Who would you elect as the next Prime Minister of Canada?
  • Pierre Poilievre – Conservative 55%, 588 votes
    588 votes 55%
    588 votes – 55% of all votes
  • Justin Trudeau – Liberal 19%, 199 votes
    199 votes 19%
    199 votes – 19% of all votes
  • Jagmeet Singh – NDP 14%, 153 votes
    153 votes 14%
    153 votes – 14% of all votes
  • I don’t really care… 7%, 71 vote
    71 vote 7%
    71 vote – 7% of all votes
  • Maxime Bernier – People’s Party 4%, 40 votes
    40 votes 4%
    40 votes – 4% of all votes
  • Amita Kuttner – Green Party 1%, 14 votes
    14 votes 1%
    14 votes – 1% of all votes
Total Votes: 1065
September 13, 2022November 30, 2022
Voting is closed

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With interest rates and house prices on the rise, some believe the country is headed towards a housing bubble, such as the one seen in the US in the mid-2000’s.

Added to those two factors is that more than 50% of recent new mortgages were approved with variable rate interest.

A clip of a January meeting of the Federal Standing Committee on Finance has surfaced recently which shows a concerned MP asking serious questions of Canadian Mortgage and Housing corporation, questions they were ill prepared to answer.

Romy Bowers, President and CEO of CMHC, the national housing agency, was unable to provide the total amount of mortgages which, if defaulted, would be passed on to the taxpayer.

She was in front of the committee and faced questions from MP Pierre Poilievre, the conservative party critic for finance.

Poilievre wanted to know what the total dollar value of insurance enforced at CMHC is at the moment.

Bowers provided a quick answer of $404 billion. Poilievre pushed the issue to get another number.

“Then what is the total value of guarantees? Under the National Housing Act, mortgage backed securities and Canada mortgage bonds, the total, please the number?” he asked.

The response given was $460 billion.

“So you add those two numbers up 404 plus $460 billion, I get $864 billion, is that the total value of the the amount of money the government is on the hook for, when it comes to backing up mortgages?” pressed the conservative MP.

Bowers admitted to some duplication in the number, but was unable, when asked, to provide the actual total taxpayers would be on the hook for if the market crashed.

So why is this important? Poilievre explained.

“Well, it makes me uncomfortable that we have hundreds of billions of dollars of unknown contingent liabilities, Miss [Bowers]. If people do default on their mortgages, your corporation then pays the default loss to the bank, and taxpayers could be on the hook for that money,” stated Poilievre. “The fact that you don’t know the total amount of guarantees that your government, that your organization is offering on behalf of taxpayers to our banks is problematic.”

He explains even more to Bowers in the video.

“If our housing prices simply went back to the level they were at in 2020, that would be nearly a 25% reduction in house prices. And if people defaulted on those houses, many would be underwater, so taxpayers would then have to pay for the default loss,” he noted, then shared with viewers his disapproval. “I would expect that the head of the corporation that is managing these liabilities and this risk for taxpayers would know the number and have them at fingertip.”

SaultOnline spoke with Poilievre in February about why he thinks the housing bubble may pop in Canada.

“Half of all mortgages issued in the last year have been variable rate. It’s dangerous, because when rates rise, their payments will immediately go up,” he told us. “The typical house in Canada today is $811,000, that’s up from $436,000 when Trudeau took office.”  He also noted that almost 20 percent of all mortgages in the last year have been for 5%.”

He explains it’s actually worse than that, after you pay off your mortgage insurance, which is around 4% of your mortgage in most cases, you have only 1 percent equity in your home, meaning you have an $800,000 mortgage.

“Let’s say you took on a variable rate. And you did that because variable rate 1.6 is three (percentage) points below the inflation rate. In other words, a negative real interest rate you’re getting paid to borrow money right now,” said Poilievre. “But let’s say rates go up two points, as Scotiabank suggests they will, a two percentage point increase on an $800,000 mortgage is $16,000 in extra mortgage payments every year. Every year repeating into eternity.”

He is concerned most families with that type of mortgage can’t afford that increase and may default, leaving taxpayers on the hook for the amount of the mortgage.

“Let’s say that 1000s of people do that, all at once, prices then crash. And all of those folks with 1% down, that’s 1% net equity. They might be they might be underwater by $100,000, or even $200,000 on their mortgage,” he told SaultOnline. “That is to say their house could be worth $200,000 less than their mortgages. What happens then? We’re talking about a financial meltdown.”

In the end, he explains his concern.

“At the end of the day, the government’s capacity to bail everything out is is limited as well. Because what is the government going to do if there’s a massive meltdown? Go and try to borrow even more? What if there’s nothing? If no one will lend well, then they have to print even more [money], which will mean more inflation?” That isn’t the answer, according to Poilievre.  He sees only one way out.

“The only way out is to quickly restore financial/fiscal responsibility quickly and the time is running out. We don’t have a lot of time before this whole mess comes crashing down on us.”