The government wasn’t saying inflation was rising, they said it would stay steady.
Yes, hence the word"despite". Government was saying one thing, despite that:
-
inflation had been rising starting January 2021, breaking the 2% target threshold in March, 3% upper bound in April, and by the time October rolled around was sitting above 4% with 4 straight months of increases
-in
October the 5yr fixed discounted rate started climbing steeply month over month, meanwhile the variable rate bottomed out for Nov-Jan
-the
overnight rate didn't start moving until March 2022
There was a 5 month period where the warning signs were there and worsening to anyone paying attention. And during that period variable rate election
peaked at unprecedented levels, and sustained that peak right through the BoC starting to raise rates.
Do you think mortgage "advisors*" at banks were doing their best to point out the warning signs and urge caution during this period, or were they pointing to the government assurances, sweeping the warning signs under the rug, and pointing out the lower payments? Keep in mind that
A- they had all these loans had a lot of stress runway, and many/most had either both of insurance or a co-signor - bank risk was heavily mitigated.
It isn’t pushing a product, it literally was the only product available if your buying these expensive houses in Toronto, Vancouver, without enough of a downpayment/income. When someone comes in says I want a mortgage of ‘xxxx’ amount and the only way to do it is variable rate you let them know that.
The spike wasn’t caused by banks pushing it, it was caused by people running head first into a mortgage from bidding wars because they didn’t want to wait and safely assess risks.
This is incorrect. Stress test provisions dictate max approvals being calculated at the higher of 5.25 (before june 2021 it was 4.8) or your approved rate + 2. So regardless of the decision between .85 variable and 1.7 fixed the max was the same - based on 5.25 The decision wasn't to take on more risk to enable higher loans, it was to take on more risk to get lower payments. Now- some people left big banks to get around the stress test and did as you said- but not nearly enough to explain the spike.
I didn't say that banks caused it, I said they exacerbated it. And they did.
People were just blindly bidding whatever their max mortgage amount was on basically any house with no conditions. Thats not the banks fault.
You can’t even say its because of poor financial advice, there is standard practice when buying for almost a century in Canada. Your conditions are basically always pending financing and home inspection. Everyone waived that and many got burned.
None of this has anything to do with people with an approval in place choosing between fixed and variable.
Its called personal responsibility, everyone can come up with some reason why it isn’t their fault. Many regret their purchases as it was way beyond what they could afford. At the end of the day no one held a gun to their head to foolishly make the most expensive purchase of their lives with no planning.
Yeah save the patronization. You can maintain your schadenfreude towards the dumdums. I have some of it too. I certainly agree that it's their bed to deal with, and have next to zero sympathy for the "plight" of people in 900k homes driving late model trucks unironically complaining that they can't make ends meet. It's time for lifestyle change's and co-signors to put their money where their signature is.
But "people are responsible for the consequences of their decisions" and "there was an unprecedented systemic anomaly of ignorant people making the same bad decision at the worst time -likely spurred on by unethical corporate behavior- it should be addressed" are not mutually exclusive statements.
