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CANADA is NOT the US.

Why Canada will not see a crisis like the US:

Canada's sub-prime market represents no more than 6% of outstanding mortgages. In the U.S., 25% of new mortgages during the 2006 peak were sub-prime.

In addition our 100% mortgage buyers actually had to qualify and have a job, in the US all they had to do was fog up a mirror.

Canada's definition of sub-prime (90% to 95% of financing) would be considered near-prime in the U.S. Adjustable rate mortgages resets (where the interest rate sharply increases) caused much of the U.S. problems. In Canada, the closest we have are variable rate mortgages, but these are constantly re-priced so consumers are not caught off-guard, and float with the prime rate ... not a predetermined 3% - 7 % higher at a fixed date.

Mortgage interest is tax deductible in the U.S., which creates a strong incentive to leverage ... to create ever larger tax deductions and have larger and larger debt, less equity. Canada has no such deduction, given Canadians the incentive to pay off the non-tax deductible mortgage as soon as possible ... generating more and more equity in the process.

Investor mortgages account for 9% of all U.S. mortgages and were among the first to default. In Canada, investor mortgages are only 2% to 3% of outstanding mortgages. Mortgages in arrears in Canada (90 days or more) remain at .027% (27 basis points) the same range since 2004. In comparison, default rates in Florida and Nevada, as an example, peaked at around 25%.

 

For more info. e-mail info@theorec.com.

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