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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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Trump kicks off a Pennsylvania rally by talking about Arnold Palmer’s genitalia

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LATROBE, Pa. (AP) — Donald Trump’s campaign suggested he would begin previewing his closing argument Saturday night with Election Day barely two weeks away. But the former president kicked off his rally with a detailed story about Arnold Palmer, at one point even praising the late, legendary golfer’s genitalia.

Trump was campaigning in Latrobe, Pennsylvania, where Palmer was born in 1929 and learned to golf from his father, who suffered from polio and was head pro and greenskeeper at the local country club.

Politicians saluting Palmer in his hometown is nothing new. But Trump spent 12 full minutes doing so at the top of his speech and even suggested how much more fun the night would be if Palmer, who died in 2016, could join him on stage.

“Arnold Palmer was all man, and I say that in all due respect to women,” Trump said. “This is a guy that was all man.”

Then he went even further.

“When he took the showers with other pros, they came out of there. They said, ‘Oh my God. That’s unbelievable,’” Trump said with a laugh. “I had to say. We have women that are highly sophisticated here, but they used to look at Arnold as a man.”

Trump senior adviser Jason Miller told reporters before the speech that Trump planned to preview his closing argument against Vice President Kamala Harris and “start to get into that framing.” Candidates have traditionally used their final days on the campaign trail to sum up for the electorate why they deserve to win the White House.

Trump eventually hit many of his favorite campaign themes but didn’t offer much in the way of new framing of the race or why he should win it. He instead boasted of creating strong tax policies and a strong military during his first term in office.

He slammed Harris as “crazy” and added a profanity.

“You have to tell Kamala Harris that you’ve had enough, that you just can’t take it anymore, we can’t stand you anymore, you’re a s— vice president,” Trump said to roars of the crowd. “The worst. You’re the worst vice president. Kamala, you’re fired. Get the hell out of here.”

He also criticized Harris for suggesting during her unsuccessful run for president in 2020 that she’d support a ban on hydraulic fracking, which is important to Pennsylvania’s economy and a position Harris’ campaign says she no longer supports.

Trump invited on stage members of a local steelworkers union that endorsed him. He donned a construction hat with his name on it.

He also said Israeli Prime Minister Benjamin Netanyahu called him amid Israeli’s ongoing war with Hamas in Gaza.

“He said, ‘It’s incredible what’s happened,’” Trump said of the Netanyahu call before moving to a criticism of President Joe Biden, saying that the Israeli prime minister “wouldn’t listen to Biden.”

Trump praised the raucous crowd, which was outside and at an airport, but also made a point of suggesting that there was more conspicuous security around him following two assassination attempts, saying, “They give you a little extra security nowadays, you notice?”

“I got more machine guns than I’ve ever seen — look at these guys,” he said referring to security. He was interrupted by cries from the crowd of “USA! USA!” before continuing, “We’ve got more guys, and every one of them is like central casting too, holy s—.”

Then he tied it back to Latrobe’s native son, adding, “They look like Arnold. Can’t look better than Arnold.”

___

Weissert reported from Washington.

The Canadian Press. All rights reserved.



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Harris says Trump is ‘cruel’ as she spotlights abortion restrictions in Georgia during early voting

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ATLANTA (AP) — Vice President Kamala Harris said Saturday that Republican former President Donald Trump was “cruel” for how he talked about the grieving family of a Georgia mother who died after waiting 20 hours for a hospital to treat her complications from an abortion pill, as she put combating restrictions on reproductive care at the center of her pitch to voters.

At a rally in Atlanta, Harris blamed Amber Thurman’s death on Georgia’s abortion restrictions that took effect after the Supreme Court in 2022, with three Trump-appointed justices, overturned Roe v. Wade. It comes as Harris is looking to the issue to propel support to Democrats, who have pledged to restore a national right to abortion if they win the White House and enough seats in Congress.

“Donald Trump still refuses to take accountability, to take any accountability, for the pain and the suffering he has caused,” Harris said.

Thurman’ story features at the center of one of Harris’ closing campaign ads, and her family attended her Atlanta rally, with her mother holding a photo of her daughter from the audience. Harris showed a clip of Trump saying during a recent Fox News Channel town hall, when he was asked about the Thurman family joining a separate media call, “We’ll get better ratings, I promise.”

“A grieving family, a grieving family, sharing the memory of their daughter with our nation. Where is the compassion?” she asked. “What we see continually from Donald Trump is exactly what that clip shows,” Harris added. “He belittles their sorrow, making it about himself and his television ratings. It is cruel.”

Before Harris became the Democratic nominee, Ian Summer, 19, planned on voting against Trump — but he wasn’t enthusiastic about President Joe Biden. Since Harris stepped into the race “she’s brought great energy,” Summer said. Summer is worried about restrictions on abortion access under Trump. “The fact that I could have a wife in the future that may not be able to receive the care that she needs, that’s a very scary thing,” he said.

Early voting is also underway in Georgia. More than 1.2 million ballots have been cast, either in person or by mail. Democrats hope an expansive organizing effort will boost Harris against Trump in the campaign’s final weeks. Harris referenced that former President Jimmy Carter recently voted by mail days after his 100th birthday.

“If Jimmy Carter can vote early, you can too,” Harris said.

Roderick Williams, 56, brought his three daughters to Harris’ Atlanta rally. His youngest daughter was born around the time former President Barack Obama entered office, and he hopes they can witness history again by seeing Harris become the first Black woman to be president.

“It’s important for them to see that anything’s possible,” Williams said.

Harris was joined at the rally by hometown music icon Usher, drawing again on star power as she looks to excite voters to the polls. Earlier Saturday she appeared with Lizzo on Saturday in the singer’s hometown of Detroit, marking the beginning of in-person voting and lavishing the city with praise after Trump recently disparaged it.

“All the best things were made in Detroit. Coney Dogs, Faygo and Lizzo,” the singer joked to a rally crowd, pointing to herself after listing off the hot dogs and soda that the city is famous for.

She said it was time to “put some respect on Detroit’s name” noting that the city had revolutionized the auto and music industries and adding that she’d already cast her ballot for Harris since voting early was “a power move.”

Heaps of praise for the Motor City came after Trump, the former president, insulted it during a recent campaign stop. And Harris continued the theme, saying of her campaign, “Like the people of Detroit, we have grit, we have excellence, we have history.”

Arms wide open as she took the stage, Harris let the crowd see she was wearing under her blazer a “Detroit vs. Everybody” T-shirt that the owner of the business that produces them gave her during a previous stop in the city earlier in the week. She also moved around the stage during her speech with a hand-held mic, not using a teleprompter.

More than 1 million Michigan residents have already voted by mail in the Nov. 5 election, and Harris predicted that Detroit turnout for early voting would be strong.

“Who is the capital of producing records?” Harris asked when imploring the crowd to set new highs for early voting tallies. “We are going to break some records here in Detroit today.”

She slammed Trump as unstable: “Somebody just needs to watch his rallies, if you’re not really sure how to vote.”

“We’re not going to get these 17 days back. On Election Day, we don’t want to have any regrets,” the vice president said.

Lizzo also told the crowd, “Mrs. Commander-in-Chief has a nice ring to it.”

“This is the swing state of all swing states, so every last vote here counts,” the singer said. Then, referencing her song of the same title, Lizzo added, “If you ask me if America is ready for its first woman president, I only have one thing to say: “It’s about damn time!”

Republican National Committee Chairman Michael Whatley said in a statement that Harris needed Lizzo “to hide the fact that Michiganders were feeling good under President Trump – real wages were higher, prices were lower, and everyone was better off.”

Talona Johnson, a product manager from Rochester, Michigan, attended Harris’ rally and said that Harris “and her team are doing the things that are required to make sure that people are informed.”

“I believe she’s telling the truth. She’s trying to help the people,” said Johnson, who said she planned to vote for Harris and saw women’s rights as her top concern.

“I don’t necessarily agree with everything that she’s put out, but she’s better than the alternative,”

In comments to reporters before the rally, Harris said she was in Detroit “to thank all the folks for the work they are doing to help organize and register people to vote, and get them out to vote today. She also called Detroit “a great American city” with “a lot of hard-working folks that have grit and ambition and deserve to be respected.”

The vice president was asked about whether the Biden administration’s full-throated support for Israel in its war with Hamas in Gaza might hurt her support in Michigan. Dearborn, near Detroit, is the largest city with an Arab majority in the nation.

“It has never been easy,” Harris said of Middle East policy. “But that doesn’t mean we give up.”

___

Associated Press writers Matt Brown in Detroit, Charlotte Kramon in Atlanta and Will Weissert and Fatima Hussein in Washington contributed to this report.



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US investigating unauthorized release of classified documents on Israel attack plans

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WASHINGTON (AP) — The U.S. is investigating an unauthorized release of classified documents that assess Israel’s plans to attack Iran, three U.S. officials told The Associated Press. A fourth U.S. official said the documents appear to be legitimate.

The documents are attributed to the U.S. Geospatial Intelligence Agency and National Security Agency and note that Israel continues to move military assets in place to conduct a military strike in response to Iran’s blistering ballistic missile attack on Oct. 1. They were sharable within the “Five Eyes,” which are the U.S., Great Britain, Canada, New Zealand and Australia.

The documents, which are marked top secret, were posted online to Telegram and first reported by CNN and Axios. The officials spoke on the condition of anonymity because they were not authorized to discuss the matter publicly.

The investigation is also examining how the documents were obtained — including whether it was an intentional leak by a member of the U.S. intelligence community or obtained by another method, like a hack — and whether any other intelligence information was compromised, the official said. As part of that investigation, officials are working to determine who had access to the documents before they were posted, the official said.

The documents emerged as the U.S. has urged Israel to take advantage of its elimination of Hamas leader Yahya Sinwar and press for a ceasefire in Gaza, and has likewise urgently cautioned Israel not to further expand military operations in the north in Lebanon and risk a wider regional war. However, Israel’s leadership has repeatedly stressed it will not let Iran’s missile attack go unanswered.

In a statement, the Pentagon said it was aware of the reports of the documents but did not have further comment.

The Canadian Press. All rights reserved.



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