Topic: What would you say to government regulated auto loans?

[PJ]

You lost me at "Government regulated". So, no. Just no.

Yeah! Except for clean water, clean air, safe food, safe medicine, safe cars and highways, what has the government ever done for us?

Let the market solve air pollution!

I believe citizens are capable of making their own decisions on consumer loans with minimal paternal oversight.

 Baseda on the number of people maxing out credit cards, I humbly suggest that is not true for 70% of people.

Sent from my Vic20 using Java Moose

What makes you think 70% of people max out their credit cards?   Most of us have done it at once in their lifetime but it's a very small number that do it on a regular basis. 

[wing]

Yeah because people are stupid.  Take a loan they can't afford to invest in mutual funds that will return less than the loan payments.  They also mentioned they are the only bank that offers interest only payments on loans, oh how nice of you!  LOL

I don't get the RRSP loan -- it's not like your RRSP room disappears ever?  Put the money in later.

[mmret]

Yeah because people are stupid.

Indeed. Some basic financial education as a policy measure is in order.

I just can't stand the "I was too stupid to understand so its someone else's fault" argument.

[ArticSteve]

 they government is doing everything in their power to slow the accumulation of personal debt down

What government would that be 

Saf's ppl ?     or those DESPOTS that destroyed the stability of the Canadian housing market? 

With the entrance of new private mortgage insurers into Canada after the Flaherty budget, Canada saw a dramatic weakening in the  standards for mortgage insurance. This enabled Canadians to get into homes they otherwise couldn't have -- and in many cases shouldn't have. It also kept house prices rising. In fact, Canadian median house prices peaked this year at levels higher than median prices at the top of the market in the U.S.

In November 2006, Canada Mortgage and Housing Corporation responded to the competition from private insurers by starting to insure no-down-payment, interest only, and 40-year amortization mortgages. A CMHC spokesperson was quoted in the National Post as saying: "We're the third guys coming up to the plate with these products. AIG has done it, GE has done it. We're just doing something that's in the marketplace."

Competition from U.S.-based mortgage insurers meant risky products rapidly took over the Canadian mortgage sector. Forty percent of new mortgages approved in 2007 were amortized over 40 years, and in overheated markets like Alberta's, the percentage was even higher. By 2007, there was clear evidence from the U.S. on the hazards of loose mortgage standards, but the Harper government did not step in to tighten regulations here.


http://rabble.ca/news/harper-government-pushed-financial-deregulation

[No H2O]

what do you think ?

How about 100% down and 0 months?

Easy when you keep putting those payments into your account after your car is paid for after 5 years. Five years later, you'll have enough to pay for your next car cash. What an effing concept!

[PJ]

regulating cars loans in this way is not that drastic of measure.  they government is doing everything in their power to slow the accumulation of personal debt down.  maybe bash some sense into people's heads.   people can't seem to manage their money.  personal debt is completely out of control.  i suppose it's fine to say that people who over extend themselves will ultimately pay the piper but if they do it en masse we all end up paying. as wing pointed out, people can be stupid.  you simply need to look at the vancouver or toronto real estate market to see a huge amount of people who can't manage their money.  my bank manager laments the fact that most of his clients will never pay off their mortgage in their lifetime and they have buried 90 percent of their money into their houses and cars.  there are hoards of people just hoping their one and only investment, their house, keeps appreciating every year and interest rates stay at historical lows for the next 40 years.    it's easy to see where this kind of financial planning will get us.

My "one and only investment" (actually it's not but whatever) has increased in value by $400,000 over the last ten years.  I could use a little more of that kind of financial planning.

I can't speak for the Toronto market but the Vancouver area prices are caused by supply and demand.  There is only so much land in the lower mainland and people keep moving here from other parts of Canada and around the world. When I moved here 20 years I heard the same nonsense (and sadly believed it for 5 years).  Truth is a house is the best long term investment you will ever make.

It actually doesn't matter if you pay off a mortgage.  Few people stay in one house long enough to do that anyhow.  When my kids move out in a decade or so I will sell the big house with the big yard and buy something for two.  The balance is a bonus.

[Sir Osis of Liver]

Ah, we've been over this, but "homeownership for every American" was a de facto government sponsored plan.

That, and at the end of the day crashes happen. Always have, always will. Its built into human behaviour. The fact that it happened at the time that it did just makes securitization a convenient scapegoat, but that would be missing the point.

There were not really any derivatives to speak of in 1929. Still blew up!

EDIT:
We've also been over this, but the private sector did its share to push things forward, keep the charade going too. Many stupid and unethical things happened. But at least at the depths a lot of that got wiped out (between losses in stock markets and mass firings on the street). The fact that we're back at all time highs in the SPX is another story.

My only point is that the banks / private sector is not the wholly responsible party, as some (most?) seem to believe.

With tight regulations implemented by FDR and later Trueman, those wild swings were very much muted. The recession of 1958 was pretty deep but fairly short, and the recovery was very strong. The same thing happened following the oil shocks and in the early 1990s. Those recessions were bad, but nowhere near as damaging as either the Depression or the Great Recession.

It is not coincidental that the system blew up again after these regulations were relaxed. The securitization of mortgage debt was not a government policy, and in fact when they tried to regulate the derivatives market, Greenspan went ballistic and pulled in all the political favours he could to prevent the market from being reined in. He eventually got the chairperson of the Commodity Futures Trading Commission removed.

Brooksley Born and the CFTC Versus Alan Greenspan

During his testimony before congress, Greenspan admitted he was gobsmacked that his belief that decision makers in the market wouldn't take excessive risks turned out to be very, very wrong. The problem is that the people taking the risks have no personal downside. At worst they take their golden parachutes and ride off into the sunset unscathed, while large numbers of people ended up losing their jobs, houses and retirement savings. See also ENRON and Worldcom. At least Ebbers did serve time for what he did.

It'll be interesting to see where the LIBOR scandal eventually leads.

[Sir Osis of Liver]

My "one and only investment" (actually it's not but whatever) has increased in value by $400,000 over the last ten years.  I could use a little more of that kind of financial planning.

I can't speak for the Toronto market but the Vancouver area prices are caused by supply and demand.  There is only so much land in the lower mainland and people keep moving here from other parts of Canada and around the world. When I moved here 20 years I heard the same nonsense (and sadly believed it for 5 years).  Truth is a house is the best long term investment you will ever make.

It actually doesn't matter if you pay off a mortgage.  Few people stay in one house long enough to do that anyhow.  When my kids move out in a decade or so I will sell the big house with the big yard and buy something for two.  The balance is a bonus.

When I was last working in Florida, I rented a townhouse that the owner had bought as an investment for $650k in 2005. When I left in June 2007, an identical unit was for sale at $399k. I watched prices drop to the $200k range. Every 4th or 5th house had a "for sale or rent" sign in front of it, places all built to serve a highly speculative market. And this was waterfront property in a nice little bedroom community outside of Tampa. Dad recently bought a property near Clearwater for less than half what it sold for in 2006.

At the time, there were a lot of ads still trying to pump up the market saying stuff like "they're not making any more land" and xx number of people move into the area every day. Lots of markets in the US went through the same thing.

Now, we never had the exotic mortgages allowed under lax US rules: low introductory interest rates and interest only mortgages. And qualifying for a mortgage is   more stringent here, so we're not going to see a collapse like the US has seen, but things could end up stagnating in a lot of markets across the country.

[PJ]

My "one and only investment" (actually it's not but whatever) has increased in value by $400,000 over the last ten years.  I could use a little more of that kind of financial planning.

I can't speak for the Toronto market but the Vancouver area prices are caused by supply and demand.  There is only so much land in the lower mainland and people keep moving here from other parts of Canada and around the world. When I moved here 20 years I heard the same nonsense (and sadly believed it for 5 years).  Truth is a house is the best long term investment you will ever make.

It actually doesn't matter if you pay off a mortgage.  Few people stay in one house long enough to do that anyhow.  When my kids move out in a decade or so I will sell the big house with the big yard and buy something for two.  The balance is a bonus.

When I was last working in Florida, I rented a townhouse that the owner had bought as an investment for $650k in 2005. When I left in June 2007, an identical unit was for sale at $399k. I watched prices drop to the $200k range. Every 4th or 5th house had a "for sale or rent" sign in front of it, places all built to serve a highly speculative market. And this was waterfront property in a nice little bedroom community outside of Tampa. Dad recently bought a property near Clearwater for less than half what it sold for in 2006.

At the time, there were a lot of ads still trying to pump up the market saying stuff like "they're not making any more land" and xx number of people move into the area every day. Lots of markets in the US went through the same thing.

Now, we never had the exotic mortgages allowed under lax US rules: low introductory interest rates and interest only mortgages. And qualifying for a mortgage is   more stringent here, so we're not going to see a collapse like the US has seen, but things could end up stagnating in a lot of markets across the country.

The difference is we went through the same recession they did and housing prices did not drop here.  Single family homes leveled off for a year or two and then continued to rise.

Who knows what will happen in the next down turn in a decade or so but I'll worry about that then.

[Northernridge]

You lost me at "Government regulated". So, no. Just no.

Yeah! Except for clean water, clean air, safe food, safe medicine, safe cars and highways, what has the government ever done for us?

Let the market solve air pollution!

I believe citizens are capable of making their own decisions on consumer loans with minimal paternal oversight.

 Baseda on the number of people maxing out credit cards, I humbly suggest that is not true for 70% of people.

Sent from my Vic20 using Java Moose

Well, perhaps if you're lucky and vote properly, your next government will make more personal decisions for you to protect you from yourself.

[Sir Osis of Liver]

Well, perhaps if you're lucky and vote properly, your next government will make more personal decisions for you to protect you from yourself.

Like who I should marry, whether a woman has access to birth control or an abortion. Whether my religious group is indeed a religion or just a front for terrorists? Those kinds of personal decisions?

Governments are best when they maximise freedom of the individual and restrict the power of corporations.

[Northernridge]

Well, perhaps if you're lucky and vote properly, your next government will make more personal decisions for you to protect you from yourself.

Like who I should marry, whether a woman has access to birth control or an abortion. Whether my religious group is indeed a religion or just a front for terrorists? Those kinds of personal decisions?

Governments are best when they maximise freedom of the individual and restrict the power of corporations.

Yes to those kind of decisions. Your partisan tricks won't work with me, I don't carry the card. 

[tenpenny]

You lost me at "Government regulated". So, no. Just no.

Yeah! Except for clean water, clean air, safe food, safe medicine, safe cars and highways, what has the government ever done for us?

Let the market solve air pollution!

I believe citizens are capable of making their own decisions on consumer loans with minimal paternal oversight.

 Baseda on the number of people maxing out credit cards, I humbly suggest that is not true for 70% of people.

Sent from my Vic20 using Java Moose

Well, perhaps if you're lucky and vote properly, your next government will make more personal decisions for you to protect you from yourself.

See, you have trouble separating discussion of ideas from personal jabs.

If you think I said I needed protecting, then you should take some basic literacy courses.


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[Sir Osis of Liver]

Well, perhaps if you're lucky and vote properly, your next government will make more personal decisions for you to protect you from yourself.

Like who I should marry, whether a woman has access to birth control or an abortion. Whether my religious group is indeed a religion or just a front for terrorists? Those kinds of personal decisions?

Governments are best when they maximise freedom of the individual and restrict the power of corporations.

Yes to those kind of decisions. Your partisan tricks won't work with me, I don't carry the card. 

 

[PJ]

My "one and only investment" (actually it's not but whatever) has increased in value by $400,000 over the last ten years.  I could use a little more of that kind of financial planning.

I can't speak for the Toronto market but the Vancouver area prices are caused by supply and demand.  There is only so much land in the lower mainland and people keep moving here from other parts of Canada and around the world. When I moved here 20 years I heard the same nonsense (and sadly believed it for 5 years).  Truth is a house is the best long term investment you will ever make.

It actually doesn't matter if you pay off a mortgage.  Few people stay in one house long enough to do that anyhow.  When my kids move out in a decade or so I will sell the big house with the big yard and buy something for two.  The balance is a bonus.

When I was last working in Florida, I rented a townhouse that the owner had bought as an investment for $650k in 2005. When I left in June 2007, an identical unit was for sale at $399k. I watched prices drop to the $200k range. Every 4th or 5th house had a "for sale or rent" sign in front of it, places all built to serve a highly speculative market. And this was waterfront property in a nice little bedroom community outside of Tampa. Dad recently bought a property near Clearwater for less than half what it sold for in 2006.

At the time, there were a lot of ads still trying to pump up the market saying stuff like "they're not making any more land" and xx number of people move into the area every day. Lots of markets in the US went through the same thing.

Now, we never had the exotic mortgages allowed under lax US rules: low introductory interest rates and interest only mortgages. And qualifying for a mortgage is   more stringent here, so we're not going to see a collapse like the US has seen, but things could end up stagnating in a lot of markets across the country.

The difference is we went through the same recession they did and housing prices did not drop here.  Single family homes leveled off for a year or two and then continued to rise.

Who knows what will happen in the next down turn in a decade or so but I'll worry about that then.

pj, the biggest reason your house rose in value so quickly was because the federal gov't introduced ridiculous 40 year mortgages and with almost nothing down. the supply of homes couldn't keep up, so everybody and their idiot brother were buying homes they couldn't afford relying on the fact that another idiot would come along and buy their dump in downtown toronto for 200k more.  these are the people who lease everything in their life. houses that were selling for 250k in 2004 are now selling for 700-800k.  i know of some homes that were selling for 400k that are going for 1.5 mil.  if you examine the long term chart for real estate, the reality is homes are an ok investment that on average return 2-3 percent a year. people who are buying now will be in their 80s when they finally pay off their home in vancouver and toronto. 

a lot of the same people do the same with their cars.  lease, don't worry about the price, just the payment size.  none of these people will save enough for their retirement and all the smart investors will have to bail these bozos out when they are 65-70.   

oh and by the way, we don't need a melt down like the states.  just look at what happened to real estate in japan when stagflation took hold in japan.  now after 20 odd years they are desperate to create some form of inflation.  they've spent the whole year printing money and trying to push the value of the yen down.

When were you ever offered a 40 year mortgage or nothing down?  The most I ever heard of was 35 years (which is gone now) and 5% down which you have to qualify for. 

Like it or not real estate is consumer driver supply and demand and prices have little to do with the government.  Doom sayers claimed the tighter mortgage rules would kill the market here but they had little effect.

I remember back in the 70's my dad bought a house for $27K and sold it for $54K 4 years later.  Sounds so cheap but the percentages are simular.  When I moved to BC in 92 I rented an old house that the owner had bought for $201K.  We all laughed that he paid that much, figured the price would fall.  Never did and now that little rancher is worth about $600K.

If you're in a growing market real estate is always a good investment long term.  Way better then renting.

[wing]

You really don't understand the housing market at all.   Yes they were offering 40 years for 0 down for awhile.

They just came out with a study that says Canada is the most over inflated market in the world!

It's okay though you aren't the only one that is in denial about it. 

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[Snowman]

Canada is only overvalued compared to counties that have crashed because of their own stupidity.

[PJ]

You really don't understand the housing market at all.   Yes they were offering 40 years for 0 down for awhile.

They just came out with a study that says Canada is the most over inflated market in the world!

It's okay though you aren't the only one that is in denial about it. 

Sent from my Nexus 5 using Tapatalk

Guessing you're too young to see the big picture.

Heard the exact same argument you make back in the 90's when houses were 1/3 the price they are now.  My dad heard in the 70's when they were 1/10th they are now.  Still think I don't understand the market? 

BTW, studies are meaningless as most are done to prove a predetermined point.  Bet I could find a study that says the price will double in the next decade if I wanted.

It's okay though, people have been in denial that prices on real estate will always go up in the long term long before even I was born.

[wing]

But prices don't always go up.   Go look up the facts.  Houses declined considerably in the 80s.

Heck look south of the border, houses going for 1/4 of what they once did.  It can happen here.

Just like gold always go up I guess.

I own a house, but I'm not betting anything on it. I don't know who will be able to afford a house when I want to sell with so few jobs available.  If I can sell it for what I paid for it in 20 years I'll be ecstatic.

The average year over year gain is about 3% in Ottawa.  I get a much better return on my stock investments.

If my house goes up 3% a year for 20 years nobody will be able to afford it.  Inflation is much lower and salaries can't keep up. 

In 20 years I'll be looking at trying to pawn off a 30 year olds house for over a mil




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[PJ]

But prices don't always go up.   Go look up the facts.  Houses declined considerably in the 80s.

Heck look south of the border, houses going for 1/4 of what they once did.  It can happen here.

Just like gold always go up I guess.

I own a house, but I'm not betting anything on it. I don't know who will be able to afford a house when I want to sell with so few jobs available.  If I can sell it for what I paid for it in 20 years I'll be ecstatic.

The average year over year gain is about 3% in Ottawa.  I get a much better return on my stock investments.

If my house goes up 3% a year for 20 years nobody will be able to afford it.  Inflation is much lower and salaries can't keep up. 

In 20 years I'll be looking at trying to pawn off a 30 year olds house for over a mil




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You're confusing short term market swings with long term gain.  You mentioned prices dropping in the 80's.  They didn't stay down long though.  Think back to what you would have paid for a house in the 80's and what it would be worth now.

And while you can find select markets in the US where an over inflated area is 1/4 what it was that's not the case in most areas.

If you're in a growing market then you will always do well in the long run.