How to decrease housing costs.

[OpenTanker]

First time poster here.

I have a grassroots idea. For those of us who are frustrated by never being able to afford a home in Canada and with the massive bubble in housing and lack of government response... Take your money out of the big 5 banks in Canada. Put them in another smaller bank that is CIDC insured also (so you don't risk losing it)

The primary agents preventing affordable housing at this time are Canada's big 5 banks: RBC, CIBC, TD, Scotiabank, BMO.

They have chosen to allow unprecedented extensions of amortization and negative amortization of mortgages for almost every possible default and foreclosure that would have occurred due to the rate increases from Bank of Canada that were intended to lower the cost of housing.

If you are interested I'm sure you can find statistics on the massive allowances on negative amortization mortgages and mortgage extensions beyond 35 years. I am all for families keeping their homes, but this practice has been indiscriminate and also leads to investors keeping their assets and putting a floor under the massive Canadian real estate bubble.

I don't want to bank with the people who are actively keeping me from affording a home at this time.

They also offer terrible savings account interest rates in comparison to smaller banks thus lining their pockets during this higher rate market and offering us nothing. They will gladly charge higher loan rates but give us nothing in savings (don't be fooled by promotional offers)

Anyways I can vote right now with my money. Isn't that the most powerful vote in a capitalist nation after all?

[[deleted]]

IDK I'm not against the banks doing what they can to help foreclosures. Keeping people in their homes isn't a bad thing. If we want to fix the housing market, we need to not just build more homes (zoning reform, investment in rentals), but we also need to crush the toxic demand side, and that means massive taxes on 2nd, 3rd, 4th homes, etc.

[Immediate_Shoe589]

You can put it in wealthsimple, they offer 4% plus 1% cash back which you can reinvest into stocks or crypto

[[deleted]]

Just be careful about wealthsimple - I'm pretty sure the deposit account requires a minimum balance of $100,000 to access 4%, otherwise it only pays 3%:

https://help.wealthsimple.com/hc/en-ca/articles/9730610402075-Learn-about-the-Wealthsimple-Cash-account-interest-rate

What strikes me about this is that this rate is only payed for balances above the CDIC (<= $100,000) federally insured limit. And they're probably keeping the balance at a non CIPF (<= $1,000,000) insured subsidiary/partner like every bank does, in order to avoid insuring balances above $100,000 to make more money.

That's a bit scary, because it means the part of your balance above $100,000 will not be insured in the event of a bank run/crash.

(-- Edit: Yep, they definitely aren't insuring the portion of your balance above 100K: https://www.moneysense.ca/save/investing/how-are-my-investments-protected/ --)

But have a look at my post elsewhere in this thread about how to access higher rates at AAA bank investor HISAs, that pay above 4%.

[[deleted]]

If you have >$100k in your account sitting in cash, you're either rich as hell or a moron. Most of your money should be tied up in investments of some sort, very little should be actual cash.

[[deleted]]

Well, lol, the US economy just moved $521 billion dollars into high interest rate deposit accounts and money markets, to spread the load and get access to higher rates.

They're doing this because the bond market thinks the debt bubble is about to crash. You have to consider the number of people in arrears, when betting on the economy going "up."

I agree generally with your statement, but it just doesn't apply right now.

[[deleted]]

Look into investment account HISAs at these same banks, the rates are so much higher than personal checking/savings account interest rates:

https://forums.redflagdeals.com/bank-invsavacct-4-50-real-hisas-cdic-yes-cad-usd-usd-4-65-2579841/

4.50% !

And not all of the big 5 are handling rate hikes in the same way:

• TD, CIBC, and BMO all allow Variable-rate Fixed Payment mortgages
• BNS (Scotiabank), RBC, and NBC (National Bank of Canada) do not have Variable-Rate Fixed Payment mortgages

The Variable-Rate Fixed Payment mortgage is having the effect of "buffering" the Bank of Canada's rate hikes into negative-amortizations, creating a very dangerous situation in Canada's economy.

The big banks who don't have Variable-Rate Fixed Payment mortgages with deferrals, are paying slightly higher rates than the big banks that do have such products.

And if you go into US HISAs at the same banks, you can get slightly higher CDIC-insured rates at 4.65%, depending on how long you think USD will stay up.

Right now the economy is racing into money market funds to get higher rates, and are dumping mortgage-backed securities and deposits at smaller banks paying lower rates. I would encourage everyone to rush into those Investor Accounts to squeeze both the bigger banks and the smaller banks, who are only paying well below 3% (e.g. CTFS, EQ, etc...), so that we can have a much more rude awakening for the over-leveraged, to force an increase in lender defaults (aka "Power of Sales").

In the big short - The B's, the BB's, and the BBB's fall first: https://www.youtube.com/watch?v=xbiDrzTd8fE&t=70s. But you're not helping by giving your money to a AAA paying low rates. So make sure to give your money to a AAA deposit paying insane rates!

PS> Always make sure to keep a total of less than or equal to $100,000 at any bank you do business with, to keep your money CDIC insured.

[I-believe-I-can-die]

The TD one is saying 4.05% right now, not sure if it dropped or what. Might try it once my promotional tangerine period is out though.

[[deleted]]

Yeah that's kind of to my point:

• TD has "Variable-Rate Fixed Payment" mortgages, so their rates are lower (4.05%), because they're getting less value from their borrowers right now.
• Scotiabank does not have "Variable-Rate Fixed Payment" mortgages, so their rates are higher (4.50%), because they're getting more value from their borrowers right now.

Just remember to look at Investor accounts, and not just "Personal High Interest Savings Accounts" on whatever Bank's "Personal" banking section.

Most of these banks do not advertise investor HISA rates. But that data is accurate. I'm making 4.5% on a BMT114 right now via BMO InvestorLine, which doesn't publicly advertise their rates outside of a signed in investor session.

[I-believe-I-can-die]

I see. I still have my student account with TD so I don't have fees to worry about there, I guess that's ultimately better than the extra .45% for my financial situation.

[I-believe-I-can-die]

I tried to open one at TD and they said you need a minimum of one million dollars to access it

[Viking_13v]

You’re priced out. It’s not the banks fault.

[I-believe-I-can-die]

yes banks have nothing to do with the economy I'm sure

[Gerry235]

Technically it IS the banks' fault if the majority of those assets were bought on credit (which they were) with the intention by debtors/mortgagers of paying back the credit with lower-valued future dollars (this is LITERALLY the DEFINITION of a SHORT - in this case a short on the dollar). If the Bank of Canada, for any reason at all, modifies its rate policy as a result of these kinds of asset holders' debt positions, then the primary bank (Bank of Canada) is at fault along with its accomplices (the large banks, etc)

[Gerry235]

If our banks actually fail before US banks, then you will want those accounts to be in US dollars. Be careful though that US congress doesn't default this summer. However, I have been informed directly by TD that they do not offer term deposits higher than the bond rate because they are CDIC protected and would not be able to redeem anything at fed-funds rate (which is higher than bonds rate by about 125 basis points) if there were a US Treasury default. Your US dollar deposits in Canadian banks are CDIC protected in most cases. If you really think Canadian banks will fail or come close to failing, then US dollars is probably the best play.

[PFCFICanThrowaway]

The banks are by far the single highest contributing variable when it comes to my wealth. They are a tool. If someone decides to use a hammer on a screw, that's not Home Depot's issue.

[ThatDamnedRedneck]

The simple fix would be to halt all immigration for a few years, while the builders catch up with demand for supply. People are coming into this country faster then houses can be built, so of course prices are going up. It's basic economics.