Saturday's Globe Story
The Globe ran an article yesterday about Canada's weakening economy. From a mortgage standpoint, they said:
- People with weak credit who qualified for a mortgage a few years ago may find it tough to renew "if they have not improved their financial situations to the point where they would qualify for a more traditional mortgage."
- In markets where home prices have tumbled (or are tumbling), a number of people may have negative equity. In other words, owe more than their house is worth. Lenders don't lend, and often don't renew mortgages, in cases of negative equity.
- "Canadian banks are borrowing and lending in the same credit markets as U.S. banks, so if the credit markets seize up in the U.S., they're going to seize up in Canada, too." - Globe quote of McGill University economics professor Christopher Ragan
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Side Bar: Scotia Economics recently wrote a report comparing our mortgage market to that of the United States. Scotia listed many important distinctions including:
- Key differences in how Canada's securitization market works (it's less leveraged in Canada)
- Canada's more conservative underwriting standards
- Canadians' lower household debt-to-asset ratios
Each of these things, along with other items in Scotia's list, have fortunately served to keep some of the froth off of Canada's real estate market. That doesn't mean Canadian home prices won't continue to fall. It just means we probably won't see the devastation witnessed below the border.
(Report link courtesy of Yatter Matters)
