September 5, 2017

You might not like the answer.

The fact is that more Canadians (69% of households) have their names on title on their homes than ever before – but they also own far less of the value of the property than ever before.  There are more mortgages, institutional and private than ever in history.

According to Statistics Canada, Canadians own less than 20% of the total value of their homes.  The balance presumably is consumed by mortgages – according to the Canadian Bankers Association Banks hold mortgages worth 34% of the value of Canadian homes.  Therefore it seems reasonable to assume that the balance of mortgages are privately held and unreported by the CBA.

The bottom line is that you probably don’t own very much of your home at all, and you most likely can only afford to live where you are because of downward pressure on interest rates.  Your options however may not be very broad – average rental costs have increased making cheap mortgages more attractive than rental costs.

After all if you buy a fixer upper for $100,000 with 5% down, hmm well, after the bank has finished lending you money for RSPs which are converted to OHOSPs and so on (you probably just have more debt and no real down payment at all so) let’s just say you have a $100,000 mortgage with a 25 year amortization at 2.9% – you are paying $469 per month P&I.  That’s cheaper than rent for sure!

Nonetheless, geared to income rentals are in high demand – higher than ever!  Why?  Because unemployment and poverty are increasing!  More and more people are addicted to credit as income replacement than ever before.  Ironically it’s not poorly educated people or low income earners who are carrying the most debt.  That privilege belongs to people with the highest levels of education and higher incomes – more income seems to equate to a greater sense of entitlement.

But remember the old maxim “if you want to listen to the music, eventually you have to pay the piper” and pay you will!