The Banks Are To Blame For Our “Housing Bubble”

The Banks Are To Blame For Our “Housing Bubble”

The banks are to Blame for Our Housing bubble. No Really, there is no one else to blame. You could throw the government in there too but mostly the banks. You can blame Realtors for driving up market price. You can blame Owners for jumping on the band wagon and demanding bidding wars. You can blame foreigners bringing their yen or rupees here. You can blame the high demand and low amount of housing all you want.

Its the banks that have created this supposed bubble and now they are scrambling to find a way to put a cap on it before they get screwed with a bunch of foreclosures like ten years ago down south.

The reason why they keep coming up with stupid regulations every few months is that for the last few years, they realize they cannot cap this freight train too fast because that would completely screw them over. Pulling back too much would lower prices so fast, people would walk away from their mortgages.

The way they created this mess was to get involved in a low interest battle among themselves. This was to combat what happened to the US market in 2008. While we did have a market that did slow down, they didn’t want it to become what happened in the US, so they lowered and lowered the interest rates.

The next thing they did was allow foreign buyers to use their money to buy houses with loopholes. (They since have changed those rules)

The banks also allowed people to use the equity in their house to purchase second and third properties, and become landlords. CMHC helped a lot of people buy these properties. (These regulations have been tightened as well)

What the banks did was to finance home renovations, and home renovation companies. This allowed everybody who watches HGTV to become all of a sudden brilliant and renovate a home, then then they could hide behind the CRA tax codes. The banks also allowed foreigners to use their money to do this as well. Not just domestic companies. (These rules have been tightened as well)

After all of their helping out the housing market, and record profits, they started to do some analysis, and started to realize that while the prices of housing has shot through the stratosphere, their liability is up there as well. So now they are coming out with reports and reports, and news articles, and new regulation after regulation to try to calm this bull down. The problem is, bulls down go down easy, and neither will this one. Run too slow or fast and you’ll get the horns. Either way, its their fault for being greedy and blaming other factors, but that seems to be the normal thing to do now.

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Would You Go Into a Court Without a Lawyer?

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The Banks Are To Blame For Our “Housing Bubble”

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New Mortgage Rules Will Affect the Canadian Housing Market

New Mortgage Rules Will Affect the Canadian Housing Market

I’m not going to write about the new mortgage rules, but you can read about them right here. So Go read them and come back.

Now that you are up to speed here is what will happen in the short and long term.

The market in the next few weeks is going to go crazy, I mean until the rules officially set in, people are going to try to buy something right away that cannot qualify under the new rules.

Like Vancouver the market is also going to drop a little bit. The reason being, the new rules are going to turn investors, foreign investors, and people who live here that invest off for a while until they can figure out the new rules and see what effect it has on the market.

The new rules affect the people who really don’t have 20% down and can afford a higher priced house. So what will this mean. Cheaper houses are going to be more sought after as well as townhouses, condos that are more affordable. Rentals will be going up as well.

The next major rules that will affect the foreign buyers that are using the tax loop holes to get away with not paying capital gains, so this will deter those buyers as well.

The thing about these new rules is that it will not affect the investors who live in Canada, who have money, who do not rely on these rules, and these loop holes. There are a lot of buyers who already have more than 20% or can get the funds necessary. Its a simple phone call to mommy and daddy who have a line of credit on their house and can lend off of that other property. So these rules will not affect those people and will make the world a more secure place in that sense.

So will these rules affect the housing market? Definitely these new rules will have huge ramifications in the market and the prices will even itself out a bit, and in other areas that are hot, they will not. This will also spurn a hot market in the lower echelon of prices for houses. Here is the thing about predictions, just when everybody thinks the market is going to get lower, nothing happens and the prices climb higher the next year. So nobody really knows.

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Interests Rates Are Going Down, What’s Next?

Interests Rates Are Going Down, What’s Next?

Unless you’ve been stuck in an igloo for the last week, you should know that the bank of Canada cut their lending rate down by .75% a few weeks ago. This means that the banks cut their lending rates, and it looks like the rates are going to go down again.

Initially most news outlets were saying that the banks were only going to cut the variable rate down but some banks have announced plans to cut 3-5 years mortgage rates.

So what does this all mean?

Well it should spark the market which looked like it was taking a downturn and it still may take a down turn. If you don’t have a job, it doesn’t matter what the rates are, you can’t pay a mortgage, and you will have to sell your house.

In the meantime, the bank of Canada will try this tactic to ease the economy slowing, and the next step is easing CMHC rules, and some other housing rules that have been changed in recent years to tighten up the market.

My predictions are:
1. 30 and 35 year mortgages are coming back.
2. 5% mortgages are going to come back strong, or even 0% down.
3. Business for Self restrictions will ease a bit
4. Banks Loan to Value will go Up currently 80% probably will go to 85% to 90%
5. The market will get Crazy this year.

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