Banks are now landlords? 90 year amortization.

[Xtrema]

https://www.bnnbloomberg.ca/some-can...pert-1.1934133

“I’ve had many clients with amortizations, that are 70, 80, even 90 years remaining, in the extreme cases, and that's simply because their payments are not going towards any principle at all,” he said.

“Otherwise, we may have generational mortgages where these mortgages can be passed on to their kids, if the amortization stays at elevated levels at 70, 80, or even 90 years. So something has to happen.”

WTF.

[Buster]

This is inevitable, and I've been saying it here for years.

The gov't will be bringing back 40 year mortgages (or more).

[ExtraSlow]

I'm in.

[ercchry]

These would be true variables (unless they’re making exceptions on adjustables too) either way though, at some point they will have to adjust the payments if they no longer cover the interest portion. You will most likely also see the am reset at renewal too. Saying they will become multigenerational is just silly

[Buster]

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These would be true variables (unless they’re making exceptions on adjustables too) either way though, at some point they will have to adjust the payments if they no longer cover the interest portion. You will most likely also see the am reset at renewal too. Saying they will become multigenerational is just silly

Japan enters the chat.

[jwslam]

I've been paying a 25yr amortized variable mortgage for 9 years now... It says I have 28 years to go.

[pheoxs]

Seems like a weird skew of things. If you're on a variable mortgage where the payments stay the same until your trigger rate then yeah you can end up barely paying off the principal and it appear like it'll take 70 years to pay off. However when you're 5 years or whatever comes due and you need to renew you're going to get absolutely fucked because not only is it recalculated but your payments will be significantly higher to get you 'back on track'. Though maybe they'll let you relock in at another 25 year amortization. CMHC won't allow anything higher for high ratio mortgages though non-insured mortgages may.

There's going to be a lot of people in a world of hurt in 2.5-4 years when all those variable mortgages come up for renewal and they learn the worst is yet to come.

[Buster]

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Seems like a weird skew of things. If you're on a variable mortgage where the payments stay the same until your trigger rate then yeah you can end up barely paying off the principal and it appear like it'll take 70 years to pay off. However when you're 5 years or whatever comes due and you need to renew you're going to get absolutely fucked because not only is it recalculated but your payments will be significantly higher to get you 'back on track'. Though maybe they'll let you relock in at another 25 year amortization. CMHC won't allow anything higher for high ratio mortgages though non-insured mortgages may.

There's going to be a lot of people in a world of hurt in 2.5-4 years when all those variable mortgages come up for renewal and they learn the worst is yet to come.

This isn't a problem of individuals, it's a macro problem which gov'ts and central banks will try to solve.

Inflationary fiscal and monetary policy will always lead to this type of outcome.

[ercchry]

There is already a mechanism in place. These products are working as designed… you need to reset am? It’s a refinance, it’s not insured… prolonging the sticker shock kept these people in their homes and housing prices strong, none of these rules matter once they have enough equity for conventional. Don’t have enough? Sell, welcome back to renting… underwater? Foreclosure…. CMHC will garnish your pay till you’re even. Market stays strong for everyone else, no pending crash, still shortage of housing starts, still net migration

[killramos]

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There is already a mechanism in place. These products are working as designed… you need to reset am? It’s a refinance, it’s not insured… prolonging the sticker shock kept these people in their homes and housing prices strong, none of these rules matter once they have enough equity for conventional. Don’t have enough? Sell, welcome back to renting… underwater? Foreclosure…. CMHC will garnish your pay till you’re even. Market stays strong for everyone else, no pending crash, still shortage of housing starts, still net migration

Housing valuation and transactions have always been marginal in nature.

What do you think happens when you skim 5% if buyers off the top? When 5% more people list their homes becuase they can’t afford them?

Values drop across the board. Now more people are underwater. Now more people list.

The whole thing snowballs and is an inherently unstable system.

The correction that is coming has potential to be massive.

[Buster]

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There is already a mechanism in place. These products are working as designed… you need to reset am? It’s a refinance, it’s not insured… prolonging the sticker shock kept these people in their homes and housing prices strong, none of these rules matter once they have enough equity for conventional. Don’t have enough? Sell, welcome back to renting… underwater? Foreclosure…. CMHC will garnish your pay till you’re even. Market stays strong for everyone else, no pending crash, still shortage of housing starts, still net migration

you're thinking like a lender, not an economist.

[ercchry]

Read the last sentence…

[killramos]

I think your “market stays strong for everyone else” bit is dangerously naive.

[suntan]

There's a reason why the Libs have opened up the immigration taps.

[ercchry]

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I think your “market stays strong for everyone else” bit is dangerously naive.

Is it though?

We’re now officially over 40m pop. We’re importing 500k people a year, new housing starts are low and interest rates and zoning challenges are not helping to make that better. (Don’t have Canada stats, but AB was 40k net migration and only 10k new starts) Anyone that entered the market before 2020 is up (all markets) TO/Van are off from ATH of 2021, but are creeping up again. So this leaves only a few demographics that have their pants down… high ratio buyers in two cities on variable rate loans that were originated in the last 2-3 years… the net migration will easily buy that up (if it even happens, as Canadians pay their mortgages, at the expense of everything else. And lenders work where they can to keep from foreclosures).

[Buster]

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There's a reason why the Libs have opened up the immigration taps.

Bring it on. Immigration is on the one policy that gives Canada a competitive edge.

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Is it though?

We’re now officially over 40m pop. We’re importing 500k people a year, new housing starts are low and interest rates and zoning challenges are not helping to make that better. (Don’t have Canada stats, but AB was 40k net migration and only 10k new starts) Anyone that entered the market before 2020 is up (all markets) TO/Van are off from ATH of 2021, but are creeping up again. So this leaves only a few demographics that have their pants down… high ratio buyers in two cities on variable rate loans that were originated in the last 2-3 years… the net migration will easily buy that up (if it even happens, as Canadians pay their mortgages, at the expense of everything else. And lenders work where they can to keep from foreclosures).

This is simply a version of the old RE myth, that it is an inherently diversified industry which could never make a directional move en masse. As kil said, this is a dangerously naive position.

[suntan]

I'm not sure how you can have a RE correction when there's tens of thousands of people arriving that need shelter.

Any collapse will need to be caused by the Bank of Canada.

[Buster]

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I'm not sure how you can have a RE correction when there's tens of thousands of people arriving that need shelter.

Any collapse will need to be caused by the Bank of Canada.

Are those people bringing capital into canada, or are they just bringing labour (and future babies) into canada?

Asset value inflations based on eye-watering leverage only continue so long as people are convinced that the leverage will work for them, not against them. The moment that psychology changes, look out below.

[ercchry]

You need PR for a high ratio loan… so those that are buying as usually buying cash, or close to it

[suntan]

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Are those people bringing capital into canada, or are they just bringing labour (and future babies) into canada?

Asset value inflations based on eye-watering leverage only continue so long as people are convinced that the leverage will work for them, not against them. The moment that psychology changes, look out below.

What does it matter what they bring? You can answer that question yourself, clearly they're mostly just oxygen-co2 converters. The point being they need to live somewhere, and that rental income is going to be sufficient to keep RE afloat ceteris paribus.

And yeah hey people aren't going to sell their houses for less just because they think rates are going to go up.