Does the US mortgage crisis have you nervous about entering the Canadian housing market? There are major differences between the Canadian and US markets and here are key points to highlight:
- Canada's mortgage default rates are much healthier (6.78% in the US vs. 2.09% in Canada).
- Much of the pain being felt in the US is a result of very aggressive mortgage products like interest only and negative amortization mortgages (which, for example, make up more than 2/3rds of California's residential mortgage market!). By comparison, negative amortization products are not offered in Canada and interest only mortgages have had a very limited take-up. Canada's mortgage industry has maintained a much higher level of standards and regulation than the US.
- Canada's debt-recovery laws are generally more lender-friendly than those prevalent in the US, which makes the current US scenario less likely to be repeated north of the border.
- The US market has seen overly aggressive competition among lenders which created a race down the credit curve. The US sub-prime market now accounts for a whopping 20% of the overall US residential mortgage market whereas the more conservative Canadian sub-prime market only accounts for approximately 5% of total mortgages outstanding.
- In general, the Canadian real estate market is much healthier than the U.S. When you combine this with CREA's view that "low mortgage interest rates, high employment, rising incomes and upbeat consumer sentiment will keep the [overall] housing market on a strong footing for the foreseeable future" we remain optimistic about the future of Canada's alternative mortgage market.
Hi Shaun: It has always been my opinion that the Canadian real estate market was healthier than the US market, but I never had any confirmation of that. Thanks for sharing all of your thoughts with us.
Shaun: I just took a peek at your blog, and discovered that this is your very first post. Congratulations, and welcome to Active Rain. I am sure you will find it a very interesting place to be, and, if you persist, I think it can be beneficial to your mortgage business. Take care... and Welcome !
Welcome! Excellent Comparative Analysis between U.S. Canada market
Live a mile and a half from New Brunswick in Maine. Wonder if agents on this side and that side may ever get licensed to go across the border. Everyone in this area gets along super and related to many of the folks over there and vice versa. Good blog! Welcome aboard!
I'm jealous it sounds like the greed and deception might not be in your market. If we had not had the too good to be true mortgages here it might also be a different result. Keep Canada on the right track.