"Overvalued housing markets in several Canadian cities and high household debt poses a clear and present danger... The report flags Vancouver as the market with the greatest risk of a housing price correction."
"all cities are at risk when interest rates eventually rise from their present 'exceedingly' low levels. Household debt growth over the past decade has been fuelled not as much by credit card borrowing but largely by loans secured by real estate, in particular home equity lines of credit. The ratio of debt-to-personal disposable income, which is now above 150% is likely to reach by late next year the 160% peak experienced in the U.S. and the U.K. before their real estate corrections occurred."
“To do so would be collusion, and it is illegal.”
“It would be a classic case of everybody dropping their asset at the same time just to make ends meet.”Meanwhile a new research paper from Pacifica Partners concludes.
“Our outlook on Canadian real-estate remains negative and we believe Canadian housing will begin an extended contraction phase.”
Curiously TD is suggesting that banks be required to stress test credit applicants who apply for home equity lines of credit to demonstrate their ability to pay it off in 20 years.
They are also suggesting that banks should be required to impose a sort of stress test on borrowers in order to qualify for a mortgage, a test that would require borrowers to demonstrate to handle interest rates in the order of 5.5%.
How much do you want to bet the banks would be doing this already if CMHC weren't guaranteeing Canadian home mortgages?
This is your greatest indication of the 'clear and present danger' the housing bubble is about to force on our country.
Banks aren't properly vetting mortgage applicants. Banks HAVE been lending out money to people who can't pay it back.
TD Bank says that:
"Implementing all these measures gradually would be sensible for the long-term, and not just in the current environment.”
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