[sailplease]

You'd think the cost on the largest piece of debt a family hasdoubling would have a negative effect, but not in Canada to date, extend and pretend is the name of the game. The government seems set to prevent any reckoning by instructing and monitoring the banks to lessen the impact via the body that regulates them. A week ago the Financial Consumer Agency instructed banks to take steps to assist mortgage holders "The guideline sets out how FCAC expects federally regulated financial institutions to provide tailored support to consumers with mortgages on their principal residence who are experiencing severe financial difficulty."

- negative amortization - not charging interest on any interest not being covered - not charging too high of rates on fixed term renewals (not sure how this one works given the cost of capital on a 5yr terms is ~ 5-5.5% -> force the banks to loose money on renewals I guess?)

So maybe the strain will slow and it will shift to non regulated debt like credit cards. It will be harder to borrow for first time buyers as banks pull back. Lots of unintended consequences I'm sure.

I imagine the hope is you can pretend rates are actually not at a 20yr high by forcing the banks to not pass on the costs, and hope they go back down again the old "money is free" days. Problem is the cost of housing staying artificially high and not letting property values comes down is just forcing the housing input to inflation to be high giving the BOC tough choices. The market is seriously fucked up, a reasonable family home in a 2nd tier city is 1M which is a cost (opportunity or real) of 130k / yr (after tax) - so better hope your family income is 200-250k. If you're 20-30 forget about it, borrow money from the bank of mom and dad.

On the plus side making 5% on a savings account is now real money -> the risk free return hasn't been this high for a long time (20 yrs?). Either rates need to come down or asset prices do, but I agree that eventually something has to give.