In October 1962, the Porter Royal Commission uncovered how an obsolete statutory interest rate ceiling drove private banks out of housing and forced CMHC to ration mortgages by income.
Wow. Thanks Mike. Can you imagine being able to buy a home when your income was under $5.001 per year? I recall my parents bought their house in 1966 or 67 at a rate of 6% on, I think, a 25 year mortgage and their friends were all, how can you afford that rate? A few years later, the bank called and asked my mother to pay off the mortgage, which still had many years to run and she asked why she would pay off an $85/month mortgage. I also remember buying my own first house in Etobicoke for $66,000 in 1980 at 13% on a vendor takeback. She had bought it post-WWII for $7,500.
Your mother held one of the last true 25-year fixed mortgages in Canada, and the bank was desperate to get out of it. Central Mortgage and Housing Corporation's 1973 mortgage study by J.V. Poapst documented what bankers called the matching problem. Institutions borrowed short on customer deposits and lent long on 25-year terms. When inflation drove deposit rates into double digits, the bank paid savers more than the six percent yield on her eighty-five-dollar monthly payment. As I documented at Hansard Files (https://www.hansardfiles.ca/p/variable-rate-mortgage-1973-origin), that ledger bleed permanently ended 25-year fixed mortgages in Canada.
Wow. Thanks Mike. Can you imagine being able to buy a home when your income was under $5.001 per year? I recall my parents bought their house in 1966 or 67 at a rate of 6% on, I think, a 25 year mortgage and their friends were all, how can you afford that rate? A few years later, the bank called and asked my mother to pay off the mortgage, which still had many years to run and she asked why she would pay off an $85/month mortgage. I also remember buying my own first house in Etobicoke for $66,000 in 1980 at 13% on a vendor takeback. She had bought it post-WWII for $7,500.
Your mother held one of the last true 25-year fixed mortgages in Canada, and the bank was desperate to get out of it. Central Mortgage and Housing Corporation's 1973 mortgage study by J.V. Poapst documented what bankers called the matching problem. Institutions borrowed short on customer deposits and lent long on 25-year terms. When inflation drove deposit rates into double digits, the bank paid savers more than the six percent yield on her eighty-five-dollar monthly payment. As I documented at Hansard Files (https://www.hansardfiles.ca/p/variable-rate-mortgage-1973-origin), that ledger bleed permanently ended 25-year fixed mortgages in Canada.
This is a part of Canadian history I was completely ignorant of. Very interesting.