I like candid articles about the economy, an investing strategy or things that should be obvious to everyone but aren’t.
Yesterday I read and article by Ted Rechtshaffen of The Globe and Mail titled, Connect the housing bubble dots: There could be trouble on CMHC’s horizon.
I’ve been talking with a lot of friends the past few years and have been amazed at how far and deep the housing bubble continues to get here in Canada.
Bank of Montreal’s (BMO) recent move to lower its five year fixed mortgage rate to 2.99% signals, to me, the height of the market.
What people need to understand is that true interest rates (set by the Bank of Canada) have not changed; all that has is the margins the banks charge for borrowing money. They’re moving lower.
Question…when was the last time your bank called you to say, “I’m gonna give you a thousand dollars!”
Banks don’t like or intend to ever lose money (like me!) and what’s surprising is that the banks are still lowering interest rates on mortgages (lowering their margins) and expanding a bubble that is already too hot.
If you can’t afford a mortgage at 3.50% you have NO business buying one at 2.99%….PERIOD!
I’m calling the top of the market, BOLDY, today. Anyone who begs to differ is either an idiot or has a significant conflict of interest – wanting the markets to continue to rise.
You never compete on price. EVER. BMO and the other banks are extending themselves too far at the wrong time of the market and will get burned.
Disclosure: I have no equity positions in BMO