The Coming Interesting Rate Mark Heading For Canada, New housing market mortgage rules have overshot their mark – February 21, 2019,
Well, it’s getting closer and closer with every passing day, inevitable interest rate hikes that will change the world as we know it. As I’ve been stating in my estimation the world economy will crash in Trump’s second term in office. Although the mainstream Canadian media will report that this coming crash was entirely the fault of Trump the truth is Canada’s coming crash will be a lot different from the United States. In 2007-08 when the crash hit the U.S Canada didn’t experience the same pain Americans felt, our debt economy in fact simply went up and up and up. It may shock Canadians to learn that America’s poor and middle class for the most part still have trouble financing a house, also many of middle America are still have their mortgages underwater from the Bush/Obama crash.
I say this so Canada understands that most of the price inflations in the U.S market are coming mainly from their upper middle and rich classes, which means when the U.S market crashes middle America won’t feel the type of pain that the middle class in Canada will experience. The housing boom, the price inflations in almost every sector of the Canadian economy will be corrected when this crash hits and that doesn’t bode well for debtors. The message I’m trying to get across is that the markets are already pricing in the coming economic crash.
The central banks can drop interest rates to -50 it won’t matter this time, the market is bracing for a serious rate hike. It’s already happened in Canada, the big 6 banks don’t really pay attention to what the BoC is doing at this point the Canadian dollar holds firm based on market anticipation that the Bank of Canada will do the right thing. The problem with Canadian banks doing the right thing now is that a lot of people simply won’t qualify for the mortgages they hold, which ultimately means that the Deep freeze in housing market suggests mortgage rules have overshot their mark.
I’ve said for years that 100-year amortizations could be a very real reality in Canada, the problem is they won’t matter much if interest rates are forced upward. a $400,000+ mortgage at 5%, 100-year amortization very depressing, the numbers also won’t work when you factor in that a lot of banking institutions that exist in Canada will most likely cease to exist the moment interest rates shoot up. Because again the problem really isn’t just the mortgage, the problem is mortgage tightening, the consumer’s inability to get into more debt, this is what causes crashes.
If you assume that you can count on your home equity loan, or your personal loans, lines of credit and those products aren’t as abundant as they once were, that’s when the problems happen and what’s happening in the United States right now is that it’s becoming more and more apparent that a recession is on its way, now the Federal Reserve can lower rates, and maybe switch course and head back to easy lending, but that’s an admission of guilt that there will be no economic recovery. If you’ve been watching the markets, you’ll notice that investors are starting to price this in, meaning that even the U.S federal reserve is being ignored by investors, which is very bad news for the U.S dollar.
What this means for Canada however is a temporary boost in our currency, but if our currency rises in value in lew of weak U.S economy, this is where the problems will begin for us. Canada without government stimulus has been in a recession since Trudeau became Prime minister, people forget that Trudeau borrowed money to grow the Public Sector, most of the jobs created under Trudeau are Public Service and the general service sectors of the economy. I want to also point out that it’s still unclear to me if the service sector jobs created under Trudeau were Crown Corporations or Canadian companies reliant on Government contracts to sustain themselves.
Because Canada’s been losing its manufacturing base, we’re going to run into some serious problems if we’re faced with a recession. When there’s a recession and you have a good manufacturing base, the problem is less severe, because there’s less pressure on the Bank of Canada to do anything radical, the problem facing Canada in the future when the recession hits is our reliance on imports. You see those dirty factories that socialists hate so much, once they’re gone we have to pay an additional fee, for them to import us stuff.
This is part of the reason why countries like China, for the most part, don’t take Trudeau’s demands seriously. China’s Leftist, the Liberal red is Leftist, China only has a more extreme stance to Leftism, but make no mistake about it, China, the Chinese government understands the free market, China in case people don’t know even with all its imperfections has Free market zones, Canada does not have free market zones, Canada has government subsidies and tax breaks for companies it deems too big to fail, which in the real world means that the Canadian government is missing out on opportunities to attract new business to Canada.
The flipside of losing manufacturing in a country like Canada is that our banks are well financed and at least for now Canadians have been making their minimum payments on their loans? But let’s say a scenario like a Recession hits Canada that forces our banks to raise their rates or to discontinue products they’re offering? This is what’s going ignored, during the 20o7-08 crash that hit the U.S the impact on Canada was that some lenders in Canada simply left our market in fear of the greater risk, that was more than 10 years ago and Canada’s debt problems have skyrocketed since then. You may want to consider reading the article below because in my opinion a lot of Canadians are focused on the wrong things.
Deep freeze in housing market suggests mortgage rules have overshot their mark – Financial Post
Interesting times ahead.
