Increase of 2nd, 3rd, 4th mortgages out-pacing 1st mortgages ? | Mortgages | Discussion forum

hwyc said
https://financialpost.com/real-estate/mortgages/investors-are-gobbling-up-homes-in-canadas-hot-housing-market

In the 12 months through June, the number of people adding a fourth mortgage or more surged 7.7 per cent, more than doubling the increase for first-time borrowers, according to data from consumer credit reporting firm Equifax Canada Inc.

Am I fueling a bubble with low interest earning deposit ?  

That article is not clearly written - 4 mortgages for a 1st time homebuyer seems strange-- perhaps it means there are 4 mortgages on one property - that investors are buying multiple properties and put mortgage(s) on first property to buy another property and then mortgage the 2nd property to buy a third etc. - i.e. the investor has 4 mortgages - but perhaps not all on the first property - but anything is possible. I think the article could be clearer.
During Covid, the federal govt provided much funding into the economy with all the handouts, relief, support, welfare etc - which put extra cash into a large number of people's pockets who did not really need that relief - so many of those people are using that cash to buy residences, investment properties, invest in the markets. The Ontario Govt also froze rental increases so tenants gained extra cash/savings. Many of these tenants likely jumped into the housing market as buyers.
While Vancouver and Toronto have very high house prices, the average price in the rest of Canada is not necessarily higher than other 1st world countries.
Apparently the Canadian economy is doing quite well from all the financial articles I read. We are a rich country and foreigners are heavy investors in Canada. We have lots of immigrants arriving - many educated and not necessarily all poor. While such things as property prices and stock prices may slow down a bit or even have a pull back, I doubt there is going to be any long term "crash" as Loonie states.
You are correct that low interest rates accentuate what it occurring but interest rates are likely going to stay at low levels for at least another year - that is the way Govt and BofC want it - and even then any increases will be very gradual so not to put the economy into jeopardy.
Just my take on things.....hopefully we will get some good leaders to steer the ship.

I agree, the article is about multiple properties, not 4 mortgages on one property. And I agree that a crash isn't coming, i.e. slight pullbacks are common but it doesn't take long to get roaring again in the big cities. Even the article mentions a 2017 crackdown on rising prices, well that didn't have any significant lasting effect within a very short time.

The current government is increasing immigration levels yet again in the next few years, that will fuel further increases in the big cities with a resultant ripple-effect elsewhere. Plus inflation upticks result in folks moving to hard assets, like real estate, so again an upward price effect.

One person with multiple properties does sound more likely than one property with fourth mortgages.

But what this comes down to is the rich getting richer and less opportunity for young families who may be stuck being perpetual renters unless they have parents who can afford to set them up. That's not my idea of a healthy economy.

Predictable scare-mongering ("very frightening"), percentage of home ownership at pretty much all time highs in Canada, I think at around 68% (1970, for example, was around 60%). I'm fine with the market determining price, prices are "high" because people have the money to buy or finance at these prices. Just because not everyone can afford a house is zero evidence prices are too high, always been lots of lifelong renters.

The young family won't be able to outbid the investor who intendeds to turn the single-family house into two rental units, unless the family too is willing to divide the house and have a rental.

It is unfortunate that developer with $1 billion to invest doesn't spend it to build $1 billion of new rental units.

It reminds me of that venture capitalist fad years ago of buying up small drug companies that were the sole source of post-patent drugs and then jacking up the price overnight.

Loonie said
It's younger families that are getting shafted.  

Yes - in some cases - however I find that many younger couples have high expectations for their 1st house re area, city etc. But many young couples/families are not so young in that they marry later, have kids later, and fewer kids, than the older generations, are more educated, have had better starting jobs than the older generations.
There are always those who seem to succeed while there are others who never seem to get ahead. I am always impressed with certain immigrants who arrive with little, work hard, are careful with their money, buy a house, etc etc - I have known some of these and seen their drive and work ethic.

Loonie said
Poor immigrants often choose the latter, or did in the past, by pooling their savings and then helping each other later to each get a house.

My father did just that. After buying his own home, he helped another family by co-signing for their house. Otherwise, they would not have qualified.

Norman1 said
The young family won't be able to outbid the investor who intendeds to turn the single-family house into two rental units, unless the family too is willing to divide the house and have a rental.
 

Isn't this an example of real estate investors helping increase the supply of homes and making things more affordable for families? You're taking an asset that housed one family and making it work for two families.

The developers or investors aren't out to win the bidding on the houses at any price. The purchase price has to make sense in the context of the rent from the resulting two units.

If the developer was that one mentioned, who was planning to create a new rental units out of the basements, then the highest bid would likely be about $74,000 more than would make sense for the rent from the resulting two units.