A reckless financial illiterate buying simply for capital appreciation using the loan which allows for the minimum monthly payment.
For example this is from Garth Turners blog about how to tell you are in a housing bubble:
When the number of people taking 35-year amortizations explodes higher. Overall, these loans have doubled as a percentage of all mortgages in two years but that does not tell the true story, since today 5/35 buyers constitute an absolute majority of new originations. Of course, 35-year borrowers pay off virtually no principle for years and years which makes this akin to renting money. No equity means no ability to withstand a market correction.From this mortgage market report 53% of new purchases are for amortizations 25 years or less. 29% are for 35 years or greater.
Another snippet from Garth's same post.
Some observers, bless their good hearts and large stones, had the courage to warn recent buyers with mortgages in the 2-3% range they could be in deep financial trouble before too long. But you know that. The reasons why have been beaten to death on this blog already.To be fair in this case he didn't say that 2-3% variable rate mortgages are the norm. But going back to the mortgage report 5-year fixed mortgages are the most popular.
-73% of mortgages held by 18-34 year olds have terms greater than 4 years.
-71% of mortgages held by 18-34 year olds have fixed rates, 9% combination
Of new mortgages within the last 12 months shorter terms do appear more popular, but not the majority. 56% have terms greater than 4 years.
Of course there are a significant number of mortgages over 30 years at a variable rate and these will most likely cause some amount of turbulence during the next leg down. The model that typical Canadian buyers have been recklessly overbidding $300,000 for a shacks in downtown Toronto or Vancouver using a 35 year VRM makes for good entertainment but does not reflect reality.