Stumbled across this CBC Article today, you can find the full article here
I have written and spoken on much of this before, but a brief summary is that Canadians currently are the most indebted of any OECD nation with 101% household debt to GDP. with the link being made that the majority of this debt is being held in real-estate or mortgage debt.
I know the Bank Of Canada has expressed concern about this the last few times they have raised rates to control inflation.
Reason being, here in Canada, majority of mortgage holders are on five year fixed rate mortgages. That is, every five years they need to re-negotiate their mortgage rate with their financial institution. So any borrower who locked in 4 years ago at record low rates, now that they are coming up for renewal, they may be in for a surprise as their mortgage payments drastically increase in order to keep their amortization schedule on track.
If inflation ever rebounds forcing the Bank of Canada to act on interest rate to fulfill their mandate ... many borrowers may find themselves in trouble.
Adding to the problem, the article also notes that house prices in Canada are 50% over-valued in relation to the corresponding rental price for that real-estate. Although there are several ways in which rental prices are tied to real-estate price, if you are interested about the relationship, I have written about one here.
What are your thoughts on the revelation, shocking, or as expected?
Feel free to comment below.
