Personal Debt levels and Mortgage Debt levels
Unless you’ve been living under a rock for the past 4 years, it’s impossible to not know the Federal govt’s concern about Canada’s Personal Debt level. The media has covered this topic extensively. After all, bad news sells more than good news…..
Here’s some current stats from Statistics Canada that really gets my blood boiling!…. We now carry a total debt load equal to around 164% of our annual household income. That’s at an all-time high…. The govt is convinced that we are spending too much or our income towards real estate… They have made numerous changes to mortgage lending rules that make it much tougher to qualify for a mortgage. If there really is a problem, why is the govt focusing on low-interest rate products like mortgages?
Current mortgage rates are at around 3.00%. Current credit card rates range from 9.99% to 19.99%….personal loan and car loan rates range from 6.00% to 9.00% and up. Aren’t low-interest rate products better than high-interest rate products? We have not seen any changes to these non-mortgage debt products…. Who benefits from higher rates? Yup, your banker!…
OLD CHRISTMAS MOVIE BUT THERE’S A MODERN STORY
I was watching that classic Christmas movie, It’s a Wonderful Life. Love that movie and it’s overall message… There is one scene that sounded so similar to today’s current Federal govt and BIG SIX BANK mentality…..I had to share this… click here for the video clip… and if you can’t watch the video, here’s a short description of the scene and it’s message…
Peter Bailey just passed away and there’s a meeting with the Board of Directors…..Mr. Potter, the greedy old banker, is questioning why Bailey Building and Loan company should extend loans to families that want to buy a home. Mr. Potter didn’t see the value in providing easy access to mortgage money….He said they should save their money and wait til they have enough to buy a home…. then George Bailey steps in and reminds the Mr. Potter and the Board of Directors that owning a home makes better citizens….doesn’t it make them better customers? Why should people wait? How long do they have to wait? Until they are too old?
See any similarities to today’s tighter mortgage rules? We may not have it as bad as the citizens of Bedford Falls, but we are most certainly being pushed towards higher interest rate products…
SOME MORE STATS THAT SHOULD MAKE YOU THINK…
Did you know that Stats Canada reported as of Q3 2012, there were $1.079trillion in outstanding mortgages…. but there was also $474bilion in non-mortgage debt!!? Let’s put this another way…. if you have a mortgage of around $300k…. you probably also have other debt totaling $140k…. That $140k scares me… and it should scare you too! Shouldn’t the govt be focusing on the non-mortgage debt before the mortgage debt? If we make it harder to access mortgage funds, and we don’t change any rules for Credit Card borrowing or Car Loans or other Personal Loans, then it’s safe to assume that non-mortgage debt will rise… causing consumers to pay higher rates of interest.
Isn’t owning a home part of the Canadian dream? Shouldn’t we encourage home ownership instead of discouraging it? By the way, rental rates are forecast to increase due to the tougher mortgage rules for rental properties…..so who is the real winner with all these new policies…? Just a reminder… the BIG SIX BANKS reported a record $30billion in profits in 2012!! Happy New Year!
Feel free to contact me with your questions or comments.
Regards,
Steve Garganis 416 224 0114 steve@mortgagenow.ca
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Steve Garganis View All
As an industry insider, Steve will share info that the BANKS don't want you to know. Steve has appeared on TV's Global Morning News, CBC's "Our Toronto" and The Real Life TV show. He's also been quoted in several newspapers such as the Globe and Mail, The Toronto Star, The Vancouver Sun, The Star Phoenix, etc.
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“Shouldn’t the govt be focusing on the non-mortgage debt before the mortgage debt? If we make it harder to access mortgage funds, and we don’t change any rules for Credit Card borrowing or Car Loans or other Personal Loans, then it’s safe to assume that non-mortgage debt will rise… causing consumers to pay higher rates of interest.” Bingo, you hit hammer right on the head. This is proof that the government, while trying to “save us from ourselves”, is actually doing quite the opposite. I believe the government knows very well that people are far more likely to default on (unreasonable interest rate debt) credit card debt than their mortgage debt. For what would it benefit a person to have all of their credit cards paid down just to default on their mortgage and therefore have no home. Like most people, I believe we would all chose our mortgage as the LAST debt to default on. The government is clearly banking on the fact that more people will turn to credit cards and loans, knowing full well that people WILL default on these first, if they cannot afford them. It is reasonable to assume that the government stands to gain in some way. They have made it harder for people to get reasonably priced monthly mortgages with affordable interest rates and instead are causing them to rely on credit cards which offer unreasonably high interest rates which potentially lead to unaffordable monthly payments and possibly default. The government pretends that it does not want people to default on mortgages so is making it harder for people to get them. This is absolute bull$hit. The government wants people to default and are increasing their margin by choosing the easy to get credit card interest that they KNOW people will default on.