price.

#40 Leftover on 10.21.22 at 3:25 pm

CB’s and governments colluded to increase the money supply in order to deal with covid. Now they’re out of bullets (at least on the fiscal side).

When policy confronts the bond market, the bond market wins. Just ask Liz Truss.

#41 the addict on 10.21.22 at 3:36 pm

#128 Old Boot on 10.21.22 at 1:00 pm
#132 Old Boot on 10.21.22 at 1:27 pm
#14 Old Boot on 10.21.22 at 1:54 pm
#15 Old Boot on 10.21.22 at 1:59 pm

…Digital control over access to our own money…

…they can control access…

…your phone is, of course, a GPS locator device…

++++++++

Cluster A personality disorders … include paranoid personality disorder, schizoid personality disorder and schizotypal personality disorder.

#42 Tender Vittles on 10.21.22 at 3:39 pm

Starting to wonder about the roaring 20s people were predicting. Enjoy the sale of course but hard to see how in such fundamentally different economic conditions and rate environments the market is going to switch into growth mode anytime soon. Even as a leading indicator, there doesn’t seem like much cheer for the short or even mid term.

#43 Westopia on 10.21.22 at 3:43 pm

“You can hate on Trudeau, Freeland and the Tiffer. But they didn’t invent this mess.”

You can’t inject $1.5 billion dollars a day in COVID relief benefits into an economy without creating inflation. Any (every?) economics 101 text book will cover this in the chapter under Monetary Policy. To absolve Trudeau and Freeland of any responsibility for the mess we are in is disingenuous. You know better Garth.

Nobody is absolved. Nor are they exclusively to blame. As stated, inflation is global. If Canada had resisted providing Covid economic support, we’d have experienced a recession of epic proportion. Do not wear political blinders. – Garth

#44 Roofer on 10.21.22 at 3:45 pm

I had read on this blog that 1 in 5 families in the GTA own a second property (rental)… I suspect returns for many will be negative the longer they hold.

#45 kommykim on 10.21.22 at 3:53 pm

RE: #9 Dr V on 10.21.22 at 1:46 pm
Ruby’s a dirty girl! But so cute.

“TD is putting the squeeze on Lines of Credit. When I first signed up for this it was (wait for it) 2.99% (Total) – a mere 18 months ago. Now it’s 11.45% !!!”

Yes, but they are only jacking Trav’s rate, not the prime.
It’s now a 6% spread. What did he do??

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

True. TD sends me promo ADs all the time. The last one on Oct 14th read like this:

“Until November 25, 2022, you’re pre‑approved for a TD Personal Line of Credit with a limit of $38,000 at a special interest rate of TD Prime Rate + 1.99% (notes: 1,2) TD Prime Rate is 5.45% as of September 8, 2022.”

Notes:
1 TD reserves the right to withdraw this offer or reduce the credit limit if adverse credit information is obtained. If your credit limit is revised, your interest rate may change. This offer is not transferable and is void if another TD Personal Line of Credit or TD offer has been accepted by you on or before November 25, 2022. Offer may be changed, extended or withdrawn at any time without notice.

2 Interest rate changes when TD Prime Rate changes or when TD changes the variance on the interest rate. TD has the right to change the variance on the interest rate at any time.

#46 Faron on 10.21.22 at 3:54 pm

Horrible person Seve Bannon off to jail.

https://www.nytimes.com/2022/10/21/us/politics/steve-bannon-sentence-contempt-congress.html

And Sail Away is gonzos for a while. Day just keeps improving.

#47 Dave Ahem on 10.21.22 at 3:56 pm

I got one of these too. I called them and explained that we had deposits in excess of 800K and a mortgage of about 300K and I didn’t want it to be changed.

They got back to me about a week later and said it would stay the same. I hadn’t used it since 2015 and probably never will.

#48 Bethany on 10.21.22 at 3:57 pm

I have had a modest LOC (under 10k) which I have been steadily paying off with my last few paycheques. I suspect TD will soon be raising my rate to 11.45% as well. If you’re unsure as to whether or not you should pay down your LOC, just think of it as getting an 11.45% annual return on the payment, since you will be saving $1,145 in annual interest for every 10k you pay down (that’s almost a hundred bucks a month)!

#49 Alberta Ed on 10.21.22 at 3:57 pm

Trudeau and his smirking sycophant Freeland didn’t invent this mess but they certainly contributed to it. Talk about financial illiteracy!

What would you have done? – Garth

#50 Crystal ball futurist on 10.21.22 at 3:59 pm

Rising rates are supposed to be good for rate reset prefs.

The 5 year bond yield has risen substantially, but rate reset preferreds (ZPR) are still not moving.

Any thoughts on why the rate reset preferreds are not moving?

Did you not read Doug Rowat’s piece on the weekend? Miss a day, miss too much. – Garth

#51 Wuhan we got y'all in check on 10.21.22 at 3:59 pm

This reminded me of the first unsecured line of credit I opened in the mid nineties with the old Canada Trust. It was 10 percent and I thought that was fairly cheap.

#52 TheDood on 10.21.22 at 4:13 pm

#1 Tom on 10.21.22 at 1:26 pm
True, inflation is less in Canada than other developed nations, but Trudeau has allowed a housing bubble to happen. We don’t know who owns half of the most expensive homes in Vancouver. Why? because we allow money laundering to happen. We have international agencies warning on this, yet Trudeau enacts toothless measures. Why do we have almost a third of properties being bought by those who own multiple properties? Because the governments won’t tax speculators enough.

_______________________________

Sure, let’s blame government for people’s out of control spending choices. How Canadian!

#53 alexinvestor on 10.21.22 at 4:20 pm

I unfortunately don’t see inflation going away next year. This year’s inflation is due supply chains, next year will be labor. Everyone is looking for large raises next year. CUPE is asking for 11.7% raises for the next 4 years. Lots of movement in my industry because companies have to offer more.

#54 WTF on 10.21.22 at 4:25 pm

Uh oh, the Banks of Mom, and the leveraged spekkers are gonna get beaten like a rented mule.

Seems like this may be the oft predicted and much delayed real RE armageddon may be finally coming to fruition. Waay Overdue.

It isn’t the Breathless Sanctimonious Wonder we had foisted upon us as PM that caused this debacle, he and his clueless minions just helped stage 3 along. Not much they can do now but watch the inferno with the rest of us.

How this mess unfolds will be interesting. Going to gut some folks badly.

Nice Dog pic BTW

#55 chalkie on 10.21.22 at 4:26 pm

Looks like the Banks have created new ways to discourage borrowing on Lines of Credit, even the secured ones. So many people are in trouble right now with the variable mortgages and the slide is just starting for the already variable owners. The banks are pushing hard to encourage 3- and 5-year mortgages, getting away from easy spending with the HELOC and LOC by increasing massive profits on variable loans.

Real Estate using attraction messages like this, CALLING ALL INVESTORS OR FAMILIES, most of us do not think this is much of an attraction for property investment right now, it is more like a one-way money pit, glory days are behind us, except it realtors.
Real Estate Prices are dropping like a stone in the air. This realtor even had the nerve to put their message in bold letters, meaning that the realtor was screaming, talking about desperation for a sale.

So far in the past six months, the general public has been much more of a realist when feeling out the value of a property vs the asking prices.

Is the housing market going to crash?
What the Americans have to say.

The last time the U.S. housing market looked so frothy was back in 2005 to 2007. Then home values crashed, with disastrous consequences. When the real estate bubble burst, the global economy plunged into the deepest downturn since the Great Depression.
Now that the housing boom is threatened by soaring mortgage rates and a potential recession.
Buyers and homeowners are asking a familiar question: Is the housing market so hot that it is about to crash?

Another realtor is advertising, this is the time to buy for investments, rent is at an all-time high and now is the time to buy your investment property. In my opinion, it is not, your deal will be in 2024.

Do not listen to realtors giving advice, (use your own common sense) the realtors have big commissions on the line, naturally they are going to tell you, there is no time like the present.
You are the person who will have all the headaches and sleepless nights, regretting tomorrow for paying too high for your property and stuck with the current rising ridiculous mortgage rates.
Second thing is, Renting is one big problem as a landlord, (been there, done that) the tenants have all the rights and you have few, stay away from being a landlord and keep your money, it is the unforeseen pop ups that will bring you down.

America and Canada, is glued at the hips, what happens there, follows here.

Quote of the day: Banks get in trouble for one reason: They make bad loans.

#56 Bib on 10.21.22 at 4:28 pm

Toronto real estate is resilient. Buy the dip. Toronto is cheap compared to similar world class cities like Manhattan, Hong Kong and Paris.

#57 Palpha on 10.21.22 at 4:39 pm

Global housing slump. I don’t hear anyone talking about how much money they “ made” on their house.
https://www.economist.com/leaders/2022/10/20/a-global-house-price-slump-is-coming

#58 DLT INC on 10.21.22 at 4:40 pm

After reading some of the comments today, here are a few comments of my own:
With governments being lambasted by a few today, I ask these people who they think is the government. In a real democracy, is not the government the representative of the people, which, of course is all of us. As such, should we not see to it that government policies reflect the interests of the people as a whole and if they do not, there is something wrong. Maybe what we have isn’t really very democratic or people are just too ignorant. Either way, shouldn’t, we, as a people concentration on doing something about that?

If the drug companies are making so much money and project that their charge for the Covid vaccines will quadruple in the coming year, how much real capitalism are we experiencing since these same drug companies received billions from governments to develop this vaccine in the first place. Someone is really getting ripped off here. Maybe we should have demanded shares in exchange for the moneys given to the drug companies. But that’s not how the capitalist system works you may say, but I say that when someone gives money to someone to develop a product he or she should naturally expect to receive dividends and become part owners in the venture. THAT is how real capitalism works.
With respect to the housing crisis, why has no one connected the dots, by seeing the relationship between rising home prices and AIR BNB’s. Also, why aren’t the property taxes for AIR BNB’s at the same rate as hotels because that is really what they are. The gains of Flippers, of course, should be taxed as straight income as ventures in the nature of trade not as capital gains.
Over the years, the government has almost turned a blind eye to unreported rental suites because I suspect that if they didn’t, a whole of people would find that they could not afford their houses. You wonder how people can afford their expensive homes? I argue that this is one significant reason. AIRBNB and unreported rental income have been the causes of house price increases. Then too, the tens of thousands of foreign students who rent suites, 10 or so to a unit sometimes, that used to go to locals, is another major reason why rents are so high in places like Vancouver. If you will remember when Covid hit and foreign students stopped coming, rental rates in the Vancouver region temporarily fell.

#59 Old Boot on 10.21.22 at 4:42 pm

#41 the addict on 10.21.22 at 3:36 pm

#128 Old Boot on 10.21.22 at 1:00 pm
#132 Old Boot on 10.21.22 at 1:27 pm
#14 Old Boot on 10.21.22 at 1:54 pm
#15 Old Boot on 10.21.22 at 1:59 pm

…Digital control over access to our own money…

…they can control access…

…your phone is, of course, a GPS locator device…

++++++++

Cluster A personality disorders … include paranoid personality disorder, schizoid personality disorder and schizotypal personality disorder.

—————

Heterodox opinions can certainly be linked to psychological disorders.

But they can also spring from the freedom of enjoying the ultimate luxury; that of no longer being financially extorted into paying lip service to the whims of my alleged social and intellectual betters.

If it makes you feel better to reject such binary thinking, you’re certainly free to think I’m both crazy AND financially independent. Fill your boots. But after much introspection, I’m pretty sure only one of those things is true.

Sorry to hear you’re still captured by addiction. My benevolent government cured me (and many other sufferers) of my vice through the judicious application of social stigma and a punishing taxes.

#60 Jim on 10.21.22 at 4:45 pm

The free/cheap money was nice when it lasted. And yes it will be nice when real estate is primarily regarded as a place where you live.!

#61 Caffeine Monkey on 10.21.22 at 4:49 pm

Shock and awe for those lulled by recency bias into thinking that change couldn’t happen this quickly. Me, I’m enjoying being nearly debt-free.

#62 cuke and tomato picker on 10.21.22 at 4:52 pm

Great post Garth. Some people have been living above
their means for 10 to 12 years because of low interest rates. The new reality is going to catch up with them
very quickly with every aspect of daily living increasing
in cost it may not be pretty.

#63 Observer on 10.21.22 at 4:59 pm

#59 Old Boot on 10.21.22 at 4:42 pm
#41 the addict on 10.21.22 at 3:36 pm

#128 Old Boot on 10.21.22 at 1:00 pm
#132 Old Boot on 10.21.22 at 1:27 pm
#14 Old Boot on 10.21.22 at 1:54 pm
#15 Old Boot on 10.21.22 at 1:59 pm

…Digital control over access to our own money…

…they can control access…

…your phone is, of course, a GPS locator device…

++++++++

Cluster A personality disorders … include paranoid personality disorder, schizoid personality disorder and schizotypal personality disorder.

—————

Heterodox opinions can certainly be linked to psychological disorders.

But they can also spring from the freedom of enjoying the ultimate luxury; that of no longer being financially extorted into paying lip service to the whims of my alleged social and intellectual betters.

If it makes you feel better to reject such binary thinking, you’re certainly free to think I’m both crazy AND financially independent. Fill your boots. But after much introspection, I’m pretty sure only one of those things is true.

Sorry to hear you’re still captured by addiction. My benevolent government cured me (and many other sufferers) of my vice through the judicious application of social stigma and a punishing taxes.

^^^^^^^^

You’re just weird.

#64 TMac on 10.21.22 at 5:09 pm

“Because the pandemic was global, CBs everywhere dropped rates to avert economic disaster as society shut down”
In turn they seem to have created another economic disaster.
Kind of a damned if we did, damned if we didn’t situation.

#65 Old Boot on 10.21.22 at 5:13 pm

Just when the WE scandal was fading quietly into the woodwork.

https://www.theglobeandmail.com/politics/article-a-canadian-tech-ceo-listed-on-12-million-arrivecan-contract-says-his/

#66 Crystal ball futurist on 10.21.22 at 5:20 pm

“Did you not read Doug Rowat’s piece on the weekend? Miss a day, miss too much. – Garth”

Indeed, I had missed that one. Thanks for pointer.
Read it. Makes sense. There’s definitely a lot of value here.

#67 GratefulCanadian on 10.21.22 at 5:29 pm

The elephant in the room is housing, here in Canada. Globally, prices are similarly high in most big cities of 1st world countries, but here in Canada we have crazy prices even in backwater towns lacking proper infrastructure (no trains, airports – because a highway that one has to drive for hours to get to an airport doesn’t amount to too much). Elsewhere, smaller places command much smaller prices. Here the insanity likely happened because of financial ignorance, greed, and (why not saying it out loud) sheer stupidity. WFH gets some folks a salary, but that doesn’t mean they are able to live in a house that needs upkeep, when up until they point all they had to do was to fork out monthly or condo fees checks.

#68 Wrk.dover on 10.21.22 at 5:29 pm

Pretty please Garth, may I link Zerohedge from Turner Nations FinViz?

Second half, pertinent

https://www.zerohedge.com/personal-finance/getting-rich-one-thing-tricky-part-keeping-it

#69 NOSTRADAMUS on 10.21.22 at 5:31 pm

WHISTLING A HAPPY TUNE AS WE PASS BY THE CEMETERY.
High prices and high mortgage rates do not make a happy marriage. As we are all now painfully aware, real estate prices have been inflated to ridiculous levels amid far too many years of Central Banks QE and interest rate repression. Sadly for a great number of the overindebted, the long overdue unwinding of this monetary madness has resulted in the days of wine and roses coming to a bitter end.
The Canadian housing bubble should have burst a long, long time ago (2010) We should have had a sharp correction, similar to the USA. But no, we skipped this spanking as a result of our vote friendly government policies. With no headwinds, we thumbed our noses and whistled a happy tune as we passed by the cemetery. We soldiered ever onward and upward to gain the dubious honor of being acclaimed, the most overpriced real estate market in the world. Job well done.
This real estate bubble has floated SOOO high it’s hard to see how any of the newer buyers inside (2016-22) can survive the fall. Which begs the question, what season is it? Answer, “Fall Season.”
On a happier note, in your lifetime, have you ever seen property taxes go down? Asking for a shell shocked friend. Devil’s Advocate.

#70 Old Boot on 10.21.22 at 5:31 pm

#63 Observer on 10.21.22 at 4:59 pm

You’re just weird.

————

I feel seen.

But you’re right, of course. It is weird to be a radical centrist in this polarized world that demands total allegiance to one of two political schools of thought.

It’s my only burden.

#71 Mike on 10.21.22 at 5:39 pm

If secured LOC rates are going to rise, does it still make sense to borrow from one to invest in a 60/40?? Assuming one can service the loan for multi years? Is there a borrowing rate % when it no longer makes any sense?

#72 Soviet Capitalist on 10.21.22 at 5:41 pm

So most canadians celebrate the handgun ban that started today?
Now the criminals will now for sure that it is illegal to do a crime using a handgun!

These sort of measures have worked well for countries like Brazil, North Korea, Soviet Union and Nazi Germany, haven’t they?

Switzerland has no problem allowing firearms, but who wants to live like them?! North Korea is what the canadians now crave, right?

#73 truefacts on 10.21.22 at 5:54 pm

“Pierre Poilievre would be as feckless as T2…” – Garth
___________________________________

2008/09 Deficit – during Great Financial Crisis $ 55 B
2020/21 Deficit – during Covid Crisis $314 B

6X the spending, but do you really think Trudeau’s spending did not exacerbate inflation? Really? You used to rail against inflation when you were a Conservative MP – why the change of heart and the hate-on for Pierre?

The Credit Crisis was vastly different than a pandemic which shuttered society and caused 14% unemployment in virtually a matter of weeks, then lasted more than two years. Having said that, government largesse during Covid was legion, and called out on this bog routinely. The deficit and debt are a disgrace. But Trudeau did not create global inflation. Do not fall for slogan politics. – Garth

#74 omasare on 10.21.22 at 5:56 pm

#34 soreentoast

Thanks I’m fluent in French, the real one not Quebec’s bastardized version.

You are extremely naive of what can happen, and how quickly it can happen, Italy got Mussolini and Germany got Hitler, I’m quite sure most people in Europe thought it couldn’t happen then, in their enlightened age.

Yes the French do bicker, but they also have been through non stop relentless waves of problems, not least terrorists attacks which we only have avoided in Canada thanks to having a massive ocean between us.

I was in Paris during the yellow vests , were you there?
I saw tanks and soldiers ready to defend the presidential palace and the National Assembly, and I don’t mean on TV, I mean I was actually there.

Yes they are spending billions of virtual money. But virtual money can’t buy what isn’t available. There is a finite amount of LNG available on the market. Of course Canada doesn’t have any to sell because sunny ways. What an ally…

The little westerner wants his steak, potatoes heating and petrol in the car.

#75 Omasare on 10.21.22 at 6:00 pm

#56 Bib on 10.21.22 at 4:28 pm
Toronto real estate is resilient. Buy the dip. Toronto is cheap compared to similar world class cities like Manhattan, Hong Kong and Paris

I never heard the words « world class cities » in Paris, Manhattan or London, UK. Only in Toronto. One wonders why

#76 wallflower on 10.21.22 at 6:07 pm

#36 West New West on 10.21.22 at 3:09 pm
It used to be that Europe was super expensive compared to Canada and the US, now its reversed.

2015 was the first year I was stunned at the price situation Europe v Canada. Since 2015, the change has escalated. I tell everyone, Europe is cheap. It is FAR cheaper to have a one month vacation in Europe (including airfare to get there) than in Canada. Food/drinks/accommodation.
As for the ones who live there, they have a far greater choice in living accommodations – so much more rental and much more shared rental – meaning built for share. We have zero built for shared rental! So young people can manage there, but not here. And shared rental means a bedroom in a condo built for 1 or 2 or a family, not built for share.

My lad is studying w Masters program in Europe – similar program (just not as technical or as useful) here is 10X tuition for Canadian citizen students. Accommodations in similar dorm room is 5X more expensive here. Food is about 3X more expensive in Canada. There is zero reason to take post grad degrees in Canada if Europe is an option for young people.
And prior to his studies, he was living in Germany, Switzerland and Portugal in cheaper rental shared accommodation options than here.

#77 Paul on 10.21.22 at 6:12 pm

#44 Roofer on 10.21.22 at 3:45 pm
I had read on this blog that 1 in 5 families in the GTA own a second property (rental)… I suspect returns for many will be negative the longer they hold.
————————————————————————————————
Interest goes up? Rents follow

#78 Ponzius Pilatus on 10.21.22 at 6:20 pm

#44 Roofer on 10.21.22 at 3:45 pm
I had read on this blog that 1 in 5 families in the GTA own a second property (rental)… I suspect returns for many will be negative the longer they hold.
——————
Yeah it’s funny.
It gone from: “If you rent, you’re paying the Landlords mortgage”,
To: If you’re a landlord, you’re subsidizing the renter”.

#79 Rochdale GM on 10.21.22 at 6:22 pm

F Legault, QC’s recently reelected PM, named a RE agent (Duranceau) as his new Minister of Housing. The last one (Laforest) would openly state she got advice from her RE agent friends. Connect the dot$.

#80 Ponzius Pilatus on 10.21.22 at 6:31 pm

#126 Just As We Thought on 10.21.22 at 12:32 pm
#118 Ponzius Pilatus on 10.21.22 at 11:07 am

Too many people and too many cars (F-150s).
Yearning to return to my roots in Austria.
To a small village by a pristine Alpine lake.
I know Europe very well, but still many places on the bucket list.
Gotta tie up some family business, and then it’s a go.
I love Canada, but deep down I’m still more European.
About two years from now. hopefully.
I’ll send postcards

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

So all that cheerleading for Canada being the greatest was just simple trolling.

Got it.

Better check on that lake though and make sure it’s still…pristine. A lot has changed in the 60 years you’ve been away. Probably polluted like everything else.

“You Can Never Go Home Again.”
————
Yes, you sure got me!
Red handed.
In my defense, I have to say that my pet peeve with Canada has always been  the car addiction ( in particular to  big gass-guzzlers) and the lack of decent mass transportation systems.
And I was always very vocal about that on this blog.
As for “You can Never Go Home Again”:
I agree, to a degree.
Not expecting to go back and walk into the pub and see my old buddies sitting at the same spots and arguing about politics.
But “Heimweh” has a strong pull,  like an addiction or something in our soul that can be triggered  by memories, sounds, smell or viewing “The Sound of Music” for the 100th time.
(just kidding, of course. Except for the music, awful movie. Even Chris Plummer did not like it).
Anyway it’s a powerful emotion, that many immigrants live with.
Many wish to go “home” and retire.
But many can’t, for a multitude of reasons.
So, I’m lucky that I can, and I owe it to myself to give it a try.
And by the way, Austria has the cleanest swimmable lakes on the planet.
I’ve been there just 3 years ago.
You should try it.
You’ll never swim in an ocean again.

#81 Dogman01 on 10.21.22 at 6:36 pm

#59 Old Boot on 10.21.22 at 4:42 pm

Heterodox opinions can certainly be linked to psychological disorders.

But they can also spring from the freedom of enjoying the ultimate luxury; that of no longer being financially extorted into paying lip service to the whims of my alleged social and intellectual betters.

———————————————–

Old Boot – truer words are rarely spoken.

It is better to have a permanent income than to be fascinating. – – Oscar Wilde

“The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable…”

“Truth, when discovered, comes upon most of us like an intruder, and meets the intruder’s welcome.” – Charles Mackay

#82 Ponzius Pilatus on 10.21.22 at 6:39 pm

#59 Ancient Booth
You’re favorite word seems to be “binary”.
Is this like “wax on, wax off” from “The Karate Kid”.
I liked the movie.
But not your comments.

#83 DJT on 10.21.22 at 6:49 pm

Canceling Carbon Tax and blockades on affordable Alberta Energy would drastically reduce inflation.
GO PP!

#84 PeterfromCalgary on 10.21.22 at 8:01 pm

I miss the old days when the economy was measured by all the stuff we built or grew in the soil. Now it is just a giant Ponzi scam.

#85 baloney Sandwitch on 10.21.22 at 8:16 pm

Inflation is government stealing from old people (retirees) who cannot demand pay raises. It is elder abuse. Throw the bums out asap.

Governments do not create inflation. Economies do that. Changing political leaders will not immediately alleviate this problem. – Garth

#86 mike from mtl on 10.21.22 at 8:21 pm

#74 omasare on 10.21.22 at 5:56 pm

Thanks I’m fluent in French, the real one not Quebec’s bastardized version.
////////////////////////////////////////////////////////

Oup there’s that Continental snobbery again, jane twofour and dolche would be grinning. If anything EU French is the nasal gloss bastard.

We have legitimate issues and terrible weather sure, but that line of thinking is straight out of the 60s.

Listen, QCFR is roughly the same language as mama France, save the pronunciation and some limited vocabulary – same as American English and GB.

Funny how the French expats (immigrants) positively love QC for its jobs, open hard working society, far less problems and laziness not to mention the emphasis put on their heritage.

#87 The Gold Standard on 10.21.22 at 8:23 pm

That’s typical TD raping their valued customers yet again. Ever since C-19 started they’ve been screwing over their customer base. They jacked up my chequing account reserve from $2K to $5K. This is the minimum balance I need to keep in order to avoid bank charges which they also increased by over 50%. They are scoundrels of the first order.

I will not give them another dollar of my business.

#88 The Gold Standard on 10.21.22 at 8:26 pm

Governments do not create inflation. Economies do that. Changing political leaders will not immediately alleviate this problem. – Garth

Governments create inflation by excessive borrowing and spending. CERB and tax cuts being examples of that.

#89 The Gold Standard on 10.21.22 at 8:30 pm

#31 Parksville Prankster

Those wacky real estate agents are at it again. The RE agent would “hypothetically” pay $2 million for it? We’ll that’s the problem, we don’t live in a hypothetical world we live in reality and $2 million is a pipe dream.

#90 LG on 10.21.22 at 8:38 pm

It isn’t just financial illiteracy.

Your closing paragraph … “Maybe we’ll come out of this mess understanding that real estate is where you, like, just live.”

I’d like to add: “Maybe we’ll come out of this mess understanding what it means to live, and what a blessing life is.

#91 crossbordershopper on 10.21.22 at 8:40 pm

i’d lend money to this travis guy at 12%. why invest in the market and take risk if you can get 12%. is it gtd, well no, but he will service the debt and isnt that cash flow from him all about the ponzi scheme of money anyway, he will pay back the principal in depreciated dollars years later, easier for him to pay back, and you benefit from the fatter monthly interest payment he makes to you. banks must be making money in this envrionment. i dont see how they dont. sure a few will be difficult to pay but the fat from everyone else is huge,
i am so sorry to see the over extended people who borrowed to buy rental properties and are totally be busted when rates plateau next year. working for nothing for years, properties wont appreciate and the service costs of there own principal residence mortgage, the line of credit borrowed against to buy another rental property with its own mortgage will be the death or at least working for nothing for years, debt is a double edge sword. i feel for people who are working for modest incomes and paying litterly 60% of there net pay in simply servicing there debt. rice and potatoes forever its a terrible circumstance they find themselves in.
luckily no bank every lent me any money and i pay cash. simpler life, less growth, but not stressed out.

#92 Randy on 10.21.22 at 9:01 pm

What’s a mortgage Garth ?

#93 the philosopher on 10.21.22 at 9:06 pm

I like today’s article because you have described some key facts. If we are to prosper in a market, we must 1) acknowledge obvious facts, 2) inquire after the things we don’t understand, and 3) sustain our efforts to distinguish #1 from #2.
A lesson from Liz Truss could be ‘don’t put power in the hands of someone who falls for knee-jerk and simplistic economic solutions.’ I appreciate your point that the pandemic was a major impetus for economic stimulus. Even though it was the needle that broke the debt-camel’s back, it was the most humane thing to do.

#94 Dogman01 on 10.21.22 at 9:10 pm

#85 baloney Sandwitch on 10.21.22 at 8:16 pm
Inflation is government stealing from old people (retirees) who cannot demand pay raises. It is elder abuse. Throw the bums out asap.

Governments do not create inflation. Economies do that. Changing political leaders will not immediately alleviate this problem. – Garth

————————————————-

The people whom get to the top of our Government are smart and ruthless, it serves their interest for the citizenry to think they are instead bumbling.

Governments across the West did indeed decide, seemingly in unison, that inflation was the preferred alternative to the economic pain of closing down their economies for the Pandemic. They printed oodles of money.

“The most basic question is not what is best, but who decides what is best.” – Thomas Sowell

When the Hockey Parents Association is in charge, don’t expect a lot of money left over for ballet. – Don Pitts

They made choices. The odd thing is they all made the same choice….

Monetary easing was the only rational choice. Much better than the alternative. But Canada’s pandemic largesse was outsized. – Garth

#95 crowdedelevatorfartz on 10.21.22 at 9:26 pm

@#26 Ponzie’s Prenatal posturing
“About 80% of Americans cite the “Economy” as their main concern.
And mid terms are around the corner.”

+++
Whatever.
Trump stacked the Supreme Court with anti abortion religious zealots.
And 50% of voters…are women.
Biden’s democrats will prevail in the midterms.
‘Prochoice beats No choice every time.

#96 Faron on 10.21.22 at 9:29 pm

#83 DJT on 10.21.22 at 6:49 pm
Canceling Carbon Tax… drastically reduce inflation

Would that be the revenue neutral carbon tax that commenters are announcing their decently large rebate checks from? LOL.

#97 Old Boot on 10.21.22 at 9:29 pm

#81 Dogman01 on 10.21.22 at 6:36 pm

#59 Old Boot on 10.21.22 at 4:42 pm

Heterodox opinions can certainly be linked to psychological disorders.

But they can also spring from the freedom of enjoying the ultimate luxury; that of no longer being financially extorted into paying lip service to the whims of my alleged social and intellectual betters.

———————————————–

Old Boot – truer words are rarely spoken.

It is better to have a permanent income than to be fascinating. – – Oscar Wilde

“The most dangerous man to any government is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane, and intolerable…”

“Truth, when discovered, comes upon most of us like an intruder, and meets the intruder’s welcome.” – Charles Mackay

———–

Cheers, Dogman.

I appreciate the measured tone and content of your posts.

#98 TurnerNation on 10.21.22 at 9:29 pm

On the Permanent rolling Economic and Social Lockdowns. Not set to end until 2025. The drumbeat begins anew. Corvid is life; Life is Corvid.

.Ontario reports 109 new COVID-19 deaths up from 67 as wastewater signals rise (cbc.ca)

—In the news. @Faron trusts the science!

.FDA’s vaccines chief sees possibility of more Covid boosters — sooner than he’d like (statnews.com)

.Pfizer COVID vaccine price hike to boost revenue for years, rivals may follow (reuters.com)

————-
Another day in a Former First World Country. Doctors and administrators are baffled.

Folks the ERs are full again. The Hospital Capacity! (We were to be so healthy after 3 years of The Rules and mandates?)
There is only one solution. A hard lockdown for only Two Weeks to Stop the Spread of the Flu.
Two Weeks to Flatten the Curve.
Only 2 weeks. Honest this time. Not 2 years…haha?

https://www.cbc.ca/news/canada/canada-ontario-quebec-bc-alberta-emergency-rooms-1.6616811
“Hospital emergency departments are jammed up in much of the country even before the traditional flu season begins, raising concerns about the winter months ahead.
In Montreal, for instance, ERs hovered at about 150 per cent capacity for much of the past week — and some surpassed 200 per cent.”

#99 crowdedelevatorfartz on 10.21.22 at 9:40 pm

@#54 WTF
“It isn’t the Breathless Sanctimonious Wonder we had foisted upon us as PM that caused this debacle, he and his clueless minions just helped stage 3 along. Not much they can do now but watch the inferno with the rest of us.

++++

True.
I realize Trudeau didn’t cause Covid and the Inflation debacle but his immediate announcement of “emergency Covid” payment to millions of people was too much. too soon.

Everyone dogpiled onto that financial fandango.
I’m hearing thta CRA is auditting some scammers but $300 BILLION dollars …..pee’d against a debt wall.
?

#100 crowdedelevatorfartz on 10.21.22 at 9:53 pm

If Russia can’t fight Ukraine….
They’re going to flood it….

Possible Dam breach looming.

https://www.reuters.com/world/europe/ukraine-curbs-power-usage-after-russian-attacks-destroy-some-energy-plants-2022-10-19/

#101 crowdedelevatorfartz on 10.21.22 at 9:58 pm

https://www.reuters.com/legal/us-jan-6-capitol-riot-panel-issues-subpoena-trump-2022-10-21/

Long long LONG overdue….
Like the housing ponzie realignment

#102 Prop Stopper on 10.21.22 at 10:08 pm

Trudeau and Freeland ARE responsible, they chose to follow the globalist lemmings blindly, we didn’t have to print trillions. Tiff should have acted within his mandate and not act instead like a cheerleader. This Putin Putin nonsense is propaganda as Canada has less than 1% trade with Russia. Trudeau shut down gas and oil not Putin. Let’s get real. The Emergency Act was Trudeau not truckers. The Covid tactic of mass shutdowns was a great reset power gouge, not following the science. It was following the WEF that caused the real trouble. Let’s start pointing fingers at the bad guys and not just waving our hands in the air like mindless orangutans, we might get somewhere.

Scary. – Garth

#103 Terry on 10.21.22 at 10:12 pm

It looks like the bond vigilantes are back after over a decade asleep. They destroyed Britain’s Liz Truss government and are sending shock waves everywhere else. Elsewhere in the news, a major undersea communications cable has been cut off southern France. Hospitals in Moscow have been ordered to equip and stock operating rooms in bomb shelters and neighboring Belarus orders it’s schools to open, clean, paint and stock bomb shelters. And finally there is this………..Television stations in both Russia and in Ukraine are broadcasting claims that a NUCLEAR BOMB is in Mykolaiv, Ukraine, and will be detonated! Lastly…….I got some pretty good bargains the past couple of weeks adding more to my positions. I guess I’ll just keep doing what I’m doing until I can’t since the future of our whole world looks very bleak at this present time.

#104 k on 10.21.22 at 10:15 pm

Hi Garth ! Love your blog. I know you are not in love with “Skippy”. However when it comes to even the mention of fiscal responsibility he shines a dim light in the tunnel of reckless spending by the government. Yes it is simple to say it’s Tiff’s fault for raising rates when it is a global thing and yes Justin had to pour money out as did all economies . Aside from his obvious political posturing he is the first in a long time in Canada to talk about financial prudence at some point in government spending. Nobody seems to care . Idiots a plenty.

#105 Capt. Serious on 10.21.22 at 10:27 pm

The one rule I remember from econ class is when central banks raise interest rates, the economy will contract. I would be surprised at this point if something doesn’t break somewhere in the banking/finance system, leading us to our next crisis.

At least the weather is nice this weekend.

#106 Facts Matter on 10.21.22 at 11:04 pm

DELETED

#107 The joy of steerage on 10.21.22 at 11:18 pm

Now that is one busy happy beaver…

https://www.dailymail.co.uk/news/article-11340795/Adorable-rescued-beaver-follows-natural-instincts-blocks-doorway-sticks.html#v-4264241517350597871

#108 Tojo Tonite on 10.21.22 at 11:42 pm

Garth,

With inflation rolling in along with austerity, how long b4 we see this website monetized with ads, combined with cost cutting countermeasures which could include trimming of the high cost suspender wearing execs, use of interns, automated robo-responses, etc…….

#109 the Jaguar on 10.22.22 at 12:14 am

Given the current state of madness in the world ( and these Blob posts ), I have retreated to the refuge of the past. Disco. A temporary distraction from the madness going on the world….

Dharma Bum, may I ask you for this next dance? A real Oldie, but one ahead of it’s time, and if the volume is cranked up drowns out all the other flotsam jetsam on this blog , which have reached levels which can only be described as ‘Beyond the Pale”.

I have Sailo next on my dance card, (or as he is sometimes known in my imagination as “Buzz Lightyear”) ,but it is hunting season. He’s on a camp cot somewhere in the wilderness…..actually viewing the night stars.

This one is for you Dharma Bum

https://www.youtube.com/watch?v=oWYJoIyQq7I

#110 SmarterSquirrel on 10.22.22 at 12:20 am

Garth, Thanks for your blog and all the information and insights you provide.

You have mentioned a few times the significant decline in real estate values and how they are likely going lower. I am curious whether the resulting increase in loan to value ratios will drive banks and other lenders to seek lump sum payments to get ratios back to where they need to be. Any idea what percent of mortgage holders could be impacted in Canada?

#111 DJT on 10.22.22 at 1:00 am

#96 Faron on 10.21.22 at 9:29 pm
Yes, ending Carbon Pricing should be the goal to drastically reduce inflation, of which Carbon Taxes are a small part.

#112 Bonobo on 10.22.22 at 1:20 am

“The answer: both. As a society we’re about to reap the harvest of FOMO, recency bias and financial illiteracy.”

I think you mean: “As a society we’re about to reap the harvest of Canadians voting for a Liberal-NDP colalition out of control government.”

“For they sow the wind, and they shall reap the whirlwind.” Hosea 8:7.

Judgement is coming fast.

#113 yvr_lurker on 10.22.22 at 2:04 am

The chicken-and-egg question of the day is whether 12% LOCs and 6% mortgages will protect new borrowers from themselves, or suck off so much disposable income from existing ones that a recession rolls in.
————–
The prediction from most experts now is that there will be a rather major recession owing to the factor you just articulated. So how are equity markets going to recover and push forward to their previous heights in such a scenario when corporate earnings start dropping and consumers are not purchasing much except the essentials. I think it will be a slow period for the next few years

#114 James on 10.22.22 at 2:08 am

Governments don’t create inflation? Gee whiz, so who was it running up the deficits every year? Spending money that they were not taking in from taxes? Hmmm.

Who is that sets the BoC mandate? When the BoC comes up with the novel new way of printing money called QE, who is responsible to have them knock it off?

Ya, don’t tell me the government doesn’t bare responsibility. Absurd. It’s 100 percent the government’s fault for continued inflation and the lowering standard of living over the last few decades.

#115 Allan on 10.22.22 at 3:05 am

Let’s make a new pandemic. The current one is worn out by now.
It should help in raising home prices and keeping interest rates down. It worked well with last pandemic. Why not repeat the same trick?

#116 Built to Spec on 10.22.22 at 3:27 am

crowdedelevatorfartz

Trump stacked the Supreme Court with anti abortion religious zealots.
And 50% of voters…are women.
Biden’s democrats will prevail in the midterms.
‘Prochoice beats No choice every time.
– – – – – – – – – – – – – – –

Trump didn’t stack anything. He appointed judges who follow the law and constitution, unlike judges appointed by Democrats whose opinions rubber stamp leftist political views.

Reversing Doe wasn’t “no choice”, it just returned abortion law to the states, a legally correct position. If you want a federal abortion law you could pass it in Congress, which the Democrats could do when they have control, like now.

And women don’t all have uniform political views – what a sexist thing to say! Many women, possibly a majority, oppose the quasi-infanticide, abortion-until-birth views of the Democrats/Left.

#117 under the radar on 10.22.22 at 5:15 am

71 – Free money is over. Only expensive lessons remain. I suspect there are a few on this blog who are trapped paying interest on their borrowed money while waiting for their portfolio to recover to even.

#118 Steven Rowlandson on 10.22.22 at 7:06 am

Okay what about depositors, what is in it for them?

#119 Jane24 on 10.22.22 at 7:48 am

I have spent about 25% of my life in Montreal, I grew up there and no many don’t like pure Parisian French or the speaker! However hubby speaks Quebec French and they welcome him when we visit the family in Lyon and Toulouse.

Quebec can be a closed society in some ways unless you can prove that you came over on the boat with Jacques Cartier in 1534 and have a “pure wool’ surname like Lefebvre or Belanger. Our family in Montreal are tr-lingual, English, French and Italian but so many top employment and society doors are shut to them – not Quebec enough. Shame. Best place in Canada to hang out in the summer.

#120 Saint Herb on 10.22.22 at 9:42 am

“A 30 per cent drop in Toronto prices would bring prices back down to where they were in December 2020. For Cross, a 40 to 50 per cent home price decline — which would take prices back to where they were in 2015 — is needed in the country’s major markets to make real estate sustainable again.”

This is what I’ve been saying all along.

#121 crowdedelevatorfartz on 10.22.22 at 9:55 am

@#116 Spectacle

Tell that to the US voters in 3 weeks.
:)

#122 Dharma Bum on 10.22.22 at 10:07 am

#30 Nonplused

And a motorcycle. Motorcycles get great mileage. – I’ve got my eye on one of those new Harley Pan-Americas. Hopefully they are more reliable than their other models.
———————————————————————————————————

Motorcycles are a great way of efficiently getting around to do most things, as long as you don’t have a ton of stuff to haul.

Trouble is…weather. In this country, for the most part, it’s cold, snowy, and rainy for approximately half the year.

Harley Davidsons are terrific. The reputation they had of being “unreliable” is ancient. I ride a 2000 Heritage Softail – got it brand new – and it still purrs like a kitten. Well, more like growls like a tiger. It’s heading into “vintage” territory. At 22 years old, she’s a beauty.

I’m gonna ride her today and the rest of the weekend, as we are getting a final kiss of summer with 20+ degree temperatures and sunshine for the next couple of days.

Then, it pretty much has to sit. Might get a few days of Indian Summer in November, though. Last hurrah.

So, not the most practical vehicle, but definitely a lot of fun. And fuel efficient.

And cool…in an old fart boomerish geriatric sorta way.

Like me!

#123 Saint Herb on 10.22.22 at 10:10 am

https://www.thestar.com/business/2022/10/22/torontos-real-estate-market-will-crash-30-or-more-by-the-spring-economists-say-how-bad-will-it-be.html

First article I’ve read that tells it like it is!

#124 the Jaguar on 10.22.22 at 10:13 am

@#116 Built to Spec on 10.22.22 at 3:27 am
crowdedelevatorfartz

Trump stacked the Supreme Court with anti abortion religious zealots.
And 50% of voters…are women.
Biden’s democrats will prevail in the midterms.
‘Prochoice beats No choice every time.
– – – – – – – – – – – – – – –

Trump didn’t stack anything. He appointed judges who follow the law and constitution, unlike judges appointed by Democrats whose opinions rubber stamp leftist political views.

Reversing Doe wasn’t “no choice”, it just returned abortion law to the states, a legally correct position. If you want a federal abortion law you could pass it in Congress, which the Democrats could do when they have control, like now.

And women don’t all have uniform political views – what a sexist thing to say! Many women, possibly a majority, oppose the quasi-infanticide, abortion-until-birth views of the Democrats/Left.++++

It’s 2022. Birth control widely available in many forms, most women working outside the home if they choose to do so, and most non Neanderthals understanding not everyone wants to be a parent.

Why is ‘abortion’ still being talked about and used as a ‘political divide’ issue? Weaponized in every election even in Canada. “Choice” and “Freedom” can be found at every pharmacy. Stop clogging up hospitals and clinics with your lazy ass solutions to unwanted pregnancy. Yes, I said it, and I’m not taking it back.

#125 Dharma Bum on 10.22.22 at 10:29 am

#97 Old Boot

“It is better to have a permanent income than to be fascinating.” – – Oscar Wilde
———————————————————————————————————

Please refrain from relevantly quoting intelligent, scholarly, or otherwise interesting and knowledgable people.

According to Ponzius the Perfect Pontificating Poobah, it shows that you, yourself, have nothing of substance to contribute.

Please heed his most wise, substantive, insightful words.

He is, after all, the smartest dog in this pound.

Just ask Crowdie.

(And everything Austrian is the BESTEST EVERRRR.)

#126 UCC on 10.22.22 at 10:36 am

Having said that, government largesse during Covid was legion, and called out on this bog routinely. The deficit and debt are a disgrace. -Garth
——

More debt that all other PMs combined- caused by one man—with a silver spoon in his mouth….He is on track to ruining the lives of generation of people.

#127 Prince Polo on 10.22.22 at 11:47 am

Gartho – are you going to play yourself in the Big Short 2.0 movie? LOCs going uppa uppa UPPA is music to my ears. The juicy bank divvies just keep ringing that cash register!

#128 Mike E on 10.22.22 at 2:21 pm

My own Red and White Bank unsecured LOC has jumped from about 5.5% to 8.5% since the CB rate hiking started.

This feels like a relative bargain.

#129 Mark Bourrie on 10.22.22 at 5:45 pm

Sweetie hound!

#130 FLHTK on 10.23.22 at 8:03 am

Houses are now for the rich! Like a rich person once told me, you can buy it but affording to keep it is another thing in itself….