Govt regulator says interest rates extremely attractive…

We can interpret a sentence to mean several different things…   Take for example the following comments made by the head of the Office of Superintendent of Financial Institutions (OSFI), Julie Dickson:

– “current levels of interest rates have already made borrowing extremely attractive to all borrowers.”  (Wall Street Journal)

– “Extremely low rates will be with us for even longer than envisaged before the summer.” (Globe and Mail)

What does that mean to you?   To me, it simply means we are in a historic low interest rate environment.. with an economy that is better off than the rest of the world…  add it all up and it looks like a pretty good time to borrow, if you ask me… Borrowing for a house is NOT the same as borrowing for a car or a trip… A house is a tangible asset.. it appreciates tax-free.  It’s a good investment…

Borrowing to invest

Speaking of borrowing to invest…. rental properties have never looked more attractive…  Borrowing to invest is NOT a bad thing and it is NOT what the regulators and economists are concerned about… They are concerned about borrowers that have borrowed to their absolute maximum capacity and cannot afford to miss a day’s work without being in danger of defaulting on a payment…

Take a bow Canadians… we are doing great!

Last time I checked, Canadians were acting as conservative as ever…. paying down their mortgages faster and borrowing at a slower pace…  Look at these stats from The Montreal Gazette:

– “In Canada, an average of 63 per cent of a household’s home value is equity, while in the U.S. this figure is just 39 per cent.” (Matthieu Arseneau, National Bank).

– “In Canada, 40 per cent of homeowners have no mortgage debt; in the U.S. it’s 31 per cent.” (Matthieu Arseneau, National Bank).

– “Debt amounts to just 24 per cent of a household’s average net worth in Canada, while it’s 29 per cent in the U.S.”  (Matthieu Arseneau, National Bank).

– “Mortgage debt, which was climbing by 10 per cent or more through last year, has throttled back to a six-per-cent pace. Other consumer borrowing hasn’t grown at all over the past year.” (Benjamin Tal, CIBC World Markets).

–  “More than 70 per cent of all mortgage-holders are on an accelerated payment schedule, Tal says, adding: “That’s a smart use of low interest rates.” (Benjamin Tal, CIBC World Markets).

Hmmm… the economists tell us we are doing pretty good, judging from those comments….

Final thoughts.

If interest rates were 6%, 7% or 8%, what we would the media be saying?   ‘INTEREST RATES AT HIGHEST LEVEL IN 10 YEARS!’ … or something like that…  and I bet we would also see this headline…  ‘BANKS WARN THAT FURTHER RATE HIKES ARE ON THEIR WAY….BEST TO LOCK INTO A LONG TERM FIXED RATE NOW’…..

Use your own judgement… seek out professional, non-biased (non-bank) advice…. Hey, I don’t know about you, but I’d rather borrow at 2.60% for aVariable rate or 3.39% for a Fixed rate, than 6%, 7%, or 8%…..  We are experiencing historical low interest rates… they will be here a little longer but they won’t last forever.. enjoy them now… take advantage…