Dear Government: The banks won’t help you! Witness rising mortgage rates.

It seems the U.S. and Canadian governments are counting on the banking industry to help them distribute aid to those most hurt by the coronavirus lock-down.  DON’T!

Despite the central banks lowering interest rates to historically low levels, the mortgage rates charged by banks in both the U.S. and Canada have been rising.  Their excuse?  More risk suggests a higher premium.  The load of re-negotiation requests is a burden too high to administer.  Neither of these excuses deals with the real reason – unadulterated greed so commonplace during times of crisis.

“Mortgage rates rose again this week as lenders increased prices to help manage skyrocketing refinance demand. This is expected to be a short-term phenomenon as lenders work through their backlog,” said Sam Khater, Freddie Mac’s chief economist.

In the U.S. the 30-year fixed mortgage rate averaged 3.65 percent for the week ending March 19 — an increase from last week’s rate of 3.36 percent.  This is despite the FED reducing its benchmark rate to near zero on SUN, MAR 15 2020.  Clearly, their motive is to discourage applications plain and simple.  Why pass along savings to consumers if you don’t have to?  It’s just business.

We’ve seen the same phenomena in Canada.  A trusted friend told me that a high-level executive at one of the big banks told him they were simply refusing to allow customers to re-negotiate their mortgage rates – even though there are protocols (and penalties) in place to facilitate same.

Canadian mortgage rates are increasing again, as economic and profitability concerns associated with the coronavirus crisis and lower oil prices outweigh aggressive monetary stimulus from the Bank of Canada.

I was a money manager for nearly 4 decades, and every financial crisis is similar.  The businesses with disproportionate market clout will claim to be relaxing their credit practices but do the opposite.  No matter how much ‘relief’ the federal governments promise, the reality is the relief will not get to the businesses who need it most.  Banks will continue to adhere to their tried and true formula – lend only to those who don’t need it, and call in the loans of those who can pay.

An entrepreneurial friend who has opened a number of burger restaurants has been lamenting (justifiably) of late;

I just find it amazing that they dramatically restrict our ability to do business and yet nothing to force landlords on rent. The bloodsuckers are showing us the middle finger. We already told them to go pound sand. We are not paying rent.

The problem (more complex than the government can contend with) is that the landlords are under extreme pressure by their lenders to ‘pay up.’  The pressure works its way down the food chain.  The government is more concerned with popularity than with the impact of its haphazard but seemingly generous policy measures – and I for one am sick of them holding press conferences to bolster their popularity.

Old Man Laughing



About Mal Spooner

Malvin Spooner is a veteran money manager, former CEO of award-winning investment fund management boutique he founded. He authored A Maverick Investor's Guidebook which blends his experience touring across the heartland in the United States with valuable investing tips and stories. He has been quoted and published for many years in business journals, newspapers and has been featured on many television programs over his career. An avid motorcycle enthusiast, and known across Canada as a part-time musician performing rock ‘n’ roll for charity, Mal is known for his candour and non-traditional (‘maverick’) thinking when discussing financial markets. His previous book published by Insomniac Press — Resources Rock: How to Invest in the Next Global Boom in Natural Resources which he authored with Pamela Clark — predicted the resources boom back in early 2004.
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