Credit crunch hits Canada (again)

From Friday's G&M "Mortgage rates climb as squeeze tightens"

In Canada this week a number of banks raised mortgage rates, and it's a matter
of days before others follow. The posted rate on the popular five-year fixed
mortgage, for example, has gone up by 0.35 of a percentage point to 7.2 per
cent.

Back in mid-December, 2006, when the Canadian housing boom was
in
full swing, the spread between posted five-year mortgage rates and bond
yields
was 2.59 percentage points, close to the average level over the past
decade.

Today, as the credit crunch persists, the spread has widened by
56 per
cent, to 4.05 percentage points as a result of tighter liquidity and
economic
volatility.

Executives at Canada's big banks say the
industry will cut
back on lending and raise rates as a result of the current
environment.

In an interview this week, Tim Hockey, head of Canadian
banking at
Toronto-Dominion Bank, said that loan growth will slow in the
industry.

"Clearly, one of the things that's happened as a result of the
recent
credit crisis is that the absolute cost of funds has gone up. And
that has
effects on both the price of lending, as well as on ... competition
for
deposits," he said.

Just another thing that will hurt the financing aspect of this housing crash. We have the October 15th change, interest rates rising and the access to lending which is all drying up.

Combine that with falling house prices and falling stock prices and you have a recipe for a disastrous housing market for the fourth quarter of 2008.

Unless you absolutely need to buy a house right now (downsizing or you can't rent) or you completely ignore the news about this stuff (and yet are still willing to spend hundreds of thousands), I wonder why anyone would be buying a house here....