Blacklocks- Loan Defaults Low But Rising
“For the first time since the beginning of the pandemic mortgage delinquency rates began to rise at the end of 2023, up to 0.2 percent in the fourth quarter of 2023,” said Mortgage Industry. “Our main findings are the risk in the mortgage market has likely more than doubled,” it added. “Increasing the amortization schedule from 30 to 40 years would likely have little effect on reducing that risk.”
The report estimated four percent of low-cost mortgage owners could not meet payments and still afford groceries when it comes to renew loans at higher interest charges. Any return to pre-pandemic jobless rates would see “more than eight percent of homeowners with mortgages would not be able to keep making their mortgage payments and afford their life essentials,” wrote analysts.
“mortgage delinquency rates began to rise at the end of 2023, up to 0.2 percent in the fourth quarter of 2023”
So 99.8% of mortgages aren’t delinquent. Is that cause for concern?
(Book Recommendation: How to Stop Worrying and Start Living – Dale Carnegie)
In my neck of the woods in suburban Victoria, noticed a recent drop in housing prices, which I hear is apace elsewhere, except In Alberta and Saskatchewan? Know of many people with mortgages renewing this year and next who are feeling financial risk for the first time in decades as their payments rise astronomically unaffordable.
Which likely means more homes going on the block. Which means falling prices, or worse. Does that sound fair?
Followed by the “fairness” decision to confiscate even more capital gains, yet another statist induced fire sale.
Budgets don’t balance themselves, but this government seems intent on ensuring they never do; ours or theirs.
When I bought my house I calculated what I could afford if the interest rate was 8 percent. Of course it was a lot less than that and it allowed me to pay off my mortgage in ten years, but if rates did go up I wouldn’t end up homeless. I suppose now most people couldn’t afford any house at all if rates were 8 percent so maybe not a fair comparison.
Part of the problem is that so many people (starting with my generation, the Baby Boomers and then younger) have treated their homes as ATM’s – purchasing cottages, motor boats, RV’s and adding the cost to the mortgage because interest rates were historically low. And now that interest rates of risen (and again, they are nowhere near what they were in the early 1980’s or 1990’s), they cannot afford their second homes or toys.
A good friend of mine who is in real estate, has always lived on lines of credit based on the home ownership which she had – first with her second husband and now with her third husband since 1980, and it has always worked out well for her. But time always catches up and she is now 70 and is not selling as much real estate. Their mortgage rate goes from 2.5% to 5.5% at the end of June. In order to keep the payments the same, they must amortize the mortgage balance of $ 300,000 over 10 years instead of 5 years.
All I can say is “Yikes!”
So far, the banks have quietly extended near-infinity amortization to mortgage holders who can’t make their payments, in particular those with variable rate mortgages. The regulators profess not to like that, but they still look the other way. No player in our current financial system wants widespread defaults, and it’s no coincidence that our PM said as much recently. It will take a spike in unemployment to cause defaults, since someone with no income cannot afford any mortgage payments no matter how long the term.
EXACTLY….and that applies to Renters as well. when folks get hit with $250-400/Mo increases on a 7-800 sq ft apartment….they bail. My situation precisely.
So, F em all, I own a 2007 34′ 4 season TravelAire RV, (Bought top of the line Skirting, Heat race, Insulation for the hoses etc , found a spot just outside of Calgary Limits: $930/Mo Power (I pay for that but will be minimal), Water & Sewer. Spot has a firepit, & a spot to part the Duramax. Bought StarLink for WiFi & streaming & Still can live comfortably on my CPP/OAS…although I am still working.
Now to start my Armament factory…
Extend the amortization to 72.7 years … or whatever the life expectation is today. That way … more people can afford to purchase my home at > 2022 prices !! It’s all good for ME. ME ME ME !!!
I have a little sympathy for the few ants and none for the many grasshoppers.
People don’t pay attention, they don’t read the business news, they don’t vote, they don’t sacrifice or just do without.
There are far too many grasshoppers.
Tough shit.
A thread from Ron Butler, mortgage guy…
“What’s Going On With Mortgage Rates? It’s NOT What We Expected
Since the first Bank of Canada Rate Cut is on the horizon for sometime this year
If this was a normal environment for Fixed Mortgage Rates we should see a gradual drop in Rates starting now but we DON’T”
https://x.com/ronmortgageguy/status/1796177556279874038
*Now who was it that spoke of Canada sleeping next to an elephant?