Uninsured Mortgage Growth

CLICK CHART TO ENLARGE

CLICK CHART TO ENLARGE

​Full CMHC 33 page 3Q 2019 PDF Report Here.​

​CMHC launched a new report earlier this week that will focus on mortgage market trends in Canada on a quarterly basis. This first report entitled "Mortgage Market Slowing & Share of Uninsured Mortgages Increasing" indeed highlights 2 major trends in place:

1. Since the 2016-2017 peak of the FOMO frenzy that pushed housing prices in the hot Canadian markets to the most un-affordable global levels (Demographia), uninsured mortgage growth has grown more than three times that of insured mortgage growth.
   
   
2. Since the late 1980's after fixed mortgage rates peaked at over 20% per year in 1981, the rate of GROWTH in mortgage creation in Canada has plunged to less than 5% Y/Y now even though nominal mortgage rates have been boot stomped via NIRP and ZIRP.

#1 above suggests that housing unaffordability continues to grow as fewer potential buyers can qualify for a high ratio debt to equity insured mortgage.

​#2 suggests that reducing mortgage rates by 75% over the last thirty-plus years has led to debt revulsion as identified in my Household Debt chart which shows a peak and flattening since the hot market price peaks of 2017​

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Earlier this year in an effort to underline the end of the secular credit surge, I posted MAXED OUT in April and LATE STAGE DELEVERAGING in June. The insistence of the Bank of Canada to join in the decade long global experiment of ZIRP and NIRP has not ignited CPI much beyond their target mandate of 2% per year (spread chart). But it has forced tax payers to move away from the diligence of savings, investment and productiveness to the chasing of yields, to the consumption of depreciating assets and to the blowing up of the biggest bubble in major asset classes in both the equity and debt sectors, the fall out of which is also identified on my Household Debt Chart that includes a plot of Federal Direct Investment data which shows the dramatic and widening divergence between investment into and out of Canada taking place in the last 3 years but has also been trending towards this conclusion each year for the last 20 years.

These trends have taken 10, 20, 30 and 40 years for the credit cycle to fully manifest and now the effects of unproductive capital have emerged with a nascent transition to the early stage of a new credit cycle where companies and households will try to deleverage by reducing the amount of debt they hold while risk appetite is low and the cost of risk taking is high.

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...History has shown that it takes a “long, long” time to restore household balance sheets, a situation that will be all that more difficult with trade and business spending hampered...
David Tulk, International Portfolio Manager for Fidelity Investment Canada, March 2019​

...The nation may already be in recession after growing at an annualized pace of just 0.4 per cent in the fourth quarter (2018) and a pretty “soggy” start to the year (2019)...
David Wolf, Asset Allocations for Fidelity Investment and Former adviser to the Bank of Canada

...Canada’s households are clearly more stretched in terms of debt and spending than their American counterparts... There’s just no latent capacity to spend or to buffer a shock in Canada... They just have less room for error, less room to cushion any kind of hit with spending, before they would actually fall into outright dissavings...
​Eric Lascelles, chief economist at RBC Global Asset Management Inc

Source of Quotes above from Financial Post.com June 2019

One of the problems facing our "economy" is the rampant flow of hard to track global criminal capital moving into jurisdictions attractive to money laundering... in this case Canada. The World Bank and the International Monetary Fund produces corruption ratings and by their measure British Columbia ranked fourth for money laundering among six regions in Canada. Manitoba and Saskatchewan combined were said to have more money laundering activity than B.C.

"B.C. Attorney General David Eby announced Justice Austin Cullen has agreed to lead what will be known as the Commission of Inquiry into Money Laundering in British Columbia, which is expected to produce a report in May 2021." Powell River Peak, May 2019

​Meanwhile the "Vancouver Model" continues to move east across Canada (see my NOV 2018 post DIRTY REAL ESTATE); "The C.D. Howe Institute study estimates of money laundering in Canada range from $5 billion to $100 billion. SEP 2018"

​That money after it's cleaned flows into business elements and hard assets throughout the "economy". It's going to take a new generation of activists to replace the mob model we find ourselves in.

One thing that generation could do is to replace our taxation system with an iteration of the APT tax which is an automated micro tax on any financial transaction. The authors of the APT tax model demonstrate the "desirability and feasibility of replacing the present system of personal and corporate income, sales, excise, capital gains, import and export duties, gift and estate taxes with a single comprehensive revenue neutral Automated Payment Transaction (APT) tax... In its simplest form, the APT tax consists of a flat tax levied on all transactions. The tax is automatically assessed and collected when transactions are settled through the electronic technology of the banking/ payments system... Real time tax collection at source of payment applies to all types of transactions, thereby reducing administration and compliance costs as well as opportunities for tax evasion."

Additionally, the APT can be adjusted easily so that it is revenue neutral, ie: we could as a society set our fiscal priorities to accomplish our social contract goals with a tax burden of less than 2% of ALL financial transactions throughout a computerized banking and financial system. We would not have to debate where the money comes from... there is more than enough of that... but we would only be left with a debate of how to invest the money. See my complete APT post of NOV 2012 

Let the new digital generation take this challenge on. 
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Meanwhile David Rosenberg May 2019
The investor class is heading towards liquidity
in the form of U.S. Treasuries and the USD