You can get some pretty good mortgage deals in Canada these days Today I got this drift via this intrusive banner advert from CIBC. Clearly CIBC wants you to see this advertisement.
The deal is 4.74 fixed with 2% cash back if you switch to CIBC. The company says:
Making the switch to a CIBC mortgage is easy and convenient. We’ll contact your current institution, complete all of the paperwork for you and transfer your existing mortgage for free — we don’t charge legal, appraisal or transfer-in fees.
I’m sure you can get great deals at other banks too – and without a whole lot of money down as I pointed out in an addendum to a post on Lehman Brothers a few weeks ago. TD was offering 5% cash back if you signed a deal with them.
What about this no money down deal from RBC? Take a look.
The full pdf is below.
Royal Bank of Canada No Money Down Mortgage Deals
100% financing. That gives you a sense of the mortgage frenzy. This reminds me of the sort of thing you might have seen in the U.S. or in Britain in 2006. Not quite like the HBOS deals for 125% loan to value in 2006, but bubblicious nonetheless.
Of course, the Canadian taxpayer will be on the hook if all of this goes horribly wrong:
Based on the frequency of reporting in the media, it seems that many people are increasingly worried that a housing bubble could develop in Canada. On Feb. 8 The Wall Street Journal even published an article suggesting that home sales and prices in Canada might have risen too quickly following the recent economic downturn and that this could create the conditions for a housing bubble similar to what occurred in the United States.
Policy makers worried about this should pay attention to a recently published study by the Fraser Institute which suggests that government intervention in the mortgage insurance market is unnecessarily exposing Canadian taxpayers to enormous financial liabilities in the event of a collapse in the housing market.
The extent of the potential taxpayer liability is staggering. The Canadian government is heavily exposed in the mortgage market because 43% of all residential mortgages (or roughly 90% of all insured residential mortgages) are backed by the government through the federally-owned Canada Mortgage and Housing Corporation (CMHC).
As of 2007, the total value of the mortgages insured directly by the CMHC was approximately $350-billion. More recent statistics estimate that CMHC currently has about $480-billion of insurance in force due to rising prices and sales.
This means that taxpayers are potentially on the hook for almost a half trillion dollars if the housing market were to collapse and require the government’s full backstop.
Recent events in the United States are a warning for Canadians about the disastrous effects of misguided public policies in mortgage and housing markets and the real exposure of taxpayers when governments guarantee mortgage financing.
–National Post, 10 Feb 2010
The great thing about the recession in Canada is that it cooled down an overheating market, especially for condos in places like Vancouver and Toronto. But, prices are marching higher again. See Vancouver Real Estate Anecdote Archive which I highlighted in the links on Sunday for anecdotes (ht Paul Kedrosky). This will end badly.