Basically, it's quite simple:
Harper and Flaherty brought 0 down/40 year mortgages to Canada - Canada's very own "sub-prime" imitation...
In Garth's words: "They allowed no-money-down purchasing of houses. Even CMHC approved a 100% financing program, which meant that people who could not walk out of a Future Shop with a free $1000 plasma television could buy a new home in a Toronto suburb worth $450,000 - for nothing."
Think about it.
We keep talking about weathering the storm, and what will happen next. How many 20-somethings do you know with an $800,000 mortgage ($350,000 home amortized over 40 years - do the math)? How many of them have guaranteed jobs?
How long will this last? What can a government do to fix this? We can't let people with no money keep these homes. Banks are sitting on all this bad debt...
It's gonna get worse before it get's better.
Thanks Harper and Flaherty. Thanks an f'n lot!
6 comments:
How many 20-something year old have to pay 12-1500 (700-800,000)in rent every month which could be paid on a mortgage? I don't buy this at all. Rent or mortgage - better to pay mortgage
If you can AFFORD it, then sure. By all means. If you can't afford $3000/month payments (or less) (versus 1/3 of that for rent), then rental makes more sense - or aiming for something a little smaller, maybe? If you have job security, that's another important point. Oh yeah... how about learning to budget, while paying rent for a while, and saving up for something called a down-payment?
The problem is too many kids got enticed into the 40 year scam, and now they're going to "pay" alright. Our society basically ensured they HAD TO have the latest iPhone, the latest PS3, Prada bag/shoes, bling-bling everywhere, AND the 3000 square foot home. I grew up in 800 or so, while we were in elementary school. We had room for all of us, and all our stuff.
What's the purpose of a mortgage, if you can't pay it? Rather than living somewhere more affordable, and maybe ride a bus to work, these young folks wanted it all - the expensive downtown condo, with 2 underground parking spots (for the requisite SUV and luxo-coupe), etc., etc.
No... I have to say, the priorities are screwed up. I am always for building a home/property, but done the RIGHT way - not this mass hysteria to "buy now" because the market's zooming to new heights... But, I guess that's why we call it a "bubble", eh?
Good post. Creating the same toxic debt environment as the US is a known path to failure.
Cheers, Coffee
What I want to know is what happened to these zero/40s? Did the Harper regime take them off the banks' hands in the course of that now long forgotten $75-billion bailout?
The big hit is coming in 2011 (5 years past 2006) when all of those 40 year mortgages are up for renewal.
Watch a bunch of houses suddenly flood the market again when these folks can't make the increased payments of a shorter mortgage term.
As the year goes on the Conservatives are going to hate that they kicked Garth out of caucus and the Liberals are going to be wishing they did more to get him re-elected.
MoS... I'm looking into that. I believe it is so. I am reading Garth Turner's new book right now, and there appears to be some reference to this. I'm quite certain that the "bailout" which we never hear of included purchases of "bad" credit.
Congratulations! Looks like we're all proud new owners of a whole LOT of debt! Compliments of Stephen Harper, of course...
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