Increasing Concern Surrounding Canada’s Uninsured Mortgage Market

Doubts about the fundamentals of the Canadian economy continue to grow.

Despite efforts by cheerleaders in the government and elite establishment, there is no avoiding the increasing concern about the fragile fundamentals of the Canadian economy.

Any economy can show some temporary growth if it’s based upon ever-expanding debt and an out-of-control housing market, but – as we saw in 2008 – that growth can turn into a crisis very quick.

In addition to fear over massive debt levels, concerns are now being raised about Canada’s uninsured mortgage market. As reported by BNN, Canada’s banking regulator is proposing tough “stress tests” for those borrowers in the uninsured market (down payment above 20%).

The “stress tests” would reportedly bring the uninsured market rules in accordance with the insured market.

BNN notes the concerns of CIBC Deputy Chief Economist Benjamin Tal:

‘“The more immediate risk is the proposed rate qualification regulatory changes, which we believe have the potential to notably slow down growth in mortgage originations.” In the report, Tal warns that a slowdown in consumer spending and the housing market could bring on a recession.”

Adds Tal, “Given current momentum in the market, it might be advisable to rethink the timing” of the stress tests in the uninsured mortgage market.

BNN also reported the concerns of Mortgage market expert Rob McLister, who said “This could easily be one of the most impactful mortgage restrictions of all time.” 

About 80% of mortgages in Canada are uninsured loans, and McLister worries that the “stress tests” could reduce the purchasing power of those with uninsured mortgages by 18% – which could lead to a recession.

Serious vulnerability

Underlying this concern over the impact of stress tests is the vulnerability of our economy. Following the same attitude we saw in the United States in the time leading up to the mortgage crisis, the big banks want to keep the party going as long as possible. Meanwhile, the core of the middle class and our economy is being hollowed out by economic restrictions, taxes, and policies that only benefit those who are already very wealthy. This has led to an over-reliance on debt and a dangerous housing bubble, and those who are raking in the profits – the banks – are terrified that it will stop.

This is the consequence of selling our country and our workers out to foreign interests, rather than building a stronger domestic economy that focuses on strengthening Canadian companies and Canadian workers.

Low wages, poor quality jobs, massive debt, and increasing instability are what those policies have brought us, and now the banks are terrified of putting that system under any stress, because they know how vulnerable and fragile it truly is.

Spencer Fernando


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