The U.S. Real Estate Market Can Learn From Canada


Could we learn from the Canadians?

When it comes to fixing our ailing real estate/housing market, the answer might be yes.

The Vancouver Sun reports that “mortgage insurance has revolutionized the Canadian housing market.”

The policies, which protect lenders in the event of default, were introduced to the Canadian market more than three decades ago.

One senior broker is quoted in the paper as saying, “We just would not see the strong housing market–new and resale alike–that we have enjoyed for the past decade without mortgage insurance.”

He says that without the insurance, most Canadians would have to either come up with a 20 per cent down payment,or have take out high interest second mortgages.

The paper says the average homebuyer in Canada can purchase a property, because of insurance, with as little as five percent down.

One Canadian website recently explained why the housing problems in the United States would not trouble Canada.

Several reasons were given–among them: most mortgage loans in Canada are only for five years with a fixed rate, and mortgage interest is not tax deductible, incentivizing homeowners to pay their notes off much more quickly.

But the other big difference is that, in Canada, “mortgage default insurance is currently required under federal financial services law for those making less than a 20 percent down payment on a property.”

The Canadians are clearly doing something right. They are managing to bring home the bacon (Canadian, of course) because they are managing to keep hold of their homes!

Photo: Mike Baird

About Author

Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.


  1. I think our mortgage default rate had doubled for a while from 0.33 of one percent to 0.67 of one percent, and is now back down to 0.45 of one percent. Although panic ensued in the media with the doubling of defaults. Funny many of the pundits failed to look at the actual percentage of all mortgage in Canada that had defaulted, which was less than one percent.

  2. Interesting article! I am from Canada. I just noticed though, one bank (PC Financial) is now advertising the super low rate of 1.85% (5 year variable) mortgage. Seems pretty low to me… I wonder if we’re headed down the same path as the US??

  3. Great article Charles! And yes, you are BANG ON Quentin (qmanrei) about our default rates. The media went CRAZY that us Canadians were in big trouble because our default rates had doubled! They always fail to explain the full story (which was the fact that we were still under 1% of all mortgages were behind on their payments). Negative news sells better than positive news!

    Back to Charles article and commenting on Doug’s post. One of the main reasons WHY Canada has not suffered the severe downturn (and foreclosures) that the US has is simply the fact that to qualify for variable or ARM (adjustable rate mortgages) in Canada, one has to qualify using a 3 year fixed rate (and more recently that has been up’ed to a 5 year fixed rate). Whereas, many lenders in the U.S. could qualify someone based on the absolute lowest rate possible (for example, on a Prime minus 1 or 2%) even though that rate will adjust in 1, 2, 3 years to a much higher rate (or move up as Prime goes up). Because of this, thousands of borrowers in the U.S. qualified (and are now being foreclosed upon) when there is no way they would have with stricter guidelines in place (like we have in the Great White North).

    Our banking system is based on a Federal Banking Act which all lenders (across the country) have to abide by. If the U.S. followed suit, there is a good chance they would be smiling like us here in Canada!

    Thanks Charles!

  4. Good article … and everyone is making really good points … but I think it’s worth noting that the fact that we’re not experiencing the same mortgage issues in Canada goes deeper than just the banking system. The rules help … and I believe it’s definitely been the backbone of our stability to a large degree but Canadians are conservative. It’s deeply routed in most to be more cautious and careful than our more entrepreneurial and risk taking neighbours to the south.

    Even when zero down mortgages were available, VERY few people used them even if they qualified. That is not just because the interest was not a write off, it’s because that is a more risky and expensive way to purchase a home and that just isn’t in the grain of how we operate.

    I am speaking generally but let me add a specific story to add to my point. We recently sent out nearly 6000 letters to homeowners in a City on the west coast of Canada looking for potential deals (preforeclosure or other opportunities where the sellers were motivated) and we have yet to find someone who is behind on their payments. In fact, what we found a lot of people who have paid off their homes and don’t plan to move because they are happy in their paid off home.

    So the banking rules are a great foundation however I think it’s truly our more conservative nature as Canadians that puts us in a brighter position in the current economic climate than our friends and neighbours in the US (our risk aversion is also what holds many Canadians back from making tons of money in business and real estate but that is a story for another day).
    .-= Julie Broad´s last blog ..Passive Income for Life =-.

  5. Hello from Wasaga Beach Canada. Funnily enough a lot of the talk up here is about the hot market and fearing a bubble and collapse once interest rates start rising. As always the media is very selective and concentrates on sales in Toronto and Vancouver ; the market is ok outside of these cities but not hot. This may be simplistic but Canada is in better shape in my opinion just because the banks did not lend to anyone ( and their dog) and create a sub prime problem like the US.
    The insurance if anything could have encouraged sub prime lending as the lenders would be safe. Im sure my friends and myself would never lend money to anyone who couldnt pay it back.
    I only arrived from London, England 2 years ago and am fully aware of seemingly overpriced homes. I bought my first apartment in 1988 for 75,000 pounds and would never have believed anyone would pay over 100,000 for it. Sold it 12 years later for 135,000..
    The insurance is good but dont lend to people who cant pay it back. I know simplistic.

  6. Greeting All,

    Charles, thanks for your article.

    I agree with what many of the fellow Canadians have said thus far.

    I think that Julie’s point with regards to Canadians being conservative is bang on.

    It seems that there are a multitude of variables that have contributed to the strong position of the Canadian mortgage market.

    I have lived all of my life just outside of Toronto. I have always noticed that many people who immigrated to Canada (Toronto and surrounding areas in particular) have always been very conservative with how they lived their lives in Canada.

    Sure, you have the entrepreneurial spirited people who start businesses and become very successful. However, there is always an underlying sense of caution, and concern about not overextending oneself.

    I have noticed this common trait of ‘caution’ with many different cultures who now have made a life for themselves in Canada. (Toronto and surrounding areas)

    My observation and comment is only representative of my personal experience and perspective of Toronto.

    Nevertheless, in conclusion, to Julie’s point, there is definitely a sense of conservatism with Canadians.

    Best Regards,
    .-= Neil Uttamsingh´s last blog ..BiggerPockets Just Got Bigger =-.

  7. I’m from Canada. We have a overheated market at the moment that is not sustainable. The current market resembles the US housing market circa 2006. Gross income to price ratio is in excess of 5. The same price ratio when the US housing market began its quick descent. The Canadian Government mortgage insurance program has encouraged excessive debt accumulation by people who have no business owning a home. Moreover, the Canadian Government is now the largest subprime lender in the world. Our income to debt ratio is higher than the US at 1.45. These are scary figures and Canada is headed exactly where our US cousins have landed.

  8. Dave Gidu,

    Are you saying that we (Canadians) will have upwards of 20% of Canadian homes falling behind on their payments and/or have negative equity in their homes? Because that’s effectively what many stats have said about the U.S.

    I am not saying that the market is currently balanced in Canada, it most certainly is overheated in Vancouver and several other markets, however, our lending policies are far FAR more conservative than anything near what the U.S. had (or even has today). Effectively, these policies have protected the lenders (and us as Borrowers) from falling into the same trap that occurred down south.

    As for subprime, our Canadian total mortgage market has rarely exceeded 5% of ALL mortgages being in the subprime category. This compares to well over 20% in 05/06/07 in the U.S.

    I am sorry to hear that you think Canada is headed for the same situation where the U.S. is currently. I for one believe strongly that Canada will continue to be a very safe place to live, work, invest, and be a homeowner (although there may be some ups/downs along the way – but to nowhere near the same extent as with our southern Brothers).


  9. I have a lot of family in Canada and agree with many about the idea of the conservative approach to purchasing large items. With so many homes in probate in the U.S. (especially here in LA), the tax benefits are not as enticing to me. Yes, it is nice to get mortgage interest refunds at tax time, but the idea of mortgage insurance is much more enticing. Seems the Canadians are much better about insurance for home & health as a general population.
    .-= Dave´s last blog ..Gary Slavett and Igor Drabkin Named Rising Stars by Super Lawyers =-.

  10. Dear @Dave Gidu and @Dave Peniuk you both Canadian guys are more aggressive in the discussion regarding Mortgage insurance in Canada. site is providing wide range of insurance policies for the Canada people. Have a look, it may be the perfect end to your discussion.

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