No U.S.-style housing crash for Canada: report - The Globe and Mail
"One-third of mortgages taken out in the U.S. in 2005 and 2006 were
in negative equity positions before house prices dropped, and at least
half of the mortgages had less than five per cent equity, making them
extremely vulnerable to even a small drop in prices, Mr. Tal says. In
Canada, only 15 to 20 per cent of new mortgages have less than 15 per
cent equity, and the negative equity position is nil, he says.
In addition, Canadian borrowers have begun reducing their exposure to
rising interest rates by choosing fixed-rate mortgages over variable.
The opposite occurred in the U.S. where adjustable rate mortgages
remained popular until the bitter end, the report says.
It also pokes holes in some of the reasons that policy-makers and
bankers in Canada often cite for keeping the Canadian housing market on a
solid footing. For instance, bankers will regularly point to the
extremely low mortgage delinquency rate here. “But as the U.S.
experience teaches us, this sea of tranquillity can turn into a violent
storm overnight,” Mr. Tal writes. “In a short eighteen-month period in
2007-08, the serious mortgage arrears rate in the U.S. surged by more
than 300 per cent.”
Ha ha ha ha ok sure go with that...
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