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Originally Posted by nik-
Sometimes a number that technically works on paper during a stress test doesn't really work in the real world. It doesn't need to be fraud, it can just be underestimating what "tight budget" can actually mean.
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Stress test also doesn't include horrible consumer spending habits such as leasing a new car every 2 years, buying the latest iPhone, getting HELOCs and building that new pool and bathroom expecting that the raising housing prices will pay for itself.
Stress tests also only started in 2018 and a stress test done in 2018 would have been higher then a 2020 mortgage.
And when you have our BoC governor encouraging Canadians to borrow and buy buy buy at historically low rates, you are going to have a bad time.
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“If you’ve got a mortgage of if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,” Macklem said.
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And Canadians sure took advantage of those comments and borrowed borrowed borrowed.
https://www.cmhc-schl.gc.ca/en/blog/...-mortgage-debt
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Purchase of new property is the main driver of mortgage debt for chartered banks, especially in the uninsured space. In the third quarter of 2021, close to $58 billion worth of residential mortgages were extended. This is an increase of 60% compared to the same period in 2020 and almost double what was extended in the same period of 2019.
Refinancing also contributed to the increase in mortgage debt, (+16%) year-over-year. This is due to mortgage borrowers capitalizing on the low interest rate environment and added equity due to house price increase.
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The bill is coming and it's not pretty.