The CBC had an interesting article on how Canada is Tiptoeing Towards a Subprime debacle similar to the United States (but not exactly the same).
I was skeptical, but I was also unaware that there are so many “alternate lenders” for mortgages in Canada (and that these Mortgages are not CMHC insured).
The banks seem to have come to their senses and are now rejecting more than 20% of Mortgage applications these days, because they cannot be CMHC insured, according to the CBC and while I think this is a good idea, folks are simply trying to contravene the system and get a loan that is not insured by the CMHC, and thus are a lot more risky.
The weird thing is that the president of one of these “alternate loan providers” claims their industry takes up 20% of the mortgage market, which is one hell of a big whack of money.
To be clear (at least to my understanding) this is not a SubPrime type situation, the loans being given out are not at low rates (which then ratchet up quickly (at least I hope not)), but it is loans that are being given to folks that banks don’t want to loan money, and that was one of the faulty pillars of the subprime debacle (i.e. people who couldn’t rent a home, were buying them instead).
These kind of loans worry me, because people are doing stupid things like tying themselves up with debts that would make the Marquis de Sade proud. If you can’t afford a house, maybe the bank is right? Owning a home is not a RIGHT it is a PRIVILEGE, and folks need to figure that one out.
There is a difference between what you want in life and what you can afford. I guess this goes back to whether Canadians are Financially Stupid, but I am willing to discuss if folks think these alternate lenders are simply offering a service (much like pay-day loan companies and such).