Canada's Housing Market: At risk of facing a 2008-type crisis?

[Michael Dumler]

Is the Canadian housing market at risk of experiencing a 2008-type collapse? Back in 2019, the Bank of Canada dropped its benchmark interest rate to nearly 0% making it a lot cheaper for citizens to take out mortgages. During the pandemic, property values soared to their highest levels, thus driving housing affordability issues in metro markets like Toronto and Vancouver. A third of Canadian homeowners have an adjustable rate mortgage, which is about three times as much as the United States. Since the Bank of Canada has been following in the Fed's footsteps of aggressive rate hike policy, what may have seemed like a good mortgage deal when rates were at nearly 0% could be vastly more expensive when they adjust up. Very recently, banks have started issuing letters out to clients giving notice that interest payments will succeed fixed monthly payments. Given the higher payments, some homeowners may be forced to sell and take what little equity they have left. To my Canadian BP members and investors, are you all seeing an increase in "For Sale" signs in submarkets and neighborhoods? Curious to hear your thoughts. 

[Theresa Harris]

No.  The Canadian mortgage requirements are very different than what the US was doing in 2008 (and I believe theirs have changed as a result of the 2008 problems).  Over the last 5(?) years, all Canadian mortgages were stress tested at higher interest rates. So anyone who got a mortgage was lent money based on higher interest rates.

Interest rates have been really low for a long time and that wasn't normal.  We all knew they would go back up and were told they would go up.  I haven't seen anymore homes on the market than usual.