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Canadians have record-high mortgage debt. What happens when rates rise? – CBC.ca

Published

3 years ago

September 5, 2021

New numbers from Equifax this week confirmed what housing market watchers have known for a while now: Canadians are addicted to mortgage debt.

Canadians took out 410,000 home loans in the second quarter. That’s the biggest quarterly jump on record, up 60 per cent compared with the same period a year earlier.

Despite fears in the early days of the pandemic that COVID-19 could be a bucket of ice on Canada’s housing market, the opposite happened. Interest rates slashed to record lows, coupled with millions of Canadians cooped up at home suddenly needing more living space, acted more like gasoline on the housing market than water.

The average price of a Canadian resale home topped $716,000 in March. While average prices have come down a little since then, they’re still well ahead of where they were before the pandemic.

Prices that go up forever may make homeowners sleep soundly in their heavily leveraged bedrooms, but many of those paper gains are built on a foundation of debt.

There aren’t just more mortgages than ever out there — they’re also bigger than ever, too. The average new home loan was for $355,000 during the quarter, Equifax says. That’s also the highest level on record, and an increase of 20 per cent compared with where we were a year ago.

All in all, Canadians now owe more than $2.15 trillion in consumer debt, more than the value of Canada’s entire economy.

Rebecca Oakes with Equifax told CBC News that this surge of new home loans could become a problem if and when rates rise.

“A small movement in interest rates can actually do quite a large increase in what a consumer needs to [come up with] in terms of those payments,” she said. “That’s kind of why we’re a little bit concerned.”

The rent vs. buy conundrum

Adam Eljerbi owns a number of homes in London, Ont., half of which he bought in the past year alone. In an interview, he said he thinks buyers in some markets may be getting in over their heads because of a need to “keep up with the Joneses,” as he put it.

“There’s a lot of speculative behaviour,” he said. “There’s a lot of, hey, homes only go up in value.”

Eljerbi has roughly $2 million in mortgage debt to his name on his properties, but he isn’t particularly worried about rising rates — or falling prices, for that matter — because he doesn’t live in any them, or depend on them going up in value.

He’s a landlord, and makes his money fixing up homes in disrepair and renting them to reliable tenants: students.

He lives frugally, in his parents’ home in Barrie, Ont., about 250 kilometres from his stable of income properties. Despite never having taken in a six-figure income from his job in the tech sector, he’s amassed a real estate empire worth about $4.5 million.

Even before he lived with his parents, he rented a basement apartment in Toronto while working in finance on Bay Street.

“I was very frugal. I’d pack my lunches. I’m very, very cautious [with] the money that I spend,” he said.

WATCH | Why Canadians need to get over their aversion to renting:

Rent vs buy?

3 days ago

Real estate investor Adam Eljerbi says more people should consider renting their primary residence, since prices in many markets simply don’t add up as an investment. 0:30

Even before the current run-up in prices, buying in Toronto never made sense to Eljerbi, but he’s comfortable with debt on his properties in more affordable markets because the numbers work: buy a fixer-upper, improve the housing stock, find reliable tenants, repeat.

“I’m a big proponent of renting where you live and owning what you can rent,” he said.

Eljerbi knows his way of life isn’t for everyone, but he wishes more people would break free of the cycle of borrowing more and more for something that will make them very little money if all they do is live in it.

“When you look at real estate in general and you look at mortgage debt, a lot of Canadians have taken on a substantial amount of debt and aren’t aware of the fact that most of … it is variable,” he said. “Once they start creeping up those interest rates, even if it’s a fraction, it starts to weigh on your cash flow.”

In over their heads?

But not everyone thinks Canada has a mortgage debt problem. Sherry Cooper, chief economist with Dominion Lending Centres, thinks the alarmism over growing mortgage debt gives a warped view of reality.

Delinquency rates are near all-time lows, she notes, which suggests the vast majority of people haven’t gotten in over their heads. She also notes that nearly half of all Canadian homeowners don’t have a mortgage on their homes, and recent changes to the stress test rules, which make it harder to qualify for a home loan, have raised the safety bar for everyone else who’s managed to buy in.

“Most Canadians are forced to qualify under even more stringent stress testing than before, substantially above their actual mortgage rate,” Cooper said. “Even if rates were to rise 2.5 percentage points, they are qualified to pay them at that level.”

Cooper says on the whole, she’s not too worried about new buyers who are contributing to that eye-popping $2 trillion debt figure, because they’ve proven their finances are more than healthy enough to withstand it.

She said the pandemic has been an “extraordinary period” for Canada’s economy, and “the proportion of the population that has been able to qualify for loans, those are the people that still have jobs.”

“It’s not the people that are living on government employee compensation,” she said. “So I don’t see this as a problem going forward.”

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Langford, Heim lead Rangers to wild 13-8 win over Blue Jays

Published

4 hours ago

September 17, 2024

Anne Joseph

ARLINGTON, Texas (AP) — Rookie Wyatt Langford homered, doubled twice and became the first Texas player this season to reach base five times, struggling Jonah Heim delivered a two-run single to break a sixth-inning tie and the Rangers beat the Toronto Blue Jays 13-8 on Tuesday night.

Leody Taveras also had a homer among his three hits for the Rangers.

Langford, who also walked twice, has 12 homers and 25 doubles this season. He is hitting .345 in September.

“I think it’s really important to finish on a strong note,” Langford said. “I’m just going to keep trying to do that.”

Heim was 1-for-34 in September before he lined a single to right field off Tommy Nance (0-2) to score Adolis García and Nathaniel Lowe, giving Texas a 9-7 lead. Heim went to the plate hitting .212 with 53 RBIs after being voted an All-Star starter last season with a career-best 95 RBIs. He added a double in the eighth ahead of Taveras’ homer during a three-run inning.

Texas had 13 hits and left 13 men on. It was the Rangers’ highest-scoring game since a 15-8 win at Oakland on May 7.

Matt Festa (5-1) pitched 1 1/3 scoreless innings to earn the win, giving him a 5-0 record in 13 appearances with the Rangers after being granted free agency by the New York Mets on July 7.

Nathan Eovaldi, a star of Texas’ 2023 run to the franchise’s first World Series championship, had his worst start of the year in what could have been his final home start with the Rangers. Eovaldi, who will be a free agent next season, allowed 11 hits (the most of his two seasons with Texas) and seven runs (tied for the most).

“I felt like early in the game they just had a few hits that found the holes, a few first-pitch base hits,” said Eovaldi, who is vested for a $20 million player option with Texas for 2025. “I think at the end of the day I just need to do a better job of executing my pitches.”

Eovaldi took a 7-3 lead into the fifth inning after the Rangers scored five unearned runs in the fourth. The Jays then scored four runs to knock out Eovaldi after 4 2/3 innings.

Six of the seven runs scored against Toronto starter Chris Bassitt in 3 2/3 innings were unearned. Bassitt had a throwing error during Texas’ two-run third inning.

“We didn’t help ourselves defensively, taking care of the ball to secure some outs,” Blue Jays manager John Schneider said.

The Blue Jays’ Vladimir Guerrero Jr. had a double and two singles, his most hits in a game since having four on Sept. 3. Guerrero is hitting .384 since the All-Star break.

TRAINER’S ROOM

Blue Jays: SS Bo Bichette (calf) was activated and played for the first time since July 19, going 2 for 5 with an RBI. … OF Daulton Varsho (shoulder) was placed on the 10-day injured list and will have rotator cuff surgery … INF Will Wagner (knee inflammation) was placed on the 60-day list.

UP NEXT

Rangers: LHP Chad Bradford (5-3, 3.97 ERA) will pitch Wednesday night’s game on extended five days’ rest after allowing career highs in hits (nine), runs (eight) and home runs (three) in 3 2/3 innings losing at Arizona on Sept. 14.

Blue Jays: RHP Bowden Francis (8-4, 3.50) has had two no-hitters get away in the ninth inning this season, including in his previous start against the New York Mets on Sept. 11. Francis is the first major-leaguer to have that happen since Rangers Hall of Famer Nolan Ryan in 1989.

—

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Billie Jean King set to earn another honor with the Congressional Gold Medal

Published

5 hours ago

September 17, 2024

Anne Joseph

WASHINGTON (AP) — Billie Jean King will become the first individual female athlete to be awarded the Congressional Gold Medal.

Reps. Brian Fitzpatrick of Pennsylvania and Mikie Sherrill of New Jersey announced Tuesday that their bipartisan legislation had passed the House of Representatives and would be sent to President Joe Biden for his signature.

The bill to honor King, the tennis Hall of Famer and activist, had already passed unanimously in the Senate.

Sherrill, a Democrat, said in a statement that King’s “lifetime of advocacy and hard work changed the landscape for women and girls on the court, in the classroom, and the workplace.”

The bill was introduced last September on the 50th anniversary of King’s victory over Bobby Riggs in the “Battle of the Sexes,” still the most-watched tennis match of all-time. The medal, awarded by Congress for distinguished achievements and contributions to society, has previously been given to athletes including baseball players Jackie Robinson and Roberto Clemente, and golfers Jack Nicklaus, Byron Nelson and Arnold Palmer.

King had already been awarded the Presidential Medal of Freedom in 2009. Fitzpatrick, a Republican, says she has “broken barriers, led uncharted paths, and inspired countless people to stand proudly with courage and conviction in the fight for what is right.”

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Account tweaks for young Instagram users ‘minimum’ expected by B.C., David Eby says

Published

5 hours ago

September 17, 2024

Anne Joseph

SURREY, B.C. – Premier David Eby says new account control measures for young Instagram users introduced Tuesday by social media giant Meta are the “minimum” expected of tech companies to keep kids safe online.

The parent company of Instagram says users in Canada and elsewhere under 18 will have their accounts set to private by default starting Tuesday, restricting who can send messages, among other parental controls and settings.

Speaking at an unrelated event Tuesday, Eby says the province began talks with social media companies after threatening legislation that would put big tech companies on the hook for “significant potential damages” if they were found negligent in failing to keep kids safe from online predators.

Eby says the case of Carson Cleland, a 12-year-old from Prince George, B.C., who took his own life last year after being targeted by a predator on Snapchat, was “horrific and totally preventable.”

He says social media apps are “nothing special,” and should be held to the same child safety standards as anyone who operates a place that invites young people, whether it’s an amusement park, a playground or an online platform.

In a progress report released Tuesday about the province’s engagement with big tech companies including Google, Meta, TikTok, Spapchat and X, formerly known as Twitter, the provincial government says the companies are implementing changes, including a “trusted flagger” option to quickly remove intimate images.

— With files from The Associated Press

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

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