Saturday, April 24, 2010

In BC... we are not Alfred E. Neuman

In the last post I talked about blissful ignorance, a comment triggered by Financial Post article which covered a recent poll by The Investors Group to find out if homeowners across Canada were concerned about the recent rate rises.

Now one thing stuck out in my mind.

Could people living in the Greater Village on the Edge of the Rainforest really be that ignorant?

Turns out Vancouver Sun columnist Pete McMartin was wondering the same thing. Working with Sun colleague Fiona Anderson, the pair advises that the Investors Group had seperate statistics on the issue for B.C., in general, and Vancouver in particular.

Seems we are not as 'blissful' as the rest of the country. And with good reason.

Among all respondents, British Columbians reported carrying the highest mortgages, with a median amount of $180,000, or $50,000 more than the national average.

But that median mortgage amount of $180,000 was for all of B.C.

Kevin Lutz, regional sales manager and mortgage specialist with the Royal Bank, said he figures new mortgages in the Metro area average around $350,000. Brian Peterson, president of the Mortgage Brokers Association of B.C., who canvassed some mortgage brokers in the Metro Vancouver area, said local brokers were telling him it was not uncommon to see new mortgages in the $400,000-$450,000 range, typically for buyers who are stretching their borrowing powers to the limit so they might get into the market.

I have 17 friends who are also stretched and each have mortgages over $500,000.

Make no mistake. The Vancouver real estate market is leveraged on cheap money and low interest rates.

Meaning... it's all about those rates.

Mark my words, if the variable rate rises to 8% (with double digit 5 year rates), Vancouver will make California's crash look like a dress rehersal.

I suspect Neuman's iconic famous motto isn't the mantra of the local mortgage carrying crowd.



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