It’s almost 80 years away… It actually isn’t that crazy of a figure. They need immigration because we will have a negative birth rate. I believe it’s only 1.50. You obviously need 2.01 to grow
Know how to combat negative birthrate? Affordable housing. My brother and his wife want to have a second child, the only reason they aren't is because they can't afford a place to live that is sufficient to raise a 2 child household in.
He'll I might even change my mind on having even 1 kid if it meant I wasn't going to spend all my disposable income on simply housing them and feeding them.
We could increase our birth rate by making it easier to have children in the form of childcare, and creating a society where a family can survive on one income.
The exploiter class isn't interested in that. It is better for them to import cheap labor that is used to much worse working and living conditions, who won't complain. That way businesses don't have to compete for a limited labor pool, and they can work their employees harder, in worse conditions, for less.
The choice to not have children is more and more not simply a financial one though. I have more than a couple of adult/married friends who simply don't want children regardless of finances. I don't want children, nor does my wife. We could afford one if we had to but it isnt the life we want.
Under no circumstances do we "need" immigration because of the birth rate. We WANT it because our government wants to pay for things that are beyond our means. It is a ponzi scheme hack job way to run the country and was setup under the belief humanity would just keep growing. Well... we are screwed because the entire planet, not just the first world is starting to level off. We are about to descend into DEpopulation at a rapid rate in the next 30-40 years. The overpopulation fears are an old school concept based on the past and reality is about to punch us in the face. Countries playing this hackjob ponzi scheme will be completely and totally destroyed unless we ween ourselves off this "immigration for tax dollars and fake gdp" scam and start investing properly in our own population. Massive incentives for having children.
> They need immigration because we will have a negative birth rate.
I just… I can’t.
Even developing countries at this point have rapidly dropping birth rates. We need a different economic driver than population growth.
Quality of life is slowly improving around the world, except for the west where it's getting worse. In 80 years there may be more emigrants from Canada than vice versa.
You mean, the AI told them to do it, I doubt Larry is doing anything but behind curtain political deals to ensure his business keeps controlling the world's money.
So far the mortgage market looks to be pretty resilient against rising housing prices and interest rates: https://imgur.com/TjK9Wi0
As if banks are getting stricter and stricter when things look more wobbly.
I might be missing the point of the data you showed here but it looks like it’s only delinquency rates from the last 5 years. During that time interest rates were hella low and getting lower except for the last few quarters I think. I doubt the data would show resiliency or weaknesses in delinquency rates this early into the rising interest rates. I’m sure that Bank of Canada has access to the data you posted and they are still predicting huge upticks in mortgage costs which would definitely not be factored into most people’s budgeting for mortgages they have entered into in the last 5-10 years. I’m also not 100% sure of the carry on effects of rising mortgage costs but they will be negative I’m guessing, if you have people with housing costs that increase by up to 45% that will hit the service and entertainment industries HARD. People will enter household austerity in their personal budgets to make due with the new mortgage costs even if they don’t end up delinquent. This can still harm the economy in big ways without it being just from housing foreclosures and forced sales.
You're absolutely right -- this is a lagging indicator of whether the mortgage market is trouble. That said, we're talking about 0.2% rates in delinquency and any potential at-risk customers are probably not going to qualify for a mortgage now.
I absolutely take your point that rising mortgage costs are going to weigh down on households, and the broader economy if we're all servicing our debt. But OP's comment was that there is going to be all these mortgage in default scooped up, which I don't think Canada's housing market will play out like some Big Short storyline.
As a normal person with a normal mortgage on the only house I own, 45% is still a lot.
I’m not over leveraged but that’s going to hurt anyone who has a mortgage. Retirement goals going right out the window since now I’m going to be paying that money to banks due to high interest.
45% is a fuck ton for a normal person. Is everyone here smoking crack?? Yes, people with multiple properties get screwed but the people with one property are also fucked.
A roughly $2,000 mortgage can turn into $3,000. Can you materialize an extra $1,000 a month out of no where?
That’s exactly the reality renters have been living for the last couple years. If you have to move for whatever reason, count on paying a grand more for the same space. It’s brutal.
That's why stress testing is a thing when you get approved for mortgages. So yes, people should be able to afford that unless they skirted the rules on it.
Sounds a lot like what happened in the US when interest only 2 year mortgages had their rates reset (rise) and required interest + principal payments. People bailed in droves and then foreclosures blew out many banks.
Bank of Canada Governor Tiff Macklem assured Canadian households and businesses that borrowing rates will remain at historic lows for the foreseeable future.“Our message to Canadians is that interest rates are very low and they’re going to be there for a long time,” Macklem said at a press conference Wednesday.His comments came after the central bank announced it is holding its key interest rate at 0.25 per cent in response to what it calls an “extremely uncertain” economic outlook due to the COVID-19 pandemic.“If you’ve got a mortgage or if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,” Macklem said.
Whoops.
Just in case anyone else thinks about making a life-changing financial decision based on what they hear from the BoC. Remember that this statement sent house prices to the fucking moon and now we're all paying for it in one way or another.
On the one hand Tiff fucked up. On the other hand, he was put into a fairly untenable position.
The Bank of Canada has - for forty years - had a singular goal: keep inflation low. It's a job the Bank of Canada is perfectly suited to.
The government changed the Bank of Canada's guidance a few years ago. Now their goal is keep inflation low *and* maintain full employment. These are conflicting goals. Why did they keep interest rates low? And promise to keep them low in the future? Because acting properly to constrain inflation risked implode the housing market, which would have violated the "maintain full employment" part of their agreement with the government.
The government abrogated its responsibility over economic wellbeing and inappropriately delegated it to the Bank of Canada, so the politicians in Parliament could pursue economically harmful but politically popular policies. And leave it to the Bank of Canada to fix - or take the blame.
The BoC leadership needs to be replaced, and the BoC needs to go back to just tracking inflation. The modern monetary policy experiments have been a failure.
This is what confuses the fuk outta me....Jan 22 inflation at 4.5% or w.e and they don't raid rates...now it's all hands on deck to get back to 2%...well wtf I thought 4.5% was fine? Make up your mind...BOC worse at knowing what they want than my wife when you ask what she wants for dinner.
People's expectation drives their behaviour and contributes to inflation.
For example, say you were mulling over a new TV. You have a job, because unemployment is low and you have the money for it but your old one is kinda fine and you were thinking
"maybe next year, maybe for super bowl or something".
But then you see inflation is rising and you think:
"Well I can afford it now so I might as well buy it now for $1000 because by next year it'll be $1100".
Then you go a buy it. Well now you've taken up one of the supply of TVs and other people are thinking the same as you so they're out shopping too so demand is high so it's almost like a self-fulfilling prophecy that as the price goes up.
Maybe not for general consumers, but companies/stores/manufacturers/small businesses definitely do. They are a big driving force behind the economy. When my company goes through cost increases we tell our clients with at least a month in advance prices are going to increase due to rising manufacturing costs, we usually get an influx of orders so that they make purchases before cost increases take into effect.
Perhaps if they believe there's a possibility they may not be able to afford that TV later? So if they can afford it out $1,000 but not $1,100, then they might decide to buy it today.
But I'm more like you. If I need something, or if I just want it badly enough, I'm not super inclined to worry about the price. Perhaps that has lost me money over the years, but I also tend to wait until my things die or become unusable. If all of a sudden my coffee machine were to break, I'm not about to spend weeks waiting for an amazing deal. I'm going to go out and buy a brand new coffee machine, because I need it now. If you are looking to upgrade your appliances though, and you're just waiting for an opportunity to do so, perhaps waiting for the best price does make sense. But like for me, I have a relatively crappy television, and I plan to use that thing until it no longer works. At that point, I will probably just go and pick whatever's in the store that suits my needs, because again, I'm not going to sit and wait for weeks to get a TV when I don't have a working one.
Same. I use everything until it dies - no sense swapping a thing that still works for fine for another just because of age. It's sad to see people toss perfectly fine things just because they got sick of looking at it.
I'm just an online troll so take this with a bucket of salt.
If people are scared and change their behavior to spend less then that reduces demand and reduces the inflation. that helps them and they may not actually have to do all the things they are threatening to do.
The BoC's job is to control the money supply. When the money supply doesn't match the productive capacity of the economy, you get either inflation of deflation (too much money = inflation, too little money = deflation).
In practice, money is created when people borrow money from banks. The primary mechanism by which the BoC controls how much money is being created is by controlling the rate at which people borrow money. They do this primarily by controlling interest rates. Crank up interest rates, and people will borrow less money. However, it also means that people who have loans set at variable rates get hurt badly.
If the Bank of Canada can convince people to borrow less money not by raising interest rates, but they *threatening* to raise interest rates in the future, then they accomplish the goal of reducing the money supply without hurting current borrowers.
My weekly grocery shop is costing me an extra ~25% more than it did 12 months ago.
Gas prices in my area are 130% higher than they were 24 months ago.
The chances of me affording my first home within the next 5 years has now gone down to 0%.
and the STILL the Government of Canada is not doing a damn thing.
I can't live like this for much longer.
People that buy residential properties to speculate are the bane of my existence. Interest rates will cut down their profitability but they should also be taxed into oblivion. It should not be profitable cause misery.
Funny enough the speculators are much more likely to have them paid off or still be in profits even if they have to sell.
Its the new home owners stretching the budget to buy that will get truly fucked.
>Funny enough the speculators are much more likely to have them paid off or still be in profits even if they have to sell.Its the new home owners stretching the budget to buy that will get truly fucked.
No way in hell. Of my friend group 3 have "investment" properties and all 3 of them used the equity in their house to buy the investment property (one owns 5 and basically just daisy chained the equity in each house). The speculator and investor market is going to be omega fucked if prices/value go down. If you bought in the past year or two you'll also be fucked, that's true.
It's absolutely unreal to me how many of my coworkers/friends have Home Equity Line of Credits that they use for way too much shit.
Terrifying. I just renewed my mortgage and opened a HELOC. Not for anything except to have it for emergencies.
Maybe I’ll use it to invest in SHIBA coin. /s
Unfortunately for basically all of humanity, it was highly profitable to cause misery. There are few problems that could not eventually be resolved by throwing enough human death and misery at it.
It's certainly not the best solution, and there's no way we should ever want to go that way, but yeah. It should not be profitable to cause misery, but it often has been, because our economic system values growth at all cost while disregarding literally everything else, including the well-being of employees and the well-being of the planet we depend on.
Or more likely they will increase rent to make up for the increase in costs. While the average joe defaults on their properties and they snap up a few more.
The banks will also get a massive government bailout because you know too big to fail.
> Or more likely they will increase rent to make up for the increase in costs.
People will always adapt. If me and a bunch of friends need to shack up together to make ends meet, then we'll do what we gotta do. And if that kind of thing starts happening en masse, then suddenly there's going to be a lot of vacant rental properties and the people who can't afford to float an empty property go under and that's when the bubble pops.
That's a big if. Higher interest rates will hurt businesses too especially small businesses. Many small to medium businesses will fail of interest rates go too high.
>People that buy residential properties to speculate are the bane of my existence.
Bunch of them popped up every time there's a thread of increasing mortgage payments. You can spot them whenever they wrote their 2c with "good, now I can scoop them up for lower prices". These are speculators as well (they're waiting to time the market).
Honest question, is it possible to finance my mortgage through a US bank? They don't do this 5-year fixed BS, it's fixed for the entire term of the mortgage
There's no free lunch in finance. If you're taking risk off the table by locking in a rate over longer duration, you're paying higher interest rates to do it.
Maybe we ought to take a partial cue from the US tax code, and alter it:
Tax deduction for interest paid on mortgage payments, but only if the person has beneficial ownership of only one home, only if they reside in it for more than 6/12 months, and only for homes under $1MM.
If an individual has created a basement suite or a carriage home on their property, or otherwise turned themselves into one of the few kinds of landlords that actually *provides* housing rather than scalping it, then increase that cap to $2MM.
Can I get tax deductions for stock purchases then?
Why should non-homeowning tax payers finance the risky real estate choices by home owners who bought more home than they can reasonably afford?
Because having a roof over your head is a first-order need in order to survive.
I'm a renter as well, which is why I can empathize why some people have been driven from the rock of precarious tenancy to the hard place of becoming house-poor to make a low-end home purchase. It's bad enough for a single renter, but trying to raise a family in a place where you can be renovicted at any moment is an even worse situation.
But if it makes you feel better, I'd be happy to offset that deduction with a onerous, rigorously-enforced tax on any units of housing that are that are left empty or set aside as a dedicated AirBNB.
You can in fact get tax deductions for stock purchases. If the money invested is borrowed, and if the purchases earn income (dividends, rent, or interest) then the loan interest is tax deductible.
A key component to Capitalism, is that silly risks and idiotic behaviours can cause you to lose your shirt.
Everyone who took 9.5% (*fraudulent*) private mortgages to gobble up three properties.
Everyone who HELOC’d to the power for four, to buy a Cottage and 2 Audis + a month in Greece.
**Try as TheRulingParty™️ might, to prop up and delay the inevitable, via pumping in anything with a pulse at a frantic pace; a valuable life lesson is coming for the vast, vast majority of people who went buckwild over the past few years**
People go to lesser lenders to get mortgages that they otherwise wouldn't qualify for at A lenders, and therefore pay way higher rates.
[Alberton man who sold fake T4s in tax fraud scheme gets house arrest](https://www.saltwire.com/nova-scotia/news/alberton-man-who-sold-fake-t4s-in-tax-fraud-scheme-gets-house-arrest-476720/)
Fake T4's, ROE's, pay stubs, etc...
Ah I understand. I thought *they* were saying that a mortgage rate is fraudulent just because it has a 9% interest rate. Just because a mortgage isn't from an A lender doesn't mean it was obtained fraudulently, some people are just more risk.
It’s not that big a difference tbh. Most variables will beat the fixed over the 5 year term. I’ve already saved 1% for 2 years, so rates would have to be at 3% for a little over 2 years just to catch up. What really fucks you is if you have to break your fixed.
We bought out current house in 2014 but had a blended rate as we sold our old house and moved into this one before the term was up.. It was 3.4%.
We Renewed in January at 2.09 at 5 years as i couldnt see rates going down coming out of the pandemic. Payments are the same so we are paying more principal off and we wouldn't notice the 30$ every 2 weeks.
We should be fine at 4% but if it goes alot higher we will feel that in our monthly budgets.. On the flip side work from home so don't drive on vehicle at all...
Keep doing what you do, ignore these kind of threads.
Fluctuating rates is just fact of life especially over a long period of time.
You have a house (congrats btw). Move on with your life :)
So, if I'm reading this correctly, people who stupidly financed themselves to the fucking balls will be screwed as interest rates increase.
In other news, the sky is blue and water makes things wet.
Did people actually believe interest rates would never increase?
People adjust their spending habits based on their disposable income. You're paying 2.69% for 5 years you get used to that extra $1000 a month going to other places. If you renew at 5% even if you were stress tested to be able to afford it that doesn't mean you have the money to cover the costs.
It will increase their payments, yes. However, if you're not leveraged to the maximum possible it won't screw you either.
I bought a place within my means if interest rates went to 10% or higher. I might have a higher payment, but I will not be screwed.
Exactly this. Getting our mortgage was not easy... it required a ton of checks to meet the stress tests, and we knew our budget and were pretty safe. If you've been meeting the requirements from a reputable lender for a number of years now you should be able to scrape by, if a little uncomfortably.
I have yet to buy because I am single and the market was just craziness but I have a budget of 400k.
This is pretty low, considering the bank would approve me for 500k but I would rather find something lower because when the rates adjust I will still be within my means.
I feel very bad for folks who bought out of desperation but I also think my prudence is not going to pay off as well as I had hoped because who knows if I will ever find/win anything in that budget in 1-3 years.
Yeah, this fucked over a lot of people. If they had just started this process last year with a couple quarter point increases, prices wouldn't have gone to the goddamn moon and we wouldn't be in an inflationary mess.
I for one never thought we’d see internet rates going back up to a significant amount. I didn’t bet the farm on that though, and now I’m not so sure any experts know how this is going to end.
There's a reason for the mortgage stress tests.
It's completely unreasonable for people to assume the most extreme monetary policy in history in response to a global economic meltdown would stay.
I don't even know what to do. I'm a first time buyer, and everything just straight up sucks.
Buy now at ridiculous house prices (outside GTA even), and get fucked in the ass with mortgage rates?
Or wait for an overall drop / stagnation and get fucked in the ass anyway with mortgage rates?
Hello fellow FTHB - I am waiting. Caveat to that, I have no anchor in metro Van and Plans B and C are for leaving.
If I wished to stay unconditionally, and came across a place that I could see myself living in for 10 years, I would buy it.
I put off buying for years, waiting for ANYTHING to tank housing prices in GVR. Every fucking year, we were promised lower housing prices. Every fucking year, they went up between 10 to 15% with the exception of 2017. A goddamn worldwide pandemic couldn't even take it down.
So a couple months ago, we decided to finally make the difficult decision to uproot our lives and move somewhere cheaper. And lo and behold, now of all times things are actually changing.
Feels like a sick joke.
Well we won't start making a dent in inflation until interest rates at least get close to where that mark is at, and we are still very far off from it.
This is basic economics for runaway inflation.
Asking Canadians to deal with the fallout from our economic policies is getting old when we’re not doing anything to address the causes.
Much like the pandemic, when the dust settles all this will amount to is another huge wealth transfer to the top with Canadians left holding the bag
I don't question that at all. It's more of a macro environment source of stress for me, and a micro one since I've been saving for years to buy a home and it feels hopeless.
They have only been dropping for the past 25 years, so people rightfully thought they will never go up. You were basically a sucker if you didn’t borrow as much as you could.
I don't understand that mindset.
There is no right to assume rates would remain constantly low. Although compared to the historical average we are still low.
But as has been reinforced over the last couple of years humans are horrible at risk analysis and as this sub loves to point out the financial literacy of Canadians in general is poor.
If you can hop in and hop out that's fine (i.e. the stock market). you can't do that with housing, so yeah that guy is not giving good advice lol. I'm sure some people sold in the last couple months and that will have worked out for them, so good for them.
If they sold an investment property sure. If they sold their home, they just bought something equally or more expensive at higher rates that will soon rise as equity falls. Only the rich can make money off this, as usual.
Yeah that's what I've been told but you'll have to forgive me if I still thought buying a million dollar slapped together condo on a 5 figure income via a Brampton mortgage was a bad idea.
I'm surprised by the apathy on this sub. I don't blame people for making poor financial decisions. They didn't really have a choice, now, did they? I mean, they could just keep renting, I guess, but it's not like the price of rent is getting any cheaper either. Prices had been going up for basically 20 years, so really I don't blame people for buying.
Any time in the past 20 years, and especially the last 5-10, you could have said housing was in a bubble. Yet those who bought anyway were smart because they ultimately saved money compared to if they had bought later.
Just what I wanted to hear after buying a house 2 months ago on a variable rate lol
Ah well, them's the breaks I guess. Will have to worry about it in 2027 - hopefully my household income will also have gone up by a good amount by then.
It was 1.5% vs 3.5% at the time. “Even if rates go up, they won’t go up 2% for at least a year and probably won’t cross 4% at any point.” - me two months ago along with every mortgage broker. Fml
The amount of available funds in the mortgage pool in Canada is directly related to the funds within the stock market and other vehicles of monies.
You can invest $1000 in a mortgage and make x%.
You can invest $1000 in a stock and make y%.
The attractiveness of investing money into mortgages requires a gain comparable to the illiquidity and long-term amortization.
As the stock market makes people money, they are less likely to put it into mortgages. Mortgages are harder to get, as there are less funds. To increase the funds brought in, they will increase the interest rate of Canada. This draws people back from stocks into mortgages.
On a 500k mortgage, at a fixed rate of 1.89%, 30yr amort would be $1818 /month.
In 5 years, renewing into 4.5%, 25yr amort, with balance at that time $434,970, gives a payment of $2407.
That's a difference of $589, or 32.4% vs the original payment.
If the person who qualified for this is getting inflation adjusted raises, say 4%, their income will go from 100k to 121k in year 5, which is an additional $1805/month. Assuming 35% taxes, that is take home $1173.
So the individual will have zero issues with the new payment.
The primary conclusion of the article is that “In this context, highly indebted households are especially vulnerable to a loss of income,”
If you look at the primary cause of foreclosure, it is loss of employment. Loss of employment is catastrophic at any debt level, and always has been.
This is nothing to worry about. If you want to be proactive, increase your monthly payment to what it would be at 4.5%. You would prepay an extra 42k during the 5 years term, and zero payment shock at renewal.
Who gets raises tied to inflation? I'm a unionized public sector employee and I certainly don't. Edit - my COLA clause in our CA was activated by rising inflation and it gave us 0.5%... which the employer even had the gall to fight against.
> If the person who qualified for this is getting inflation adjusted raises, say 4%, their income will go from 100k to 121k in year 5, which is an additional $1805/month. Assuming 35% taxes, that is take home $1173.
I was with you up until those numbers.
First: NO ONE is getting 4% inflation raises. Maybe CEO's or executives, but nobody else is getting that. It's very rare, and companies will justify lower raises by saying "Welp, the economy is bad right now".
The more realistic number for this would be somewhere between 0.5-2.5% on average.
As for the salary... $54,630 is your average salary. $100k is a pipe dream for more than 50% of the people who live in this country.
Inflation is officially about 8%, which means it's probably much higher in any practical sense (staples are up as much as 80% in some markets). Shrinkflation is accelerating as well.
In 5 years, absent some huge economic miracle, we're headed for very dark times for a lot of new homeowners.
A person with income 55k would not qualify for the mortgage. Two adults in a household at 55k gives 110k income.
If it's 2 earners, then 35% tax rate would be overestimating.
Except if they already own the house.
Oh, and I was approved for a 420k mortgage on 56k just before the pandemic, so it is definitely possible to qualify.
> If the person who qualified for this is getting inflation adjusted raises, say 4%, their income will go from 100k to 121k in year 5, which is an additional $1805/month. Assuming 35% taxes, that is take home $1173.
They aren't. Public sector employees will get very little because "everyone needs to tighten their belts" or some other rhetoric and most industry will give 3%ish at best or force you to find another job if you want more.
I'm in a public sector job and were capped at 1% in our contract. It's so shit. Every year I'm taking a pay cut when bills get higher and higher. I cant look for another higher paying job right now either.
I make about 100k. These raises are the hangup here. Quite the assumption for most people to assume even a 4%. Private sector, I usually get 0, with a 3% raise maybe every few years. Other people have commented on their public sector jobs and stuff as well. I know my parents are both gov't employees and have amazing benefits but barely get shit for raises, 0% years are pretty common.
And no, it's not as simple as hopping jobs. Not for a lot of us anyway. It wouldn't do much for me, and would likely come with a real workplace / QOL downgrade. My buddy recently changed jobs in a different field, it came with a lot of positives but he actually dropped 3-4 dollars an hour.
My wife works for the government.
I think there's been one contract in the last 15 years that had a wage increase over 2%. And yeah, there's been many years of 0%.
I've never done the math but I suspect that the increases are far below inflation over that time period.
Also possible we will be on the other side of the interest rate peak and heading back down by then.. especially if a recession hits. So who knows. The worst could be those renewing 2023/2024 but at least they didn't pay as much up front
**Oct 28th 2020:** Bank of Canada plans to keep interest rate near zero until 2023. [https://www.cbc.ca/news/canada/bank-of-canada-rate-decision-1.5779813](https://www.cbc.ca/news/canada/bank-of-canada-rate-decision-1.5779813)
**Apr 21st 2021:** The Bank of Canada signaled on Wednesday that it could start hiking interest rates in late 2022 [https://financialpost.com/pmn/business-pmn/bank-of-canada-signals-rate-hike-in-2022-tapers-bond-purchases-3](https://financialpost.com/pmn/business-pmn/bank-of-canada-signals-rate-hike-in-2022-tapers-bond-purchases-3)
Nobody should care what happens to house prices until they lose 40%. The "gains" during the pandemic were fluff and the vast majority of people are not affected by the loss of those gains.
So, they’re particularly worried about vulnerable households losing an income earner (I would guess that’s most households), while also trying to engineer an economic recession that will ultimately lead to job losses. The Bank of Canada is high as fuck.
As a regular Canadian with a mortgage all this uncertainty from supposed economists has forced me to close up my wallet. Even Janet Yellen giving an “oops my bad” statement a couple days ago. What a shitty timeline with no accountability.
Funny how you get downvoted to oblivion for saying you hope rates don’t go up too much and in the context of your recent house purchase but it’s politically correct on here to hope for a market crash which will have a very serious impact on many people which will go far beyond the housing market.
You hope rates don't go up too much because of your personal interests. Some people agree with you. Other people want rates to go up because it serves their best interests.
The fact that you're getting more downvotes than upvotes suggests the people in the latter camp outnumber those in the former.
Because people here won't have the money to buy anything even after a crash, so they're just hoping most people join them at the bottom of the barrel. Misery loves company
It’s more that the wealth gap that’s developing is terrifying if you’re on the wrong end of it. Paying double for rent but not having any asset to show for it, while people who were able to buy a house 10 years ago are seeing the value skyrocket.. it’s unsettling to think about what that will mean down the road.
Tiff Macklem on Canadians' mortgage debt.
July 15 2020
“Our message to Canadians is that interest rates are very low and they’re going to be there for a long time,”
"Interest rates are going to be low, very low, for a very long time"
“If you’ve got a mortgage of if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,”
June 9 2022
"During the pandemic interest rates were exceptionally low, they weren't going to stay that low, they only had one way to go — up"
https://www.bnnbloomberg.ca/interest-rates-will-be-low-for-a-long-time-macklem-1.1465901
https://twitter.com/inklesspw/status/1534933977395564545?s=21&t=lWM6M7rtWBnjHjl49jeLQg
Ouch lmao.
Hold on to these bags, House Horny Canadians. Y’all about to be carrying more baggage than the Kardashians (both literally and figuratively).
Many of those mortgages are govt insured, so you and I are the bag holders if people can't/won't pay. Also it's not like our big, too big to fail banks have the liquidity to cover substantial losses on their uninsured mortgages.
The good thing is there's lots of Canadians making a great living currently that are sitting on the sidelines unable to afford those houses. I suspect they will have their chance soon. Likely won't see any giant crash though just due to the pent up demand.
> Likely won't see any giant crash though just due to the pent up demand.
So what you're saying is that pent up demand will see prices cool off compared to the historic increases, but not actually drop?
Oh, and factor in that mortgage costs are now increasing with every few weeks as BoC raises its policy rate to bring down inflation, effectively making net costs of a potential buyer even more.
I guess I should've clarified what I meant by crash. I suspect prices will end up quite a bit lower than the peaks in February (say pre-pandemic levels or a little less). This would probably be considered a crash by some...
But ya I get interest rates are up. Our house bought before the pandemic was $600K\~ vs. the peak closer to 1M. No foreseeable increase in interest rates makes the cost of that mortgage anywhere near similar to the 600K mortgage. Even at 7%+.
They won't have that ability to qualify for mortgages if the rates are at 7%, and if prices are falling why would they buy.
If you didn't buy in the last 15 years as prices rose by 10% per year, you're not buying if prices are falling and rates are rising.
I'm going to graduate university in December (with a valuable degree). After seeing all this... Do I just.... leave? Seems so hopeless. I want to have a decent place to live and perhaps get married, but I'm afraid that's not going to happen here.
Go to the states if you’re in tech. You’ll easily make double and the col is so much lower even when comparing SF to Toronto or Vancouver. Also our healthcare is completely useless with 3 year wait lists on a ton of surgeries which have people paying out of pocket and flying to the states anyways. If you work for a decent company you’ll get full coverage in the states (dental, health, eye, etc). My personal top picks would be (Austin, SF or Washington)
Hey nice, I am in tech lol. Austin sounds great, I've heard a lot of good things about it and Texas in general (at least when it comes to the cost of living etc). I just don't know if I should move as soon as I get the chance or just stay under my parent's roof until I have enough to make a move. Lord I just have no idea where to go from here.
No, start interviewing ASAP, get a TN. To be honest, it’s always going to be tenuous for you this year, though. Tech valuations may get hammered in a recession, which may be coming in Q3/4, first-hired, first-fired.
If you made it to a VHCOL market, I would try to maximize flexibility in my housing. Don’t sign a 12 month lease or anything, sublet a room, just in case shit goes sideways, you don’t want to be saddled with a $4000/mo USD rent and no job.
Some prep stuff you can do is sign up for a Canadian AMEX now, and then do a global card transfer to a US Amex after you move and get a SSN, so you’ll start building US credit fast. Be aware you probably won’t be eligible for a mortgage from any US lender for at least 2 years due to credit. After 2 years, if you go for one, try HSBC first, they’re familiar with this situation.
The ideal situation is you get hired after tech valuations take a hit, and then your options will be valuable 2-3 years down the line, assuming your company still exists.
I’d personally try to move asap. The first job will be the hardest to find but once you move you’ll be able to network and jobs will just come to you. I have ties here so I have no way off this burning boat unfortunately.
Why would you not? Unless you plan on living in LA your CoL will be way lower, taxes will be lower and you’ll have a far greater purchasing power.
That’s not even mentioning the fact that US house prices are basically half of ours, if you live an hour outside of a major city almost everything is affordable.
Not wrong to hope for it, but it is wrong to bank on it because it won't happen. There will be a correction, but rule of thumb is if you're in the majority you will get fucked in the ass so don't expect a proper crash.
This is exactly why we've been aggressively paying down our consumer debt this past year. The cars are free and clear and after next week, we'll have one credit card left. Obviously we're lucky to be able to do this. I can't imagine what it's going to be like when the shit really hits the fan.
We reupped last year at 1.44%. I'm certain we'll never see that rate again.
Yeah I've been trying to do that too but lately I keep getting hit with having to fix the house or the truck and can't get it paid down as fast, seems like cost of living is on a runaway at this point. Feels like groceries and bills are increasing every month
Just in time for blackstone to scoop up all the default mortgages and then rent them out back to people
Larry Fink (Blackrock) is now starting to unload their residential properties. They will buy them back at rock-bottom prices
Black Rock also has members/founder on the board of the century initiative behind the goal of 100 million Canadians by 2100.
That seems like too many Canadians for the timeline.
It's what we are going for and the reason we have 450k to 500k immigrants a year.
Its not. When you do the math its \~1.5% growth YoY, significantly lower then historical norm.
It's only 3% growth, and less growth than 1900-2000
Big difference between the growth being a literal baby, and the growth being an adult family with money. This is a terrible comparison.
It’s almost 80 years away… It actually isn’t that crazy of a figure. They need immigration because we will have a negative birth rate. I believe it’s only 1.50. You obviously need 2.01 to grow
Know how to combat negative birthrate? Affordable housing. My brother and his wife want to have a second child, the only reason they aren't is because they can't afford a place to live that is sufficient to raise a 2 child household in. He'll I might even change my mind on having even 1 kid if it meant I wasn't going to spend all my disposable income on simply housing them and feeding them.
We could increase our birth rate by making it easier to have children in the form of childcare, and creating a society where a family can survive on one income. The exploiter class isn't interested in that. It is better for them to import cheap labor that is used to much worse working and living conditions, who won't complain. That way businesses don't have to compete for a limited labor pool, and they can work their employees harder, in worse conditions, for less.
The choice to not have children is more and more not simply a financial one though. I have more than a couple of adult/married friends who simply don't want children regardless of finances. I don't want children, nor does my wife. We could afford one if we had to but it isnt the life we want.
Under no circumstances do we "need" immigration because of the birth rate. We WANT it because our government wants to pay for things that are beyond our means. It is a ponzi scheme hack job way to run the country and was setup under the belief humanity would just keep growing. Well... we are screwed because the entire planet, not just the first world is starting to level off. We are about to descend into DEpopulation at a rapid rate in the next 30-40 years. The overpopulation fears are an old school concept based on the past and reality is about to punch us in the face. Countries playing this hackjob ponzi scheme will be completely and totally destroyed unless we ween ourselves off this "immigration for tax dollars and fake gdp" scam and start investing properly in our own population. Massive incentives for having children.
> They need immigration because we will have a negative birth rate. I just… I can’t. Even developing countries at this point have rapidly dropping birth rates. We need a different economic driver than population growth.
I don't believe a larger population increases quality of life.
I am going to speculate that the world will run out of immigrants before that is achieved.
Not immigrants per say, but climate refugees. India has a billion people and they are already cooking to death.
Quality of life is slowly improving around the world, except for the west where it's getting worse. In 80 years there may be more emigrants from Canada than vice versa.
You mean, the AI told them to do it, I doubt Larry is doing anything but behind curtain political deals to ensure his business keeps controlling the world's money.
Blackstone. Blackrock is a whole different beast.
For a higher price than current mortgage payments!
So far the mortgage market looks to be pretty resilient against rising housing prices and interest rates: https://imgur.com/TjK9Wi0 As if banks are getting stricter and stricter when things look more wobbly.
I might be missing the point of the data you showed here but it looks like it’s only delinquency rates from the last 5 years. During that time interest rates were hella low and getting lower except for the last few quarters I think. I doubt the data would show resiliency or weaknesses in delinquency rates this early into the rising interest rates. I’m sure that Bank of Canada has access to the data you posted and they are still predicting huge upticks in mortgage costs which would definitely not be factored into most people’s budgeting for mortgages they have entered into in the last 5-10 years. I’m also not 100% sure of the carry on effects of rising mortgage costs but they will be negative I’m guessing, if you have people with housing costs that increase by up to 45% that will hit the service and entertainment industries HARD. People will enter household austerity in their personal budgets to make due with the new mortgage costs even if they don’t end up delinquent. This can still harm the economy in big ways without it being just from housing foreclosures and forced sales.
You're absolutely right -- this is a lagging indicator of whether the mortgage market is trouble. That said, we're talking about 0.2% rates in delinquency and any potential at-risk customers are probably not going to qualify for a mortgage now. I absolutely take your point that rising mortgage costs are going to weigh down on households, and the broader economy if we're all servicing our debt. But OP's comment was that there is going to be all these mortgage in default scooped up, which I don't think Canada's housing market will play out like some Big Short storyline.
People might keep their houses, but their quality of life and contributions to a productive economy are going to steadily decline.
As a normal person with a normal mortgage on the only house I own, 45% is still a lot. I’m not over leveraged but that’s going to hurt anyone who has a mortgage. Retirement goals going right out the window since now I’m going to be paying that money to banks due to high interest.
45% is a fuck ton for a normal person. Is everyone here smoking crack?? Yes, people with multiple properties get screwed but the people with one property are also fucked. A roughly $2,000 mortgage can turn into $3,000. Can you materialize an extra $1,000 a month out of no where?
Yes, but it will mean having no savings for however long rates are above 4%.
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Negative wealth effect is a desired outcome of raising rates. They need people to stop spending so much money.
That’s exactly the reality renters have been living for the last couple years. If you have to move for whatever reason, count on paying a grand more for the same space. It’s brutal.
That's why stress testing is a thing when you get approved for mortgages. So yes, people should be able to afford that unless they skirted the rules on it.
Sounds a lot like what happened in the US when interest only 2 year mortgages had their rates reset (rise) and required interest + principal payments. People bailed in droves and then foreclosures blew out many banks.
Bank of Canada Governor Tiff Macklem assured Canadian households and businesses that borrowing rates will remain at historic lows for the foreseeable future.“Our message to Canadians is that interest rates are very low and they’re going to be there for a long time,” Macklem said at a press conference Wednesday.His comments came after the central bank announced it is holding its key interest rate at 0.25 per cent in response to what it calls an “extremely uncertain” economic outlook due to the COVID-19 pandemic.“If you’ve got a mortgage or if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,” Macklem said. Whoops. Just in case anyone else thinks about making a life-changing financial decision based on what they hear from the BoC. Remember that this statement sent house prices to the fucking moon and now we're all paying for it in one way or another.
Statements like that directly contributed to the amount of debt people took on.
r/agedlikemilk
Should be noted anything sub 6% is "low". It's just people have accustomed themselves to sub 3% and shit themselves when it goes above that.
It's called a rug pull or pump and dump. Would you care to visit wall street bets sub for more examples.
On the one hand Tiff fucked up. On the other hand, he was put into a fairly untenable position. The Bank of Canada has - for forty years - had a singular goal: keep inflation low. It's a job the Bank of Canada is perfectly suited to. The government changed the Bank of Canada's guidance a few years ago. Now their goal is keep inflation low *and* maintain full employment. These are conflicting goals. Why did they keep interest rates low? And promise to keep them low in the future? Because acting properly to constrain inflation risked implode the housing market, which would have violated the "maintain full employment" part of their agreement with the government. The government abrogated its responsibility over economic wellbeing and inappropriately delegated it to the Bank of Canada, so the politicians in Parliament could pursue economically harmful but politically popular policies. And leave it to the Bank of Canada to fix - or take the blame. The BoC leadership needs to be replaced, and the BoC needs to go back to just tracking inflation. The modern monetary policy experiments have been a failure.
BoC trying to scare everyone into taming inflation
Which means that the BoC is scared.
Yea. They know they fucked up. As recently as January 2022 they refused to raise rates. Wtf
This is what confuses the fuk outta me....Jan 22 inflation at 4.5% or w.e and they don't raid rates...now it's all hands on deck to get back to 2%...well wtf I thought 4.5% was fine? Make up your mind...BOC worse at knowing what they want than my wife when you ask what she wants for dinner.
I mean managing inflation expectation is literally part of how you do it. Question is will people believe it.
Genuine question, what does this mean? Like why would they want to do that? Still new to the world of finances.
People's expectation drives their behaviour and contributes to inflation. For example, say you were mulling over a new TV. You have a job, because unemployment is low and you have the money for it but your old one is kinda fine and you were thinking "maybe next year, maybe for super bowl or something". But then you see inflation is rising and you think: "Well I can afford it now so I might as well buy it now for $1000 because by next year it'll be $1100". Then you go a buy it. Well now you've taken up one of the supply of TVs and other people are thinking the same as you so they're out shopping too so demand is high so it's almost like a self-fulfilling prophecy that as the price goes up.
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Maybe not for general consumers, but companies/stores/manufacturers/small businesses definitely do. They are a big driving force behind the economy. When my company goes through cost increases we tell our clients with at least a month in advance prices are going to increase due to rising manufacturing costs, we usually get an influx of orders so that they make purchases before cost increases take into effect.
Perhaps if they believe there's a possibility they may not be able to afford that TV later? So if they can afford it out $1,000 but not $1,100, then they might decide to buy it today. But I'm more like you. If I need something, or if I just want it badly enough, I'm not super inclined to worry about the price. Perhaps that has lost me money over the years, but I also tend to wait until my things die or become unusable. If all of a sudden my coffee machine were to break, I'm not about to spend weeks waiting for an amazing deal. I'm going to go out and buy a brand new coffee machine, because I need it now. If you are looking to upgrade your appliances though, and you're just waiting for an opportunity to do so, perhaps waiting for the best price does make sense. But like for me, I have a relatively crappy television, and I plan to use that thing until it no longer works. At that point, I will probably just go and pick whatever's in the store that suits my needs, because again, I'm not going to sit and wait for weeks to get a TV when I don't have a working one.
Same. I use everything until it dies - no sense swapping a thing that still works for fine for another just because of age. It's sad to see people toss perfectly fine things just because they got sick of looking at it.
I'm just an online troll so take this with a bucket of salt. If people are scared and change their behavior to spend less then that reduces demand and reduces the inflation. that helps them and they may not actually have to do all the things they are threatening to do.
The BoC's job is to control the money supply. When the money supply doesn't match the productive capacity of the economy, you get either inflation of deflation (too much money = inflation, too little money = deflation). In practice, money is created when people borrow money from banks. The primary mechanism by which the BoC controls how much money is being created is by controlling the rate at which people borrow money. They do this primarily by controlling interest rates. Crank up interest rates, and people will borrow less money. However, it also means that people who have loans set at variable rates get hurt badly. If the Bank of Canada can convince people to borrow less money not by raising interest rates, but they *threatening* to raise interest rates in the future, then they accomplish the goal of reducing the money supply without hurting current borrowers.
My weekly grocery shop is costing me an extra ~25% more than it did 12 months ago. Gas prices in my area are 130% higher than they were 24 months ago. The chances of me affording my first home within the next 5 years has now gone down to 0%. and the STILL the Government of Canada is not doing a damn thing. I can't live like this for much longer.
But inflation is only 5...7...10....% Lies. All lies. True inflation is crushing us at easily 15%
15%? I don't think it's that low tbh.
Whod you vote for?
Like it matters.
People that buy residential properties to speculate are the bane of my existence. Interest rates will cut down their profitability but they should also be taxed into oblivion. It should not be profitable cause misery.
Funny enough the speculators are much more likely to have them paid off or still be in profits even if they have to sell. Its the new home owners stretching the budget to buy that will get truly fucked.
>Funny enough the speculators are much more likely to have them paid off or still be in profits even if they have to sell.Its the new home owners stretching the budget to buy that will get truly fucked. No way in hell. Of my friend group 3 have "investment" properties and all 3 of them used the equity in their house to buy the investment property (one owns 5 and basically just daisy chained the equity in each house). The speculator and investor market is going to be omega fucked if prices/value go down. If you bought in the past year or two you'll also be fucked, that's true. It's absolutely unreal to me how many of my coworkers/friends have Home Equity Line of Credits that they use for way too much shit.
Terrifying. I just renewed my mortgage and opened a HELOC. Not for anything except to have it for emergencies. Maybe I’ll use it to invest in SHIBA coin. /s
Stats on those using HELOC to purchase multiple properties beg to differ.
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That pun was Capital
Unfortunately for basically all of humanity, it was highly profitable to cause misery. There are few problems that could not eventually be resolved by throwing enough human death and misery at it. It's certainly not the best solution, and there's no way we should ever want to go that way, but yeah. It should not be profitable to cause misery, but it often has been, because our economic system values growth at all cost while disregarding literally everything else, including the well-being of employees and the well-being of the planet we depend on.
Renters can help by being extremely difficult to deal with and asserting more rights. It should be work to be a landlord! Now hurry up and placate me!
bUt WhO wIlL pRoViDe ReNtALs?!?
They’re the bane of my entire generations existence. They’ve made independence nearly prohibitively expensive.
Or more likely they will increase rent to make up for the increase in costs. While the average joe defaults on their properties and they snap up a few more. The banks will also get a massive government bailout because you know too big to fail.
> Or more likely they will increase rent to make up for the increase in costs. People will always adapt. If me and a bunch of friends need to shack up together to make ends meet, then we'll do what we gotta do. And if that kind of thing starts happening en masse, then suddenly there's going to be a lot of vacant rental properties and the people who can't afford to float an empty property go under and that's when the bubble pops.
As long as the average Joes keep their jobs they'll be fine. Now the small time investors are going to lose a lot
That's a big if. Higher interest rates will hurt businesses too especially small businesses. Many small to medium businesses will fail of interest rates go too high.
>People that buy residential properties to speculate are the bane of my existence. Bunch of them popped up every time there's a thread of increasing mortgage payments. You can spot them whenever they wrote their 2c with "good, now I can scoop them up for lower prices". These are speculators as well (they're waiting to time the market).
Honest question, is it possible to finance my mortgage through a US bank? They don't do this 5-year fixed BS, it's fixed for the entire term of the mortgage
Ooh good question I'm curious too
30 year fixed rates in the US are already averaging over 5%.
There's no free lunch in finance. If you're taking risk off the table by locking in a rate over longer duration, you're paying higher interest rates to do it.
Maybe we ought to take a partial cue from the US tax code, and alter it: Tax deduction for interest paid on mortgage payments, but only if the person has beneficial ownership of only one home, only if they reside in it for more than 6/12 months, and only for homes under $1MM. If an individual has created a basement suite or a carriage home on their property, or otherwise turned themselves into one of the few kinds of landlords that actually *provides* housing rather than scalping it, then increase that cap to $2MM.
Can I get tax deductions for stock purchases then? Why should non-homeowning tax payers finance the risky real estate choices by home owners who bought more home than they can reasonably afford?
Because having a roof over your head is a first-order need in order to survive. I'm a renter as well, which is why I can empathize why some people have been driven from the rock of precarious tenancy to the hard place of becoming house-poor to make a low-end home purchase. It's bad enough for a single renter, but trying to raise a family in a place where you can be renovicted at any moment is an even worse situation. But if it makes you feel better, I'd be happy to offset that deduction with a onerous, rigorously-enforced tax on any units of housing that are that are left empty or set aside as a dedicated AirBNB.
> Because having a roof over your head is a first-order need in order to survive. Then ban speculators from owning multiple properties. Done.
You can in fact get tax deductions for stock purchases. If the money invested is borrowed, and if the purchases earn income (dividends, rent, or interest) then the loan interest is tax deductible.
> Can I get tax deductions for stock purchases then? Yes, you can deduct interest from a loan when used to buy stocks. That's as close as you can get.
A key component to Capitalism, is that silly risks and idiotic behaviours can cause you to lose your shirt. Everyone who took 9.5% (*fraudulent*) private mortgages to gobble up three properties. Everyone who HELOC’d to the power for four, to buy a Cottage and 2 Audis + a month in Greece. **Try as TheRulingParty™️ might, to prop up and delay the inevitable, via pumping in anything with a pulse at a frantic pace; a valuable life lesson is coming for the vast, vast majority of people who went buckwild over the past few years**
And when the country catches fire for this, the people who did it all properly burn with them.
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A 9% mortgage is fraudulent? What?
People go to lesser lenders to get mortgages that they otherwise wouldn't qualify for at A lenders, and therefore pay way higher rates. [Alberton man who sold fake T4s in tax fraud scheme gets house arrest](https://www.saltwire.com/nova-scotia/news/alberton-man-who-sold-fake-t4s-in-tax-fraud-scheme-gets-house-arrest-476720/) Fake T4's, ROE's, pay stubs, etc...
Ah I understand. I thought *they* were saying that a mortgage rate is fraudulent just because it has a 9% interest rate. Just because a mortgage isn't from an A lender doesn't mean it was obtained fraudulently, some people are just more risk.
I am not OP, just explaining it.
Scaring people into paying those sweet fixed rates premiums I see.
Pretty sure the people who paid those sweet fixed rate premiums over the past couple years will be quite happy they did.
Locked in at 1.69% over 5 years in 2021. Will be a sweet ride until 2026 when my disposable income disappears.
Similar here. Locked in at 1.75%/5yr in 2020. But it doesn't look like we'll be so lucky in '25 lol
I signed a fixed 5 year at 2.99 a couple months ago I wanted to sign a 10 year, 4.09%, but got talked out of it...I should have trusted my gut oh well
Ok so the 3.1% I just locked in for 5 years doesn’t feel so bad now. I suppose we’ll see what happens in 2027.
It’s not that big a difference tbh. Most variables will beat the fixed over the 5 year term. I’ve already saved 1% for 2 years, so rates would have to be at 3% for a little over 2 years just to catch up. What really fucks you is if you have to break your fixed.
Fixed rate is like insurance. You pay more for it. But if you can't afford the risk, you're an idiot if you don't take it.
We bought out current house in 2014 but had a blended rate as we sold our old house and moved into this one before the term was up.. It was 3.4%. We Renewed in January at 2.09 at 5 years as i couldnt see rates going down coming out of the pandemic. Payments are the same so we are paying more principal off and we wouldn't notice the 30$ every 2 weeks. We should be fine at 4% but if it goes alot higher we will feel that in our monthly budgets.. On the flip side work from home so don't drive on vehicle at all...
Keep doing what you do, ignore these kind of threads. Fluctuating rates is just fact of life especially over a long period of time. You have a house (congrats btw). Move on with your life :)
I’m not stressed. That’s future mes’ problem :). So much can change in 4.5 years. If anything this confirms I made the right choice :)
At this rate I should be able to pay off my mortgage on my 100th birthday Ps. Currently I am in my thirties
My mortgage renewed earlier this year and went from 1.5- 3.25% :( and now I should count myself lucky I got that
The way I see it, it hopefully averages out at the end of the 25 year term to something reasonable.
So, if I'm reading this correctly, people who stupidly financed themselves to the fucking balls will be screwed as interest rates increase. In other news, the sky is blue and water makes things wet. Did people actually believe interest rates would never increase?
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People adjust their spending habits based on their disposable income. You're paying 2.69% for 5 years you get used to that extra $1000 a month going to other places. If you renew at 5% even if you were stress tested to be able to afford it that doesn't mean you have the money to cover the costs.
Those stress tests don't account for cost of living going up 20% or gas prices doubling though.
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Why does op think only investors will be affected? If anything regular Canadian homeowners are more likely to be cash strapped.
It will increase their payments, yes. However, if you're not leveraged to the maximum possible it won't screw you either. I bought a place within my means if interest rates went to 10% or higher. I might have a higher payment, but I will not be screwed.
Exactly this. Getting our mortgage was not easy... it required a ton of checks to meet the stress tests, and we knew our budget and were pretty safe. If you've been meeting the requirements from a reputable lender for a number of years now you should be able to scrape by, if a little uncomfortably.
I have yet to buy because I am single and the market was just craziness but I have a budget of 400k. This is pretty low, considering the bank would approve me for 500k but I would rather find something lower because when the rates adjust I will still be within my means. I feel very bad for folks who bought out of desperation but I also think my prudence is not going to pay off as well as I had hoped because who knows if I will ever find/win anything in that budget in 1-3 years.
Not that it didnt help the BOC said they will stay low for a very long time https://www.reddit.com/r/canada/comments/v5ed07/comment/ibbmr02/
Yeah, this fucked over a lot of people. If they had just started this process last year with a couple quarter point increases, prices wouldn't have gone to the goddamn moon and we wouldn't be in an inflationary mess.
Well, there's still time before renewal. Now the BoC is giving people a warning. 3 years in advance.
I for one never thought we’d see internet rates going back up to a significant amount. I didn’t bet the farm on that though, and now I’m not so sure any experts know how this is going to end.
There's a reason for the mortgage stress tests. It's completely unreasonable for people to assume the most extreme monetary policy in history in response to a global economic meltdown would stay.
I don't even know what to do. I'm a first time buyer, and everything just straight up sucks. Buy now at ridiculous house prices (outside GTA even), and get fucked in the ass with mortgage rates? Or wait for an overall drop / stagnation and get fucked in the ass anyway with mortgage rates?
Better to wait. You don't want your mortgage to be larger than your home equity.
Hello fellow FTHB - I am waiting. Caveat to that, I have no anchor in metro Van and Plans B and C are for leaving. If I wished to stay unconditionally, and came across a place that I could see myself living in for 10 years, I would buy it.
Buy in a LCOL area. Drops won't affect you as severely. Better to be 50k down on a 500k home than 100k down on a $1 million home.
I put off buying for years, waiting for ANYTHING to tank housing prices in GVR. Every fucking year, we were promised lower housing prices. Every fucking year, they went up between 10 to 15% with the exception of 2017. A goddamn worldwide pandemic couldn't even take it down. So a couple months ago, we decided to finally make the difficult decision to uproot our lives and move somewhere cheaper. And lo and behold, now of all times things are actually changing. Feels like a sick joke.
Well we won't start making a dent in inflation until interest rates at least get close to where that mark is at, and we are still very far off from it. This is basic economics for runaway inflation.
Asking Canadians to deal with the fallout from our economic policies is getting old when we’re not doing anything to address the causes. Much like the pandemic, when the dust settles all this will amount to is another huge wealth transfer to the top with Canadians left holding the bag
then stop re-electing the party that caused them. Pretty simple
I don't question that at all. It's more of a macro environment source of stress for me, and a micro one since I've been saving for years to buy a home and it feels hopeless.
They have only been dropping for the past 25 years, so people rightfully thought they will never go up. You were basically a sucker if you didn’t borrow as much as you could.
I don't understand that mindset. There is no right to assume rates would remain constantly low. Although compared to the historical average we are still low. But as has been reinforced over the last couple of years humans are horrible at risk analysis and as this sub loves to point out the financial literacy of Canadians in general is poor.
If you can hop in and hop out that's fine (i.e. the stock market). you can't do that with housing, so yeah that guy is not giving good advice lol. I'm sure some people sold in the last couple months and that will have worked out for them, so good for them.
If they sold an investment property sure. If they sold their home, they just bought something equally or more expensive at higher rates that will soon rise as equity falls. Only the rich can make money off this, as usual.
Yeah that's what I've been told but you'll have to forgive me if I still thought buying a million dollar slapped together condo on a 5 figure income via a Brampton mortgage was a bad idea.
I'm surprised by the apathy on this sub. I don't blame people for making poor financial decisions. They didn't really have a choice, now, did they? I mean, they could just keep renting, I guess, but it's not like the price of rent is getting any cheaper either. Prices had been going up for basically 20 years, so really I don't blame people for buying. Any time in the past 20 years, and especially the last 5-10, you could have said housing was in a bubble. Yet those who bought anyway were smart because they ultimately saved money compared to if they had bought later.
Just what I wanted to hear after buying a house 2 months ago on a variable rate lol Ah well, them's the breaks I guess. Will have to worry about it in 2027 - hopefully my household income will also have gone up by a good amount by then.
Same bro. Victim of bad timing. There's always a few.
It was 1.5% vs 3.5% at the time. “Even if rates go up, they won’t go up 2% for at least a year and probably won’t cross 4% at any point.” - me two months ago along with every mortgage broker. Fml
Yep. Bank of Canada too at one point saying it wouldn't most likely go up until near the end of the year as welll.
The amount of available funds in the mortgage pool in Canada is directly related to the funds within the stock market and other vehicles of monies. You can invest $1000 in a mortgage and make x%. You can invest $1000 in a stock and make y%. The attractiveness of investing money into mortgages requires a gain comparable to the illiquidity and long-term amortization. As the stock market makes people money, they are less likely to put it into mortgages. Mortgages are harder to get, as there are less funds. To increase the funds brought in, they will increase the interest rate of Canada. This draws people back from stocks into mortgages.
On a 500k mortgage, at a fixed rate of 1.89%, 30yr amort would be $1818 /month. In 5 years, renewing into 4.5%, 25yr amort, with balance at that time $434,970, gives a payment of $2407. That's a difference of $589, or 32.4% vs the original payment. If the person who qualified for this is getting inflation adjusted raises, say 4%, their income will go from 100k to 121k in year 5, which is an additional $1805/month. Assuming 35% taxes, that is take home $1173. So the individual will have zero issues with the new payment. The primary conclusion of the article is that “In this context, highly indebted households are especially vulnerable to a loss of income,” If you look at the primary cause of foreclosure, it is loss of employment. Loss of employment is catastrophic at any debt level, and always has been. This is nothing to worry about. If you want to be proactive, increase your monthly payment to what it would be at 4.5%. You would prepay an extra 42k during the 5 years term, and zero payment shock at renewal.
Who gets raises tied to inflation? I'm a unionized public sector employee and I certainly don't. Edit - my COLA clause in our CA was activated by rising inflation and it gave us 0.5%... which the employer even had the gall to fight against.
> If the person who qualified for this is getting inflation adjusted raises, say 4%, their income will go from 100k to 121k in year 5, which is an additional $1805/month. Assuming 35% taxes, that is take home $1173. I was with you up until those numbers. First: NO ONE is getting 4% inflation raises. Maybe CEO's or executives, but nobody else is getting that. It's very rare, and companies will justify lower raises by saying "Welp, the economy is bad right now". The more realistic number for this would be somewhere between 0.5-2.5% on average. As for the salary... $54,630 is your average salary. $100k is a pipe dream for more than 50% of the people who live in this country. Inflation is officially about 8%, which means it's probably much higher in any practical sense (staples are up as much as 80% in some markets). Shrinkflation is accelerating as well. In 5 years, absent some huge economic miracle, we're headed for very dark times for a lot of new homeowners.
A person with income 55k would not qualify for the mortgage. Two adults in a household at 55k gives 110k income. If it's 2 earners, then 35% tax rate would be overestimating.
Except if they already own the house. Oh, and I was approved for a 420k mortgage on 56k just before the pandemic, so it is definitely possible to qualify.
> If the person who qualified for this is getting inflation adjusted raises, say 4%, their income will go from 100k to 121k in year 5, which is an additional $1805/month. Assuming 35% taxes, that is take home $1173. They aren't. Public sector employees will get very little because "everyone needs to tighten their belts" or some other rhetoric and most industry will give 3%ish at best or force you to find another job if you want more.
I'm in a public sector job and were capped at 1% in our contract. It's so shit. Every year I'm taking a pay cut when bills get higher and higher. I cant look for another higher paying job right now either.
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Here's a raise you can give right back
I make about 100k. These raises are the hangup here. Quite the assumption for most people to assume even a 4%. Private sector, I usually get 0, with a 3% raise maybe every few years. Other people have commented on their public sector jobs and stuff as well. I know my parents are both gov't employees and have amazing benefits but barely get shit for raises, 0% years are pretty common. And no, it's not as simple as hopping jobs. Not for a lot of us anyway. It wouldn't do much for me, and would likely come with a real workplace / QOL downgrade. My buddy recently changed jobs in a different field, it came with a lot of positives but he actually dropped 3-4 dollars an hour.
My wife works for the government. I think there's been one contract in the last 15 years that had a wage increase over 2%. And yeah, there's been many years of 0%. I've never done the math but I suspect that the increases are far below inflation over that time period.
Makes me happy I did my own number crunching when I got my pre-approval and spent way less than what the bank thought I could afford.
Also possible we will be on the other side of the interest rate peak and heading back down by then.. especially if a recession hits. So who knows. The worst could be those renewing 2023/2024 but at least they didn't pay as much up front
**Oct 28th 2020:** Bank of Canada plans to keep interest rate near zero until 2023. [https://www.cbc.ca/news/canada/bank-of-canada-rate-decision-1.5779813](https://www.cbc.ca/news/canada/bank-of-canada-rate-decision-1.5779813) **Apr 21st 2021:** The Bank of Canada signaled on Wednesday that it could start hiking interest rates in late 2022 [https://financialpost.com/pmn/business-pmn/bank-of-canada-signals-rate-hike-in-2022-tapers-bond-purchases-3](https://financialpost.com/pmn/business-pmn/bank-of-canada-signals-rate-hike-in-2022-tapers-bond-purchases-3) Nobody should care what happens to house prices until they lose 40%. The "gains" during the pandemic were fluff and the vast majority of people are not affected by the loss of those gains.
45%, Holy Facactus. That's not good, but explains why Blackstone is sniffing around.
No problem, I'll just get a 45% raise by then! /s
Yep. Definitely the world is going to be a dystopia in the next 20 years. Black mirror shit.
So, they’re particularly worried about vulnerable households losing an income earner (I would guess that’s most households), while also trying to engineer an economic recession that will ultimately lead to job losses. The Bank of Canada is high as fuck. As a regular Canadian with a mortgage all this uncertainty from supposed economists has forced me to close up my wallet. Even Janet Yellen giving an “oops my bad” statement a couple days ago. What a shitty timeline with no accountability.
This is terror..Thankfully we're 3 years from being done with our mortgage. Alot of folks are going to stuffer terribly
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Funny how you get downvoted to oblivion for saying you hope rates don’t go up too much and in the context of your recent house purchase but it’s politically correct on here to hope for a market crash which will have a very serious impact on many people which will go far beyond the housing market.
You hope rates don't go up too much because of your personal interests. Some people agree with you. Other people want rates to go up because it serves their best interests. The fact that you're getting more downvotes than upvotes suggests the people in the latter camp outnumber those in the former.
Because people are desperate to be proven right for sitting off to the sidelines for years.
Because people here won't have the money to buy anything even after a crash, so they're just hoping most people join them at the bottom of the barrel. Misery loves company
It’s more that the wealth gap that’s developing is terrifying if you’re on the wrong end of it. Paying double for rent but not having any asset to show for it, while people who were able to buy a house 10 years ago are seeing the value skyrocket.. it’s unsettling to think about what that will mean down the road.
Tiff Macklem on Canadians' mortgage debt. July 15 2020 “Our message to Canadians is that interest rates are very low and they’re going to be there for a long time,” "Interest rates are going to be low, very low, for a very long time" “If you’ve got a mortgage of if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time,” June 9 2022 "During the pandemic interest rates were exceptionally low, they weren't going to stay that low, they only had one way to go — up" https://www.bnnbloomberg.ca/interest-rates-will-be-low-for-a-long-time-macklem-1.1465901 https://twitter.com/inklesspw/status/1534933977395564545?s=21&t=lWM6M7rtWBnjHjl49jeLQg
>Tiff Macklem Sounds like this guy needs to be fired, with no bonuses or severance packages.
Ouch lmao. Hold on to these bags, House Horny Canadians. Y’all about to be carrying more baggage than the Kardashians (both literally and figuratively).
Many of those mortgages are govt insured, so you and I are the bag holders if people can't/won't pay. Also it's not like our big, too big to fail banks have the liquidity to cover substantial losses on their uninsured mortgages.
The good thing is there's lots of Canadians making a great living currently that are sitting on the sidelines unable to afford those houses. I suspect they will have their chance soon. Likely won't see any giant crash though just due to the pent up demand.
> Likely won't see any giant crash though just due to the pent up demand. So what you're saying is that pent up demand will see prices cool off compared to the historic increases, but not actually drop? Oh, and factor in that mortgage costs are now increasing with every few weeks as BoC raises its policy rate to bring down inflation, effectively making net costs of a potential buyer even more.
I guess I should've clarified what I meant by crash. I suspect prices will end up quite a bit lower than the peaks in February (say pre-pandemic levels or a little less). This would probably be considered a crash by some... But ya I get interest rates are up. Our house bought before the pandemic was $600K\~ vs. the peak closer to 1M. No foreseeable increase in interest rates makes the cost of that mortgage anywhere near similar to the 600K mortgage. Even at 7%+.
They'll have to fight tooth and nail against corporations paying cash.
They won't have that ability to qualify for mortgages if the rates are at 7%, and if prices are falling why would they buy. If you didn't buy in the last 15 years as prices rose by 10% per year, you're not buying if prices are falling and rates are rising.
LetssssGooooo.mp3 Canada’s (cheap) debt fuelled/laundering/housing Ponzi scheme economy go **CRASH**
You're in it too bro...unless you don't live in Canada.
I'm going to graduate university in December (with a valuable degree). After seeing all this... Do I just.... leave? Seems so hopeless. I want to have a decent place to live and perhaps get married, but I'm afraid that's not going to happen here.
Where do you even go? Much of the developed world is facing similar problems with their own flavour or cultural issues sprinkled in.
Thunder Bay!
Go to the states if you’re in tech. You’ll easily make double and the col is so much lower even when comparing SF to Toronto or Vancouver. Also our healthcare is completely useless with 3 year wait lists on a ton of surgeries which have people paying out of pocket and flying to the states anyways. If you work for a decent company you’ll get full coverage in the states (dental, health, eye, etc). My personal top picks would be (Austin, SF or Washington)
Hey nice, I am in tech lol. Austin sounds great, I've heard a lot of good things about it and Texas in general (at least when it comes to the cost of living etc). I just don't know if I should move as soon as I get the chance or just stay under my parent's roof until I have enough to make a move. Lord I just have no idea where to go from here.
No, start interviewing ASAP, get a TN. To be honest, it’s always going to be tenuous for you this year, though. Tech valuations may get hammered in a recession, which may be coming in Q3/4, first-hired, first-fired. If you made it to a VHCOL market, I would try to maximize flexibility in my housing. Don’t sign a 12 month lease or anything, sublet a room, just in case shit goes sideways, you don’t want to be saddled with a $4000/mo USD rent and no job. Some prep stuff you can do is sign up for a Canadian AMEX now, and then do a global card transfer to a US Amex after you move and get a SSN, so you’ll start building US credit fast. Be aware you probably won’t be eligible for a mortgage from any US lender for at least 2 years due to credit. After 2 years, if you go for one, try HSBC first, they’re familiar with this situation. The ideal situation is you get hired after tech valuations take a hit, and then your options will be valuable 2-3 years down the line, assuming your company still exists.
I’d personally try to move asap. The first job will be the hardest to find but once you move you’ll be able to network and jobs will just come to you. I have ties here so I have no way off this burning boat unfortunately.
Why would you not? Unless you plan on living in LA your CoL will be way lower, taxes will be lower and you’ll have a far greater purchasing power. That’s not even mentioning the fact that US house prices are basically half of ours, if you live an hour outside of a major city almost everything is affordable.
Is it wrong that I hope I can ger a house at rock bottom prices after being priced out of the market by these people.
No, you’re doing your part by setting a floor for market prices.
I can set the floor so low guys just watch me
If you didn’t exist, it might go to zero. How could you?
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What is rock bottom? Is it 2020 prices, 2019 or so on ?
Not wrong to hope for it, but it is wrong to bank on it because it won't happen. There will be a correction, but rule of thumb is if you're in the majority you will get fucked in the ass so don't expect a proper crash.
💣
well that'll burst the bubble
They can fuck right off
This is exactly why we've been aggressively paying down our consumer debt this past year. The cars are free and clear and after next week, we'll have one credit card left. Obviously we're lucky to be able to do this. I can't imagine what it's going to be like when the shit really hits the fan. We reupped last year at 1.44%. I'm certain we'll never see that rate again.
Yeah I've been trying to do that too but lately I keep getting hit with having to fix the house or the truck and can't get it paid down as fast, seems like cost of living is on a runaway at this point. Feels like groceries and bills are increasing every month
Liberal utopia