Mortgage Miracles

Billy Clinton created America’s final housing boom by giving away free mortgages to the homeless.  The U.S. economy might not ever recover from Clinton’s many fatal thrusts into raw financial greed.  Voters love him for his sleazy genius.  Canada never did play at this mortgage game, so the Canadian housing market has not collapsed as it did in the U.S.  That's not to say that Canada is home free.

In our healthy market, home prices simply move in the opposite direction to interest rates.  Canadians should remember this.  With interest rates at 3%, a one thousand dollar monthly interest payment will carry a $400,000 mortgage.  However, at a 12% rate of interest, that same monthly payment will only carry a loan of $100,000.

When rate hikes do begin, many Canadian homeowners will find themselves severely pressed or unable to carry mortgages taken out at earlier depressed rates of interest.  This could lead to a snowball effect in Canadian mortgage defaults. Canadians should be careful not to become over extended in our current rosy interest rate environment.