The global crisis of 2008 was started by the deflation of America's housing bubble. Property went down instead of going up, and what do you know - the banks didn't see (didn't want to see?) it coming and had to be bailed out left, right and centre.

It strikes me as complacent to think that Canada's housing market will continue to rise. And even more complacent to think that banks won't be forced to take huge losses when it does go down. But wait, we have CMHC so banks are able to off-load a good chunk of their bad debts directly to taxpayers without having to be bailed out...

Where did you lose me? ;-)

It's interesting you use the 'defer to the institutions, they know best' and personal attack arguments. They are big, powerful and I am just an anonymous internet poster, surely they must be right and I must be wrong.

I'm pretty sure you would have said the same thing about the big banks in 2007. They are big, powerful, rich and have been in existence for over 80 years. So any anonymous poster saying that they are overexposed to US property must be full of it.

It was caused by banks taking phenomenal risks and placing extremely bad bets. And they didn't have to be bailed out, but various governments decided it was better and more palatable to bail them out than not.

Canadian banks were barely exposed to the same kind of risks because they were more boring, long-sighted and adverse to such risks all along. The worldwide economic crisis has affected Canada - of course it has. But it's banking system, for the most part, has stuck it's nose in the air with a slight whiff of "we told you so" and carried on pretty well. I'm not naive, and the banks here are no way perfect.

I have no idea on the percentage of Canadian mortgage defaulters - but it can in no way come close it's southern neighbours. I do feel the CMHC has had something beneficial to do with that.

If you want to borrow up to 95% of the value of a house, what is fundamentally wrong with paying a premium for that risk - a risk to both you and your loan company?

Of course it doesn't come close. But you missed one tiny little detail: US house prices came crashing down from dizzy heights, Canadian prices have not done so... yet. As long as prices keep going up, you won't see many defaults. Why would you default? If you get in trouble, you can always sell at a profit. That will disappear once prices start coming down.

Nothing. The premium for that risk is called 'the interest rate'. The higher the risk to the bank, the higher the interest rate on the mortgage. If you default, then that's the bank's problem. With CMHC, the govt. assumes (takes away) some risks previously borne by the banks, so they can charge lower interest rates. But when a default does happen, the taxpayer is joinly on the line.

And why do you assume that Canadian banks are more stable than their US counterparts? Other than observing that they plainly don't know their arse from their elbow in terms of consumer experience, compared to the UK banks? The polite term for this is 'conservative banking' ?

That doesn't exactly fill me with confidence...

I think I know exactly what they're doing, and it's this:
1. Oops, a world economic crisis is happening. We need to keep internal demand up, because external demand is sure to drop. But how?
2. Oops, if our housing market goes south like in the US, internal demand will fall off a cliff and then we're really in deep shit.
3. Hey, it gives people a fantastic 'feel good' factor when house prices are rising. Also, people lend more against their houses to buy shit they don't need. That's internal demand !! Yay !
4. Let's make sure the housing market continues to rise then. That will keep the economy steady and get us elected. And we can boast that we're so much cleverer than the US !
5. But how? Let's make people's monthly payments more affordable, so they can borrow more to keep the housing market going.
6. I know ! Let's subsidise the banks by assuming some of their risks, so they can drop interest rates so the market can still go up while people remain able to afford payments !
7. Wait a minute... won't that blow up a bubble? And what will happen if interest rates do go up, as they have to some time? Well, we're just interested in getting elected and staying in power *right now*. All that stuff will happen on somebody else's watch. La la la, all's well.

It's all so you can have a voice like this one.....not that you will understand eh

The Federal Housing Administration is the US equivalent.

MIG being the uk equivalent. Perhaps the op should put his shovel down.

Please explain the jump from CMHC to oil bonuses and whatever point you're trying to make in your post above.

No, the CMHC premium is paid on top of the interest. The bank gets their interest, and CMHC gets their premium.

Yes, the government assumes some of the risk, but they charge a premium for it (some other people might call this "insurance"). I'm having a house built right now- the CMHC premium is around $13k.... not an inconsiderable amount.

CMHC arent however the only entity doing this in Canada- there are private insurers too.


I'm sorry but I'm a little bewildered at how this is coming as a surprise to you. As I mentioned previously, they've only been doing it for 80 years or so.... rather successfully, as you can see. And as is being pointed out by others, it's a common practice in other countries too.

Very interesting. Where were they when banks got into trouble because of defaults?

Confused how most of your points above have anything to do with the CMHC mortgage insurance scheme.
Point 1: although it may be news to you, the CMHC came into existence a very long time ago and has been providing this insurance for years, nothing to do with the recent global economic crisis.
Point 5: The new mortgage rules which means that mortgages which require the insurance (i.e. less than 20 % down) have to be amortized over 25 years instead of 30 years amortization currently permitted will increase people's monthly payments not decrease them.
Point 6: - see comments on point 1 - this is not a new scheme, and is not a reaction to the current crisis.

Amen brother. I'm very thankful the vast CAD $'s spent and lives taken in the Iraq and Afghanistan war zones have kept my freedom of speech

We didn't go to Iraq

Sorry, I meant the gulf war with Iraq.

Anyway, aren't you British?