The reason BMO lowered it’s 5-year mortgage rate in March 2014
In case some of you are wondering why BMO and I guess other Canadian banks are lowering their 5 year mortgage rate it’s because they want to qualify more people for homes. In my opinion this is wrong and the reality is they’re putting the Canadian consumer on the hook in the event that interest rates rise and Canadians can’t afford their mortgages. Worst than this however is that this will also qualify more people to qualify for CMHC which in my opinion is my real concern. This is the reason why major banks in Canada are doing this because essentially they have no risk because the Canadian tax payer even those of you currently RENTING are on the hook in the event of a housing crash or collapse.
To add more clarification CMHC gets it’s money from MORTGAGE BACKED SSECURITIES and Canadian Mortgage Backed Securities are backed by Canadian tax payers. If you have no idea what I’m talking about go to TD Canada trust website found here: http://www.tdcanadatrust.com/planning/investing-basics/investment-options/fixed-income-investments/icrcipmb.jsp
or go to the CMHC website found here: https://www.cmhc-schl.gc.ca/en/hoficlincl/mobase/ to learn more about how Mortgage backed securities work. Canadians need to understand that the Canadian tax payer funds the Government of Canada. The Government of Canada get’s it’s money from collection money from you in the form of taxes from the people of Canada so if the housing market collapses EVERYONE in Canada is on the hook for the bill.
Canadians tax payers are on the hook for housing collapse even if you’re a renter
The CMHC GUARANTEES investors their money in the event of a housing market collapse which is one of the forces that’s propping up the Canadian housing market. No one is addressing this issue and every time the media talks about this they dance around it like it doesn’t exist. If the United States decides to raise interest rates and Canada doesn’t follow suite the Canadian dollar will lower which might camouflage the housing collapse temporarily but when prices of EVERYTHING starts to rise and the Canadians start to feel it – and then the bank of Canada does decide to raise interest rates people most of whom are in debt and barely qualify for their homes in the first place will start to feel the pinch which may cause a MAJOR sell off of houses.
Add this to the fact that Canadians aren’t paying the full price for their energy consumption and you have yourself a major problem. You must also factor in gas and the price it currently costs Canadians to go to the Gas stations to fill up their cars. I don’t mean to sound like a doom and gloomer but I see a big problem on the horizon for Canada if they don’t tackle this situation now. To calm down the banks who in my opinion are bullying the Canadian government right now; the bank of Canada at the very least should warn of an interest rate hike and also tell these major banks or put a law in place that let’s these schedule 1 banks know that Canadian taxpayers will NOT be bailing them out if the housing sector collapses or if the banks can’t get back the money for the loans they gave to Canadian consumers.
The Real Reasons Schedule 1 Banks are lowering mortgage rates
For those of you not following me or understanding what I’m saying here. BMO is LOWERING their 5 year mortgage rate and the Canadian banks are already supposedly making a huge profit with interest rates at record low levels. What this should explain to readers is they’re trying to qualify MORE people to purchase houses or Condominiums because most of the people that already CAN’T afford to buy a home from a schedule 1 bank are going to mortgage brokers who are qualifying them at higher interest rates.
When or if the housing marketing collapse happens in Canada don’t say that I didn’t warn you!
For the record I do not give financial advice and anything you’re reading on this page should be considered and read for entertainment purposes only! Good luck and I highly recommend staying out of debt you can’t afford to repay!