Having lived exactly half my life in Canada and half in the U.S., I know what fantasies and delusions are believed on both sides of the border...After 2008, the countries that hadn't experienced their own housing collapse, laughed at the U.S., and went on to create their own even bigger bubbles - Canada, Australia, Norway etc...
Royal Bank of Canada
I think we all see where I'm going with this...
There were several specious reasons Canadians believed they were immune to a U.S. housing collapse: 1) because, "there's no subprime" in Canada. To the contrary, prior to starting my first full time job, I actually worked very briefly at a subprime lender in Vancouver in 1990 - they consolidated 18% credit card loans into 25% consumer loans for people who were locked out of conventional banks i.e. subprime 2) There's no "zero down payment mortgages". In Canada, first mortgages require 25% down payment, however second mortgages can cover the remainder up to 20%. Meaning that 5% down payments are now ubiquitous in markets that are going up 25% per year. Also, unlike the U.S. ALL Canadian mortgages are variable rate, meaning they expose the borrower to interest rate risk every 1,3,5 years. There's no such thing as a 30 year fixed. There's also no such thing as a "non-recourse" mortgage, meaning foreclosure equals bankruptcy, unlike in many states you can't walk away from a mortgage.
Fast forward 7 years, and Canadian banks face a commodity bubble imploding and a real estate bubble going parabolic due to Chinese money laundering aka. mass exodus...
ZH: March 22, 2016
