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Bank of Canada is more worried than usual about debt loads

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The Bank of Canada is more worried than it was last year about household debt loads, and is concerned about the abilities for households to stay on top of them in the coming years once mortgages renew at higher rates.

That’s one of the main takeaways of the bank’s Financial System Review, an annual assessment of various risks the bank deems to be of concern to the stability of Canada’s financial system.

While the bank highlighted the risks of cybersecurity attacks, the ongoing global banking crisis and climate change, the risk presented by growing mortgage debt was a recurring theme throughout the document.

After slashing them in the early days of the pandemic, the Bank of Canada raised its benchmark interest rate aggressively last year.

While the move appears to have achieved its desired effect of bringing down inflation, it came with the collateral damage of walloping variable rate mortgages, as the bank’s rate moved from barely above zero in early 2022 to 4.5 per cent presently.



While only about one-quarter of mortgage holders have a variable rate loan, the effect of rate hikes has been dramatic, adding thousands of dollars to the periodic payments in many cases and extending the life of the loan by years if not decades.

In 2019, less than one-fifth of new mortgages were amortized for longer than 25 years. Last year, almost half of new loans were stretched out over a longer period.

Existing mortgages, many of which have been insulated from rate hikes so far, will start to feel their impact in the coming years as they renew, and the bank is worried about what might happen when they do.

“The decline in house prices has also reduced homeowner equity, and some signs of financial stress — particularly among recent homebuyers — are beginning to appear,” the bank said.

By the end of 2026, nearly all mortgage holders will have seen their payments increase. The bank says if rates evolve the way financial markets expect, the typical mortgage payment will be about 20 per cent higher over the next three years.

Financial stresses appearing

The numbers show that the financial stresses on households that the bank is worried about are already starting to appear.

The average debt service ratio — the percentage of a household’s total income that goes toward paying their mortgage — rose from 16 per cent to more than 19 per cent last year. That’s the highest level on record in at least a decade.

And the percentage of all mortgages where the DSR is in excess of 25 per cent skyrocketed, from 12 per cent in 2021 to 29 per cent by the end of last year.

 

Rising mortgage rates ward off potential homebuyers

4 months ago

Duration 2:04

Higher mortgage rates are dissuading potential homebuyers across Canada, according to new housing numbers from the Canadian Real Estate Association, while some sellers are failing to turn a profit on previously high-priced properties.

Given the amount of money it’s taking to cover the mortgage, it’s no surprise that many of those households are having a harder time staying on top of their other debts.

The bank says that households that took on a mortgage since 2020 are carrying about 17 per cent more credit card debt on average than those that took out a mortgage in the three years leading up to the pandemic. Arrears on credit cards have also been rising and are close to pre-pandemic levels.

Royce Mendes, an economist with Desjardins, recently warned about the looming risk of mortgage debt, calling it a “ticking time bomb” in a report last week. It’s clear the central bank is thinking the same thing, he said Thursday.

“The Bank of Canada is worried about the same thing we are: mortgage renewals a few years in the future.”

Robert Kavcic, an economist with Bank of Montreal, said in a report to clients that while debt loads of all forms are indeed ticking higher, he doesn’t expect it to become a major shock to the system because higher rates are being absorbed slowly.

“The characteristics of the Canadian mortgage market have been extremely important in containing the early damage from the tightening cycle (e.g., the lack of immediate payment shock is a key reason we are not seeing forced selling in the housing market),” he said.

“It buys households and the economy time to absorb higher rates … the mortgage market is not a time bomb, but more of persistent headwind that will blow for a few years going forward.”

 

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Toronto FC promote forward Charlie Sharp, wingback Nate Edwards to first-team roster

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TORONTO – After being drafted in the third round (61st overall) of the 2023 MLS SuperDraft, forward Charlie Sharp decided to put his dream of playing professional football on hold.

He spent a couple of weeks training with Toronto FC that summer and then returned for a fifth year at Western Michigan University.

“It was a really tough decision for me,” Sharp recalled. “Because I knew that going back to school, nothing was guaranteed. I could get injured or not perform well, but it seemed to really work out for me.”

Sharp scored 19 goals and added eight assists as a senior, leading the Broncos to a 17-2-3 record and a third-round appearance in the NCAA tournament where they eventually lost to national runner-up Notre Dame on penalty kicks. Sharp, who scored or assisted in nine of his last 10 matches, ranked first in the NCAA with 0.95 goals per game and 2.30 points per game and was tied for second with seven game-winning goals.

The 23-year-old Sharp, whose rights were retained by Toronto, spent time with the TFC first team in this year’s pre-season and signed with Toronto FC II in February. On Tuesday, he joined TFC 2 teammate Nate Edwards, a wingback from Brampton, Ont., in signing a first-team contract.

“We are happy to officially elevate Charlie at this time,” Toronto GM Jason Hernandez said in a statement Tuesday. “His strong mentality and mature playing style will be a welcomed addition to our young player group in the first team.”

Both players signed contracts that run through 2025 with club options for 2026 and 2027.

The deals were completed in advance of Friday’s MLS roster freeze but took their time working their way through the league office.

“A bit of unorthodox path that I chose,” said Sharp. “But I think you’re seeing it more now with players that get drafted.”

“I’m super-happy,” he added. “I think I made the right decision.”

As a senior, Sharp was one of three finalists for the 2023 MAC Hermann Trophy, which honours the top NCAA soccer player. The award eventually went to Clemson senior forward Ousmane Sylla.

The six-foot-five 185-pounder from Brighton, Mich., finished his collegiate career with 42 goals 22 assists, and 106 points in 89 games. He ranks first in career goals and games and tied for fourth in assists for Western Michigan.

In returning to Kalamazoo for a fifth year, Sharp also succeeded off the pitch by completing his degree in computer information systems.

Despite some niggling injuries, Sharp has five goals and two assists in 16 appearances with TFC 2 this season. He made his first-team debut off the bench May 15 against Nashville.

“I had a lot of friends and family watching,” he said.

“It’s been a journey,” Sharp added. “I’ve been thankful for every step of the way.,”

The 21-year-old Edwards has one goal and two assists in 23 games with TFC’s MLS Next Pro team.

“He has been a top performer with TFC II this season and we look forward to his continued growth within our environment,” said Hernandez

Edwards, who also joined TFC 2 in February, made his first-team debut May 21 in Canadian Championship play against Ligue1 Quebec champion CS Saint-Laurent.

The five-foot-eight 167-pounder split his college career between Syracuse University and Purdue University Fort Wayne. As a senior in 2023, he had one goal and four assists for Syracuse and was named to the 2023 All-Atlantic Coast Conference (ACC) Academic Team and College Sport Communicators (CSC) Academic All-District Team.

At Purdue University Fort Wayne, he had two goals and an assist in 40 appearances across three seasons (2020-2022) with the Mastodons.

Follow @NeilMDavidson on X platform, formerly known as Twitter

This report by The Canadian Press was first published Sept. 17, 2024.

The Canadian Press. All rights reserved.



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Calgary man sentenced to six years in prison for sharing terrorism videos on TikTok

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CALGARY – A Calgary man who pleaded guilty to sharing Islamic State recruitment videos and propaganda on TikTok will spend the next six years behind bars.

Zakarya Rida Hussein was sentenced during a court appearance on Friday after he pleaded guilty to one of four terrorism-related charges.

Hussein admitted that he owned social media accounts that posted ISIS recruitment videos and propaganda.

He also admitted to sharing a bomb-making video online.

The man was arrested in June 2023 after a joint investigation led by the RCMP and the Calgary Police Service.

Hussein will need to submit DNA results and will be under lifetime ban from owning firearms after he’s released.

This report by The Canadian Press was first published Sept. 17, 2024.

The Canadian Press. All rights reserved.



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Byelection win: Bloc Québécois to squeeze Liberals for gains, not trigger election

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MONTREAL – The Bloc Québécois leader says he’s in no hurry to trigger a federal election and will instead stick with his plan to extract gains from the minority Liberal government.

Yves-François Blanchet made the comments to reporters today after his party’s stunning byelection victory in the former Liberal stronghold of LaSalle—Émard—Verdun, in Montreal’s southwest.

Blanchet says the NDP’s decision to end its agreement with the Liberals that had propped up the minority government gave his party the momentum it needed to win the riding by just 248 votes.

With the victory, which was announced early this morning, the Bloc has 33 seats that when coupled with the Liberals’ 154 seats create a majority in Parliament.

Blanchet says he will evaluate what the Bloc can gain from the Liberals in exchange for his party’s support, adding that among its demands is more money for seniors.

Bloc candidate Louis-Philippe Sauvé won the LaSalle—Émard—Verdun riding with 28 per cent of the vote, holding off the Liberals and NDP in a tight race.

Blanchet says the victory — which gives the Bloc its second seat on the Island of Montreal — demonstrates that voters have options outside of the Liberals.

This report by The Canadian Press was first published Sept. 17, 2024.

The Canadian Press. All rights reserved.



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