The debt hustlers

There was arousal in the bond market this week. Not great news for the houseless kiddos or the 940,000 families who will be renewing $360 billion in mortgages next year.

Economists think rates will be going up in 2027, just about everywhere. It’s already started, in the US, Europe, the UK, Australia and India. We now live in a world defining by galloping sovereign debt levels, stubborn inflation, high energy costs, elevated government and defence spending and this insanely-expensive AI infrastructure buildout.

So, up go mortgages. Next year will bring ubiquitous 5% loans, accompanied by considerable moaning and whining.

Despite a crappy jobs scene, the bank of Canada will be hiking again, perhaps as soon as next month. The US Fed is definitely on track for multiple increases, with high job creation and a bustling GDP (despite Jensen’s libido problem). Inflation is swelling again, at 4% here and spreading across the American economy. Investors see the rate tide coming and have been selling off bonds, forcing yields higher. Those of US Treasuries and Canada five-year bonds all raced higher this week.

A 20 bps jump in that Canadian debt (a big move for one week) means home loan costs will not be falling here despite a weakening economy. In fact, the opposite.

This brings us to the pearl-clutching problem of what to do? How do we keep the young fully addicted to real estate ownership in order to assure an indebted, compliant middle class and prevent realtor homelessness?

Well, the feds are trying hard, as you know. Billions are being poured into new housing builds, builder financing and municipal infrastructure – as well as buying up unsold condos and turning them into (yuck) rentals.

But, says the industry, not enough. Home ownership rates are faltering, so rules must change. Adulthood without crippling mortgage debt is, after all, unthinkable.

Here’s the latest:

An outfit called the National Housing and Investment Institute has been set up. Comprised of the Big Five banks (who hold most of Canada’s mortgages), the land development industry, and huge builders like Mattamy, it’s lobbying for fundamental change in the way people finance real estate.

For example, make it easier for the young to get into a new-build with a rock-bottom downpayment and a government subsidy, like a low-interest (and probably forgivable) loan. Of course, that would increase demand for new homes and put upward pressure on prices. But let’s remember who’s doing the lobbying here. Right. Those who build. Those who lend.

The Institute also wants Ottawa to diddle with the stress test, “to allow for more nusnace and flexibility.” That might include a sliding scale based on the type of property being purchased or the length of loan being taken. Whatever. Just make it easier.

And in a major suggestion, these guys want the feds to allow newbie buyers mortgage interest deductibility. Yes, like in the US. This would be for newly-built homes and could result in lower tax-free capital gains when the property is sold. Of course, it would bring more demand, higher prices and more government spending to offset the lower tax revenues.

Not to be outdone, here are the mortgage crusaders riding over the crest of the hill.

“It is time for the government to stop standing in the way of Canadians trying to buy a home,” cries the Canadian Mortgage Brokers Association. “Canadians are working harder, saving longer, and watching the dream of homeownership slip further out of reach.”

More debt. Higher interest charges. Longer loans.

.

Here’s their ask:

Forty-year mortgages. Yes, again. So first-time buyers have the opportunity of borrowing more, paying far more in interest over the life of their loan, and helping to push home values skyward.

“Canada’s restrictive mortgage rules are driving up monthly payments and shutting prospective buyers out of the market,” they argue. ”While Ottawa has introduced limited 30-year amortizations, these measures leave many Canadians behind, including existing homeowners looking to move into larger homes. Longer amortization periods would lower monthly payments, give buyers greater flexibility, and help free up entry-level housing for the next generation of homeowners.”

More debt. Higher interest. Longer loans. What could go wrong?

Oh, and the lenders also want the government to subsidize down payments with low-interest loans to first-time buyers. That would help them achieve 90%, 95% or even 100% financing. Concurrently, the brokers want existing homeowners to be able to borrow against their equity – up to 90% of a home’s market value – so they can consolidate debt (as opposed to spending less).

“We cannot keep telling an entire generation of Canadians that homeownership is within reach while maintaining policies that push it further away,” say the brokers. “A young professional with a stable job should not have to spend the better part of a decade saving for a down payment while housing costs continue to rise.”

All true. And the cure is simple.

Stop buying real estate with stupid prices. It’s a trap.

About the picture: “Garth, you broke the mold with that Crab picture a while ago,” writes Pete, on Hornby Island BC. “These are my Peking ducks, patrolling the orchard for things to eat.  They are obviously not dogs, but they behave like Bentley, who has been featured on your blog before. They lay down in the tall grass beside my chair when I sit under an apple tree in the afternoon sunshine with a beer – while checking my stocks on the laptop.  The dog sits on the other side.  Nice blog. Cheers.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/11/13/the-debt-hustlers/