{"id":28849,"date":"2017-12-14T07:58:33","date_gmt":"2017-12-14T12:58:33","guid":{"rendered":"http:\/\/olduvai.ca\/?p=28849"},"modified":"2017-12-14T07:58:33","modified_gmt":"2017-12-14T12:58:33","slug":"canadian-homeowners-take-out-helocs-to-fund-subprime-buyers-unable-to-get-a-mortgage","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=28849","title":{"rendered":"Canadian Homeowners Take Out HELOCs to Fund Subprime Buyers Unable to get a Mortgage"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"https:\/\/wolfstreet.com\/2017\/12\/13\/canadian-homeowners-take-out-helocs-to-fund-subprime-buyers-unable-to-get-a-mortgage\/\">Canadian Homeowners Take Out HELOCs to Fund Subprime Buyers Unable to get a Mortgage<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>The Housing &amp; Debt Bubble ascends to the next level of risk.<\/strong><\/p>\n<h4>By Steve Saretsky, Vancouver, Canada,\u00a0<a href=\"http:\/\/vancitycondoguide.com\/\" target=\"_blank\" rel=\"noopener\">Vancity Condo Guide<\/a>:<\/h4>\n<p>The HELOC (Home Equity Line of Credit) has been a blessing and a curse for Canadian households. While it has helped spur house prices and\u00a0simultaneously provided consumers the ability to tap into their new found equity, it has also crippled many Canadian households into a debt trap that seems insurmountable.<\/p>\n<p>Between 2000 and 2010, HELOC balances soared from <a href=\"http:\/\/www.macleans.ca\/economy\/realestateeconomy\/how-canadian-homes-became-debt-traps\/\" target=\"_blank\" rel=\"noopener noreferrer\">$35 billion to $186 billion<\/a>, according to the Financial Consumer Agency of Canada, an average annual growth rate of 20%.\u00a0As of 2016, HELOC balances sit at $211 billion, a 500% increase since the year 2000. While also pushing Canadian household debt to incomes to record highs of 168%.<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-37512\" src=\"https:\/\/wolfstreet.com\/wp-content\/uploads\/2017\/12\/2017-12-12-VCG-Heloc.png\" alt=\"\" width=\"536\" height=\"400\" \/><\/p>\n<p><a href=\"https:\/\/twitter.com\/BeDebtSavvy\" target=\"_blank\" rel=\"noopener noreferrer\">Scott Terrio<\/a>, a debt consultant, says the situation is a full blown \u201cextend and pretend,\u201d meaning borrowers are just continuously refinancing or taking on more and more debt in order to sustain their lifestyle.\u00a0Canadians can extend their debt repayment terms and pretend to live a lifestyle they can\u2019t otherwise obtain.<\/p>\n<p>What the HELOC has also been able to do is help spur the private lending space which has ultimately supported rising house prices. Seth Daniels of JKD Capital, one of the most astute Canada-Watchers, says there\u2019s a growing trend where \u201ca homeowner acts as a sub-prime lender by drawing a HELOC at 3% interest only, and lends it to a subprime borrower at 8-12% for one year (interest only).\u201d<\/p>\n<p>This is something I\u2019ve been hearing on an ongoing basis from mortgage brokers and lawyers who help facilitate these deals. Especially since mortgage lending conditions tightened, starting with OSFI\u2019s first mortgage stress test back in November, 2016. The financial regulator required \u201chigh-ratio\u201d borrowers (those with less than 20% down payment) to qualify for a mortgage at the borrowing rate plus 2%. So basically you\u2019re getting qualified on what you can borrow at 5% even though you\u2019re borrowing at 3%.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Canadian Homeowners Take Out HELOCs to Fund Subprime Buyers Unable to get a Mortgage The Housing &amp; Debt Bubble ascends to the next level of risk. By Steve Saretsky, Vancouver, Canada,\u00a0Vancity Condo Guide: The HELOC (Home Equity Line of Credit) has been a blessing and a curse for Canadian households. While it has helped spur [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[103,15366,17497,7829,17496,4255],"class_list":["post-28849","post","type-post","status-publish","format-standard","hentry","category-economics","tag-canada","tag-canadian-housing","tag-heloc","tag-home-equity-line-of-credit","tag-steve-saretsky","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28849","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=28849"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28849\/revisions"}],"predecessor-version":[{"id":28850,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/28849\/revisions\/28850"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=28849"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=28849"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=28849"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}