Re:New Zealand plunges into recessionary spiral
by ameminator on Friday November 04, 2022 @10:46PM
(#33477294)
It seems to be common due to the oligopoly of Canadian banks (there are 5 big banks for all of Canada and the concept of a small bank just doesn't exist, due to regulatory hurdles). It's a way to push the risk onto the consumer and guarantees that homeowners are first to suffer in a downturn - conversely Canadian banks are very "safe" from economic pressures, at least compared to their American counterparts. It's already a big problem because Canadian household debt has reached 2.1 trillion dollars [0], with a GDP of 1.9 trillion dollars [1] (all in USD).
Note these figures don't include government debt, which is also significant. Altogether, Canada may face a liquidity crisis on servicing the debt, if rates continue to rise.
[0] https://www.ceicdata.com/en/indicator/canada/household-debt
A mortgage that ends after 5 years and needs to be renewed would be considered a balloon mortgage, and they are rare in the US. They are "non-qualified" mortgages which means the government sponsored entities won't buy them, so there is a limited secondary market and they have much higher rates.
I don't think I would sleep great at night knowing that every 5 years I would need to either get a new mortgage loan or lose my house.