Wouldn’t it be great to have an infinity pool in your house? Maybe that could be a selling feature of infinity mortgages. After all, if you never have to pay off your mortgage, why not top it up with all sorts of stuff you really don’t need? What could possibly go wrong?
The maximum amortization is typically 35 years, but apparently banks don’t think that’s not enough. A significant share of the above banks’ portfolios had at least 35 years left. Over a quarter (27.4%) of TD’s Canadian residential portfolio have amortizations of at least 35 years left in Q1. Not far behind are CIBC (27%), and RBC (26%). BMO didn’t break down amortizations for more than 30 years.
One only has to look at the same period a year before to realize how unusual this situation is. Only three banks had amortizations longer than 30 years in Q1 2022—Scotiabank (1.4%), National Bank (1.3%), and TD (0.3%). Seeing 2 points would have been alarming, but over ¼ of mortgages at some banks is barely triggering a reaction.
Eventually there will be a reaction, and the idiots instituting these policies will claim they could not possibly have seen it coming.
And those are the ones insured by CMHC…
Longer mortgage terms will do for housing cost what it’s done for automobile cost … double it overnight.
Well, it’s renting but with none of the advantages of renting. You are liable for repair, you can’t just walk away, etc.
It is absolutely the worst way to manage your accommodation.
The touchy feely, “isn’t that great!” result of this, is the financially illiterate get to stay in their homes. At a greatly inflated cost to their cost of living, without an end game scenario.
It would be cheaper to sell and rent, but, GREED gets in the way. Many have lost their equity, so, they’ve convinced themselves to stay in their homes, make the doubled payments which were originally, historically high, ingesting large amounts of Hopium, waiting for interest rates to return to gutter levels.
Never gonna happen.
The banks have influenced the corrupt Liberals to change the rules, so that the banks don’t get stuck with thousands of underwater mortgages via foreclosure.
FOMO drove the millenials to overextend, gotta have those quartz counters, 4000 sq ft, and the triple garage with pool. How’s those $8,000/mo payments feeling?
The bad result, is a housing market that needed a steep correction, in historical terms, has been manipulated out of existence. A whole generation is now shut out of the market. PERMANENTLY.
Thanks Chrystia, the non-financial finance minister.
Many years ago the British banks were giving 100-year mortgages so that your grandchildren could finally pay off the house. I don’t know if they ever got out of that one, it might be interesting to find out.
Interesting that you’d bring that up. Watching Escape to the Country, where properties were fetching outrageous prices, compared to us Canadians at the time, I asked a Brit acquaintance how anyone could afford them. She remarked that no one ever expected to have their house paid for, they looked at it as a form of rent, with no risk of eviction if you could keep up the payments.
Why would people act any differently from their governments or compliant media? Bouncing, ebullient Peter Armstrong trumpeted that Canada’s economy “grew by 0.1%” in the last report. A bit of simple arithmetic subtracting the fake-money government deficit spending in the same time period might have given a different conclusion. The economy, like the mortgage, will take care of itself.
After people default on these 35 year mortgages when the market crashes, to avoid massive debt, it will be just another step in how to get to “you’ll own nothing and be glad”.
Well if the government keeps inflating everything, it will work out okay for the banks and the borrowers with thanks to the obliging depositors. We’ll all just be poorer and mostly none the wiser.
Yup, that’s the kicker and the plan.
Progress is a “painless” lobotomy of consequence, wisdom, perseverance, grace, wisdom, all ingredients of the character of a successful society with a backbone and something to fall back on.
So basically, renters with tenure. The mortgage holder becomes the landlord, but without responsibility.
A shit pile has more honest character, then most politicians, bankers, judges, reporters , and lets not forget the smiling vegetables that can’t say NO, even as “progress” slowly sucks the independent life out of their kids.
Corrupt to the core.
If there is a God there will be a reckoning.
That’s where my hope lies for my kids and others that worked for what they got. Including respect, and accolades.
Life isn’t supposed to be a bowl of cherries, but the corruption on so many levels by people that smugly socially engineered this mess, while the useless idiots forgot where they came from is sad and disgusting.
I can still laugh and smile but I let the truth burn.
Gotta tell you, my POS 1978 bungalow with nothing owing on it has never looked better.
First republic bank held paper on many Hampton properties that are Interest Only, so the principal never gets paid off. This isn’t that much different
Interesting, but other copies of this have been “edited” to remove the “smart guys” slide…hmmmm:
https://www.businesspundit.com/sub-prime/
Sweden and Japan already have 100 year mortgages.
Europeans can take out mortgages that last more than 100 years.
In France, for example, people can choose to repay their mortgage at a rate of 1% per year for up to 120 years.
Art,
I was just gping to mention 100yr+ mortgages in EU, Holland for certain, as a cousin explained to me back in 2002.
Mind you THEN, a small 12-1400 sq ft home in Holland was running 750k CAD.+
Singapore where all land/ residential titles are a 99 year lease.
Here’s some math on it:
$1 million mortgage back when interest was 3%, payment with standard 25 yr amort is $4742/mth
Reviews 5 years later with principal at $855,000 (pd $285,000 split $145,000 principal and $140,000 interest).
Renewal rate at 6%:
– keep on schedule with 20 yr amort, payment pops up 29% or $1384/mth to $6162/mth
– extend to 25 yr amort, payment is up 16% or $767/mth to $5509/mth
– bank is a hero doing 40 yr amort, payment stays about same at $4705/mth
When that 40 yr amort renews in 5 yrs, the principal will be $825,000. Barely dropped. $282,000 pd split $30,000 principal and $252,000 interest).
Back in the day, we bought our first house with a 9.5% mortgage (okay, the house price was $24,000 and we did have a $5,000 down payment but we’re talking fifty years ago). Was with a bank but moved quickly to the company credit union when bank wouldn’t prepay the city taxes to get an offered tax break. Moved some six years later and – still with the credit union – watched the rate go up to 16%. Fortunately, the credit union was more flexible than the bank so we were able to pay more than the minimum from the get-go which saved us when rates skyrocketed. Needless to say, we paid off our mortgage as soon as we could.
Fast forward some years, and we decided we needed a major reno – again paid through a mortgage. Needless to say, we pushed to pay this mortgage off as soon as possible.
Looking at our offsprings who are now doing the mortgage route. They’re also trying to pay off as soon as possible, given the limitations imposed by their mortgage agreements. They don’t trust the economy.