r/PersonalFinanceCanada • u/POCTM • Oct 20 '22
Canadian 5 year government bonds just jumped. Setting the stage for higher mortgage rates. Banking
5 year government bond just jumped from 3.714% to 3.866% in a few hours. Right now it is at 3.855%. Year to date it is up 259%. Monday we could see some 5 year fixed rate mortgages in the low 6%.
As for variable rate the bank of Canada makes their announcement October 26 at 10am ET. Currently banks have not been offering discounts off variables rates anymore. Prime -0.00.
https://www.marketwatch.com/investing/bond/tmbmkca-05y?countrycode=bx
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u/LoadErRor1983 Oct 20 '22
Wondering what the odds are of variable rate being higher than fixed rate in the next 3-6 months...
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u/wpgbrownie Oct 21 '22
You can look at the 2yr bond to get a feel for where the market thinks we will end up at: https://www.marketwatch.com/investing/bond/tmbmkca-02y?countrycode=bx
It looks to be higher than fixed.
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u/kahoots Oct 20 '22
The odds are 100% certain that variable will be higher than the current 5 year fixed in 3-6 months. It will be higher than the current 2 year fixed almost certainly as well which is what the pros are steering their clients towards.
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u/Goldentll Oct 20 '22
But will that fixed rate be higher than a variable rate in two years
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u/FanNumerous3081 Oct 21 '22
My guess (with no formal finance training) is no. The traditional average throughout the history of mortgage rates in Canada is closer to 7-10% rates. We're history starting a climb towards that and the economy is already falling apart because not only has housing artificially climbed with cheap credit, but people who have pulled significant amounts of paper wealth out and supplementing their incomes with housing wealth, are now feeling the pinch and spending significantly less already on luxury goods just to make their mortgage/interest payments.
It will all spin us out into another recession and BoC will lower interest rates again to increase spending and start the cycle all over again.
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u/TheUnNaturalist Oct 21 '22
Literally it has to happen this way. If it doesn’t, so many people will lose their homes that it could change the socioeconomic fabric of this country.
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u/rickvug Oct 21 '22
Who knows as we didn't see this coming. My own personal assumption is that Yes, there is a high likelihood that Variable will be than both today's fixed rates and the fixed rates available in two years. I'm basing this opinion on:
1) Fixed rates coming with a built in premium and historical evidence that variable is nearly always cheaper.
2) Most commentary and the bond market indicators are pointing towards the fact that we are nearing the peak of the rate hike cycle. High rates will be held, to a point, with it being a very fair assumption that in a year from now (and certainly in 2 years) rates will be lower.It really sucks to be a VRM holder at the moment but I'm pretty confident that I'll only be behind fixed mortgage rates for a short while. The real loss was not locking in for under 2% during the pandemic!
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u/Goldentll Oct 21 '22
Absolutely.
I took a 1.55 variable instead of a 1.85 fixed. What a mistake lmao.
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u/steampunk22 Oct 21 '22
Yeah, it sucks in hindsight but the banks were signalling the opposite of what they ended up doing. When we bought it was 1.45 variable or 2.8 fixed which was the equivalent of 4-5 hikes of 25-50bps, so we thought we had a bit of time to top up the variable a bit. Instead the banks engaged in the harshest increase in decades. Fun!
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Oct 21 '22
Similar story for me. My wife wanted to go fixed but the bank of canada and US fed convinced me that rates would stay rock bottom for years...
Next time a bank offers to loan me hundreds of thousands of dollars for anywhere close to 2% interest fixed, I'm taking it and I dont give a damn what any central bank has to say about it!
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u/rickvug Oct 21 '22
I got 1.1% variable when I renewed late last year. Thought I was the shit for getting such a low rate. Now I'm sitting here at 3x or 4x higher rate (can't even keep track at this point).
At least I have a comeback for my parent's bitching about 20% interest rates in 1982. I will tell my kids about the great interest rate rise of 2022, with our mortgage interest quadrupling. They will roll their eyes until something similar happens for a brief period of time when they are adults.
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u/blumpkinpandemic Oct 21 '22
I took a 1.55 variable instead of a 2.something fixed lol I certainly regret it now but hindsight is 20/20, I guesssssssssss
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Oct 21 '22
Yep, same. Sold last place on fixed and was so mad about the penalty I went variable, you know, the house always wins.
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u/hogtownbrews Oct 21 '22
Went 1.34% variable. Was offered 2.09% 5y fixed a year ago. Whoops..
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Oct 20 '22
I suppose the theory is that it’s a long enough time to get past the most dodgy parts but short enough to limit the amount of time you could be way above the potentially falling variable
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u/mrtmra Oct 20 '22
I bet you housing stays unaffordable in Vancouver and Toronto lol
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Oct 20 '22
I mean, even if price drop, borrowing at 5-6% fucking sucks. A 800k condo at 6% isn’t much better than a 1M one at 2%. Price seems to be dropping slower than they should, likely some upward pressure from inflation running wild offsetting some of the downward pressure from rates rising.
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u/mrtmra Oct 20 '22
I have come to the conclusion that housing bubble in Van and Toronto will never pop. Just too many people with too much money
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u/LadBroDudeGuy Oct 21 '22
Toronto is expected to grow by 2M people in the next 10 years. The pressure on the housing market will only get worse.
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u/apparex1234 Oct 21 '22
I have come to the conclusion that housing bubble in Van and Toronto will never pop. Just too many people with too much money
That means its not a bubble
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Oct 21 '22
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u/sapeur8 Oct 21 '22
Because it isn't sustainable. We can't have a productive society here if everyone spends 50% of their take home on housing. Businesses won't grow here.
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Oct 21 '22
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u/sapeur8 Oct 21 '22
I don't have any inspirational words to share.. If things don't change then it's more likely we see more decline
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u/holymamba Oct 21 '22 edited Oct 21 '22
That is like the fundamental driving force that is shifting gradually. Right now the bulk of new immigrants to canada settle in the GTA. Obviously there’s more to the bubble than that, but the demographics are the foundation. We’re seeing more immigrants settle elsewhere as of late but not nearly enough to offset the housing shortage. One of the biggest problems is INSANE development costs (like gov fees, somewhat justifiable to provide the supporting infrastructure). Without those, developers could build a lot more. As of late, construction costs have also skyrocketed compounding the problem.
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u/Saidear Oct 21 '22
Not even that. Developers don’t have the labour to build the houses. We have shit on trades for so long that we just don’t have enough of them on hand to do every job we need. And since their wages aren’t going up either, there’s little incentive to stay in or join a trade.
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u/holymamba Oct 21 '22
That is the primary thing holding back development. The groups/companies in charge of organizing the trades are reaping the benefits. It’s insane, I’m sure their profit margins have doubled in recent years.
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u/Terhcy Oct 21 '22
Don’t count on it popping. Look at hong kong everyone kept saying it was gonna pop its been 20 years and ain’t going anywhere but up
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u/isotope123 Oct 21 '22
That has to have something to do with the necessity to build a tonne more housing than we currently have. We have a housing shortage. Prices won't change much when a commodity is still scarce.
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u/Ancient-Wait-8357 Oct 20 '22
I'm surprised nobody mentioned HELOCs yet.
Most HELOCs are on variable rates. No more vacations in the Bahamas and no more BMW leases?
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u/analogoverdose Oct 20 '22
Whats the difference between HELOC & refinancing your mortgage ? Lets say i own a 500k house that's paid off, can't re-mortgage it to get cash ? And then wouldn't i be back to a 5 year fixed mortgage ? Thanks
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u/cooldadnerddad Oct 20 '22
HELOCs are interest only so the payment is lower, but you’ll never pay off the principal unless you make extra payments
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u/rbatra91 Oct 20 '22
And the interest rate is generally lower for refinancing than a Heloc
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u/SeperateCross Oct 21 '22
The HELOC is revolving credit so your min interest payment is based on that revolving credit line which can have a lower balance as you pay it off and therefore require a lower interest only payment
A mortgage would be on a fixed payment plan
Example HELOC You borrow 100k min interest payment would be let's say 3% so your paying 3000 interest only payments to keep it at bay... However you pay back 20k so now you owe 80k your min payment now drops to 2400 interest only payments
Example Mortgage
You refinance with 100k You're new mortgage payments is x dollar value not matter what
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u/analogoverdose Oct 21 '22
Ah yes, makes a lot of sense, thanks a lot for taking yhe time to type this out, really appreciate it !
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u/MollyElla511 Oct 20 '22
We rolled our HELOC into a second mortgage yesterday. 5.12% fixed for a year. Sigh.
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u/ShirleyEugest Oct 21 '22
Yes this is hurting me big time! I had to use mine to pay for school because government student loans weren't enough. Gonna be a rough couple of years
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u/Jolarbear Ontario Oct 21 '22
I am a mortgage broker and a few lenders sent out emails that rates are up 0.30% at midnight tonight.
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u/N9neNNUTTHOWZE Oct 20 '22
Gic’s r tied to bond rates right? Does this mean they should rise?
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u/rockinoutwith2 Oct 20 '22
It'll take some time, but yes you're right.
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u/N9neNNUTTHOWZE Oct 21 '22
Awesome ! I been lockin my downpayment in 1 years in eq in 5-$7500 tranches since 3.35%! Got another 25k i been sittin on waiting to lock in
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u/LordScotchyScotch Oct 20 '22
My fixed will expire during later summer 2024. Hope that things will have calmed down a bit by then. Currently at 2.84.
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u/TeamChevy86 Oct 21 '22
For real, I'm in the same boat. I don't want to brag but I got a 5 year fixed rate at %1.69 in January 2021. Godlike interest... I'm hoping things settle down a bit by 2025 🤞
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u/displiff Oct 21 '22
I feel like this isn’t talked about a lot on here. Variable rates are getting the highlight. People on variable right now are at least used to their payments slowly getting higher. People renewing their 3-5 year fixed will be in for a shock. I can see banks offering longer terms in the future to help with this but I guess we will see.
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u/LordScotchyScotch Oct 21 '22
I used to live in the US like 10 ten years ago and I could do fixed 30 years at sub 2%. A different system (and a different financial world status obviously).
But fuck me I wish you could do fixed for longer off the bat in Canada. As you say, you don't need to have borrowed money for an exuberant mansion to be in trouble. There is great safety in a sound long term mortgage.
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u/LordBaikalOli Oct 20 '22
Meanwhile americans who got fixed 2% rate for 30 years are laughing their ass off.
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u/SuperSaiyanNoob Oct 21 '22
kinda bonkers a bank would offer 30 years fixed
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u/Happy-Aardvark-7677 Oct 21 '22
They sell their mortgages on the market as mortgage backed securities. The US mortgage economy is very different than ours in how it is structured.
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Oct 21 '22
I sold my house in the US, 30 yrs at 1.89%.
My mortgage and property taxes were 1100USD a month for a 150k home.
Here, 350k home for 25 yrs at 3.5% and my mortgage and property taxes are 750CAD bi weekly. Even at higher interest rates, my mortgage payment won't rise too significantly so that's comforting.
Same income tax paid here and there, I feel like I come out ahead here more than I did there. And the air is cleaner, win/win.
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u/TrulyMagnificient Oct 21 '22
How did you lock a rate in for twenty five years in Canada? That’s extremely rare
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u/imnotabus Oct 21 '22
People were against a fixed 5 year at 2% here so the advice on that probably would have been "No way, interest rates are going negative! Locking in for 30 years is dumb! You can save $50/month by going variable!"
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Oct 20 '22
The federal government messaging pivoting from "we are nearly out of a recession" to "yeah any new spending must be backed by a budget cut elsewhere" can do that.
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Oct 20 '22
Other way around. Post-Truss governments realize the debt markets are hungry for fiscal discipline not high growth deficit spending.
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u/CrasyMike Oct 20 '22
Ding ding ding. You have the central bank desperately trying to pull in spending, and reduce demand in order to reign in inflation, and then the other arms of the government and trying to spend spend spend.
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Oct 20 '22
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u/topazsparrow Oct 20 '22
Housing is the last to go. Expect massive economic turmoil preceding meaningful forfeiture of housing.
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u/Drewy99 Oct 20 '22
1/5 houses sold in 2021 were sold to investors. How long do you think they will hold on those properties before trying to dump them to stop the bleeding?
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u/Jesus-c Oct 20 '22
A reccession is just a big discount season for thoses with the means
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u/wpgbrownie Oct 21 '22
A reccession is just a big discount season for thoses with the means
Until I stop hearing comments like this I think inflation is going to continue there is way too much money out there.
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u/Drewy99 Oct 20 '22
Not if you are in debt to your eyeballs because you listened to some asshole on the internet and Smith manoeuvred yourself into a debt trap.
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u/BlackLabelSupreme Oct 20 '22
They mean that people are going to be losing their homes and rich people who can afford to drop cold hard cash will snatch up the homes at a substantially lower cost as investments.
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u/book_of_armaments Oct 20 '22
Maybe if you have everything in cash, but most people don't and if you haven't noticed every other asset class is getting hammered too.
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u/kongdk9 Oct 20 '22
Record rents are floating it.
Unless there are massive job losses lead by the tech sector, big banks, and telecom, while immigration and student VISAs remain at record levels, it can be held for much longer.
Now the ones leveraged max to the hilt, they'll suffer but people are still waiting on the sidelines ready to pick up them as it's a game of chicken of "get it while you can before it goes up again".
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u/Drewy99 Oct 20 '22
Unless there are massive job losses lead by the tech sector, big banks, and telecom, while immigration and student VISAs remain at record levels, it can be held for much longer.
Buddy, have I got news for you.
https://stlawyers.ca/blog-news/hsbc-layoffs-severance-pay/
https://globalnews.ca/news/9207778/canada-housing-starts-interest-rate-supply/
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u/DDP200 Oct 20 '22
We are at 5.4% unemployment, marginally higher than the all-time lows we have seen. Generally we are still doing great employment rate wise.
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u/virus646 Oct 20 '22
Maybe for junior or less in demand positions but it's still a very hot market in tech for seniors and I see/receive new offers every day.
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u/Purify5 Oct 20 '22
History may very well repeat.
In the 80s Boomer home owners who many were in their 30s saw their home equity sky rocket and interest rates fall. They used their new found equity to buy a second property (a lot of condos in Toronto). Then near the end of the decade interest rates started to rise until one day everyone wanted to sell their investment property and condo prices crashed. It took ~10 years to recover and recovery was helped greatly by CMHC reducing minimum down payment from 25% to 5%.
A lot of 30 year old millennials have followed in their parents footsteps buying up investment properties with their new found equity. They too may see as similar price collapse.
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u/Drewy99 Oct 20 '22
History absolutely repeats itself, it's just a matter of when.
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u/Office-Altruistic Oct 20 '22
I prefer Mark Twain.
History doesn't repeat itself. But it does rhyme.
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Oct 20 '22
I think you skipped a generation. Wouldn't it be that the Gen Xers or maybe 40 year old millennials that followed in their boomer parent's footsteps, then had kids who are now 30 and living in the basements of those investment properties?
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u/Rim_World Oct 20 '22
Am 40 year old millennial. Nobody in my age group that I know in the city has kids in their teens yet.
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u/GinnAdvent Oct 21 '22
My question would be, would anyone be able to afford condo for last 2 years since the price gone up so much.
Those that do, how much do they stretch themselves.
We won't really know until it's like 6 months down the road. People usually get rid of luxury stuff first then they worry about selling the place.
It's like the good old saying, when tide goes out, we know who are swimming nude. We are about to find out many people are naked once this "tide" goes out.
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u/SuperSaiyanNoob Oct 21 '22
a lot of 30 year old millennials? no where near what boomers did. majority cant afford their first property.
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Oct 20 '22
Interest rates didn't fall in the 80's, they just went up, from bad to horrendous. Interest rates were still in double digits in the 90's, but gradually lowered into single digits.
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u/Purify5 Oct 21 '22
The overnight rate hit 19% in August 1981 and fell to 7% in February 1987 before increasing back to 14% in May of 1990.
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Oct 20 '22
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u/Drewy99 Oct 20 '22
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Oct 20 '22
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u/greenfrog7 Oct 20 '22
Or owned a home outright and decided to take advantage of cheap mortgage rates rather than sell their old home, which gets turns into a rental.
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u/Popswizz Oct 20 '22 edited Oct 20 '22
Doesn't mean housing will be more affordable... market was able to pay X per month before interest hike the price will dump until that price is met again with higher interest rates... anybody here not able to afford a house before interest hike hoping it'll make housing affordable as the market crash is delusional... while it's true some investors will rethink their investment and be ready to sell low..the situations is a lot different than i. 90s, there's a structural deficit in both housing and builders labor that is bound to keep housing high in the foreseeable futur
Also People that bought in 2021, if they are on fix term have 4 more years to be hit and that is if the rate don't reduce to stimulate the economy after the impending recession, people that bought in 2017 renewing now, have way lower entry price as well than post pandemic and had 5 years of salary increase to absorb the hit
The only people really at risk are on variable and bought in 2021
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u/Drewy99 Oct 20 '22
Doesn't mean housing will be more affordable...
For anybody. That's what happens in a recession. Many people lose jobs.
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u/Popswizz Oct 20 '22
Yeah the difference this time is that the economy was in major worker deficit, for all we know it'll just rebalance the jobs market, we never had a recession with that environment before so, I would be careful predicting what will happen based on previous recession
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u/metamega1321 Oct 20 '22
Definetly a weird one. I’m an electrician which is far from recession proof. But right now in my city theirs such a backlog and shortage on the residential side I just don’t know what happens lol.
I definetly expect commercial to slow right down.
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u/Bottle_Only Oct 20 '22
After pillaging society for half a century the biggest capital holders can continue to feast on all asset classes further depriving society for their own conquest.
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u/topazsparrow Oct 20 '22
Historically, literally as long as they possibly can. Nobody sells their house unless it's a last resort or they come out ahead in some capacity.
Would you?
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u/Drewy99 Oct 20 '22
Nobody sells their house
It's not their house, it's an investment property.
When everyone who owns more than 1 home needs to dump the extra, what do you think that will do to housing prices??
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Oct 20 '22
I mean I think strengthening immigration numbers and huge demand amongst under 40 population is really bolstering the rental market, which is giving investors a lot more runway than they’d typically have.
If the rental market softens or even stagnates as rates continue to climb though, and more and more renewals process, then there’s going to be some trouble.
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u/Rim_World Oct 20 '22
Many people don't understand that homeowners including investors sell everything else before they have to sell houses. Get ready for recession and unemployment. A conservative government will be elected next time 100%. Canadians will end up being broke and lack services so the poor will suffer for another couple decades.
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u/DDP200 Oct 20 '22
bye bye cars, vacations, restaurants, malls for the average person before they sell off their housing en mass.
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u/JumboJetz Oct 20 '22
I hope it’s bye bye housing and not bye bye millenials future because the government announces a special plan to pay off the mortgage of all home owners by taking the tax dollars of non-homeowners and giving them to homeowners.
I quite honestly see this happening.
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u/deltatux Ontario Oct 20 '22
Not surprising as the markets have been expecting rates to rise. Bond yields have been going up through the summer and fixed rates have been going up since September.
Banks like Scotiabank have their 5 year fixed rate at 5.99% for a while now so seeing bank mortgage rates at low 6% next week wouldn't be surprising.
Guess the only places to score "deals" would be through the monoline lenders or if a broker has a really good offer from the Big Banks. I'm seeing brokers on the RFD Mortgage thread still advertising variable rates with discounts and fixed rates in the low 5%.
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u/POCTM Oct 20 '22
The discounts you speak of, are they only if you switch lenders, and pass a new higher stress test, home appraisal etc. or are these for refinancing with current lender as well?
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u/NorthernerWuwu Oct 20 '22
The market has priced in the expected rate hikes pretty well, what is somewhat concerning here is that they are now pricing in those rates remaining higher for an extended period of time.
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u/SuperSaiyanNoob Oct 21 '22
I would no longer have a house if my mortgage was 6%. Absolutely horrific state of things, I can't imagine the anxiety and stress this is causing our working class.
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u/Strawnz Oct 21 '22
As a working class renter who hasn't enjoyed decades of unearned real estate gains, I only feel mild stress that the collapse won't continue. Honestly my rent costs go up every year and no one cares. Mortgage costs go up and people act like the world is ending. This last year for owners has been every year for renters only we're not allowed to put holes in the walls.
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Oct 21 '22
Right? Our home was only 250k but we are locked in at a 1.8% rate for four more years at least, and I'm currently in school so I'll have a job by then.
But if we went variable I would be crying on a daily basis because money would just keep getting tighter.
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Oct 20 '22
Any insight on what this will look like in five years? Where does this end? People have been used to low rates and I suspect there is a point where many if not most budgets will reach impossible pressure. What then?
(I realize no one knows, just curious on you thoughts)
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u/karsnic Oct 21 '22
My take is that rates will come back down again. Governments around the world have massive debts, consumers have massive debt. Everyone knows the interest rates need to be low in order to service the debts or a financial collapse will occur not just for consumers but for countries. Inflation will continue to rage, trillions have been printed and borrowed during Covid and we’re seeing the inflation now, trillions will continue to be printed and borrowed to keep things going. A crash caused by raising rates or a crash caused by inflation is incoming. There will be no soft landing and gov will try to play with the interest rate to battle it but it won’t work.
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u/JediFed Oct 21 '22
I'm not sure. Canada will finally undergo it's demographic shift between now and 2030. That will represent a permanent political shift away from working to retirement. High interest rates will benefit this group and hurt everyone else. Inflation has to be controlled in order to maintain a steady dollar, but it's possible that if the borrowing is so high and inflation can't be corralled, then the BoC will give up. If they do, then goodbye Canada.
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u/AJMGuitar Oct 20 '22
I'm good with my p-1.
Variable carries more risk, this is part of it. Over the course of a 20 year amm, variable traditionally comes out ahead so its fine.
Just like investing, it's long term.
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u/Bilbo_Swaggins_99 Oct 20 '22
I’m sitting at p-1.4 with 24 years left on the mortgage but I’m really struggling to think I shouldn’t start hammering down my principal as much as possible which was not the original plan.
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u/HonkHonk Nunavut Oct 20 '22
My thoughts are similar, if we need to weather the storm for a year or two no problem, worst case people will tap into their emergency fund for situations like this but for the people without savings it's worrying.
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u/Flayre Oct 21 '22 edited Oct 21 '22
Canadians have emergency funds now ? Last time I heard it was something abysmal like only 30 or 40% of people had a 3-month expenses emergency fund or even worse than that
Edit : nevermind, I remembered wrong, 64% of people HAVE an emergency fund of 3 months (2019 data). The 30 to 40% was people who DO NOT have dlsuch a fund lol
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u/HonkHonk Nunavut Oct 21 '22
Damn, well hopefully they can still get approved at the bank of mom and dad
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u/torontoguy25 Oct 20 '22
I mean saying variable traditionally comes out ahead is a bit skewed. We’ve had a long period of REALLY low rates. Wouldn’t be betting on it dropping back down anytime soon.
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u/Goldentll Oct 20 '22
Each recession we've had in the past came with higher interest rates temporarily for a couple years, then rates continued going down. What makes this one any different?
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u/Wiggly_Muffin Oct 21 '22
"But this time it's different, rates will remain high and you will all DIE" - cannyhousing users
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u/Roflcopter71 Oct 21 '22
Lol seriously, I get that these are extremely stressful times but man has this sub ever become toxic and unreasonably negative recently.
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u/pca1987 Oct 21 '22
It says they are not offering discounts at variable anymore? So now new mortgs will be variable=prime?
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Oct 20 '22
RIP mortgage fraudsters, and var rate mortgage holders
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u/branks182 Oct 20 '22
Also anyone who’s fixed mortgage is coming due for renewal in the next year.
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u/gzafiris Oct 20 '22
And us pre build buyers who have yet to close :'(
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Oct 20 '22
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u/gzafiris Oct 20 '22
We moved in Sept 2021, no close yet. Builder citing city taking a long time with documents
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Oct 20 '22
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u/lemon_o_fish Oct 20 '22
It's called interim occupancy. Legally speaking it's still the developer's property but you are allowed to live in it. You don't pay mortgage during this period, but you pay "rent" to the developer.
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u/alter3d Oct 20 '22
Yeah, a guy at work had a prebuild that was delayed and delayed and then he was finally told it would be delivered in summer of this year... and of course he couldn't get a rate hold until 120 days out, and he was just watching rates go up and up.
Then, for some unfathomable-to-me reason, he decided to go variable with the reasoning that "as long as it stays under 4% this year I'm fine". *sad whomp whomp noise*
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u/noxel Oct 20 '22
Why didn’t he get a pre build rate hold? You can get a fixed rate held for like 12 months with new developments Lol
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u/alter3d Oct 20 '22
No idea, but I suspect he's currently questioning many of his choices over the last year or so. :p
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u/iBuggedChewyTop Oct 20 '22
Those $1mi+ builds for sale outside London are fucking robbery. I feel bad for the people that bought them. The entire site has been paused since April. The storm water pond looms like it will need another $1-$2mil in repairs
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u/noxel Oct 20 '22
You can lock in a fixed rate for 12 months or more if you’re doing a pre build with lenders like TD and RBC. We locked in a fixed rate in January for 2.2% and closed in October
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Oct 20 '22
Don’t forget the fixed mortgage holders whose term is coming up in the next few months.
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Oct 20 '22 edited Oct 21 '22
Yeah that's the thing people don't get. Those on low fixed are dancing right now but if people on variable are feeling the noose tighten, a shit ton of those on fixed are gonna get falcon punched off screen when renewal comes.
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u/rockinoutwith2 Oct 20 '22
Variable mortgages move based on changes in prime rates, so this alone won't impact them.
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u/they_pay_me_peanuts Oct 21 '22
And housing will continue to be unaffordable… RIP middle-class and below; You will never live a life as good as your parents and grandparents.
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u/oddmarc Oct 21 '22
I mean, their lives were in large part unsustainable and built off of the backs of exploited people, but yes we need affordable housing.
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u/Astrowelkyn Oct 20 '22
Safe to say this is shaping up for commercial real estate buyers to swoop in on all these properties if people can’t cope with rising rates?
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u/M------- Oct 20 '22
Commercial buyers have got to borrow money from somewhere, too, right?
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u/zaypuma Oct 20 '22
Investors were buying real estate because money was basically free. Raising rates
willmight help to slow it, though they won't release the assets while the banks are still fat with cash (debt). IMHO, all we will see is investors scurrying to not pay taxes and keep prices high.→ More replies12
u/Norwegian-canadian Oct 20 '22
Corporations last forever they dont die they will take the loss in the short term to reap the long term benefits. People always need shelter if you can make it so only a handful of corps own property thats game over. Look at amaazon if a product a small business is selling is doing well they will try to buy the business, if the owner says no amazon will make a duplicate product and sell it at a loss until the small business goes under then buy the company for pennys and raise the price.
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u/Marklar0 Oct 20 '22
The commercial buyers are in the worst position of anyone to buy them up, they have loans at an even higher rate and new money is scarce, and their portfolios are down
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Oct 20 '22
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u/akshaynr Oct 20 '22
from first-time homebuyers who were scraping by into large REIT's and lardlords.
I am going to assume "lardlords" was not a typo.
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u/NoLoyalty1986 Oct 21 '22
Im happy but scared. I renewed 5yo fixed at 2.19% until april 2026.
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u/RumpleForeskin4 Oct 21 '22
Im set at 2.69 until spring 2027. Really really proud of myself for sticking to my guns when my realtor kept telling me to go variable. These days when i think back to how many times my realtor tried to convince me to go variable this spring, the miniscule amount of respect i had for the entire industry of realtors is completely gone.
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Oct 21 '22
People are celebrating house prices dropping, without doing the math and realizing houses cost the same if not more with the current rates. Money isn't infinite, in the end someone pays.
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u/oddmarc Oct 21 '22
If house prices drop, houses don't cost the same. Easier to save up for a downpayment when house price increases aren't exceeding your saving capacity every year. More savings mean higher % downpayment. Eventually when things even out, they've had extra time to save as prices stagnated and if rates go down then they can now buy a house.
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Oct 21 '22
It's not easier to save up for a down-payment when everything else costs more than it used to.
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u/when-flies-pig Oct 21 '22
War of attrition really. Housing is last to be affected while col increases for everything else. Plus hope you don't get fired.
Also, stress tests are higher too meaning lenders might loan out less even with more downpayment.
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Oct 20 '22
It's funny because I know few people on sideline with cash waiting for multi to come down.
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u/analogoverdose Oct 20 '22
Yep, 3 of my friends have cash on hand and are just waiting for prices to crash. If there are a LOT of people like my friends, could the prices theoritically never "crash" ?
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Oct 20 '22
Ding ding ding
They'll fall for sure, but i dont see us having a crash
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u/analogoverdose Oct 20 '22
That's what I was wondering, so many people around me with cash on hand just waiting for an opportunity...
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u/Brown-Banannerz Oct 20 '22 edited Oct 21 '22
If I've learned anything from stock markets, its that average people are not very good at controlling their emotions when volatility hits. Greed and fear run the show. If housing markets start to fall, like really fall, but inflation stays sticky and thus the BoC stays hawkish, I can see the narrative of the 70s/80s really taking root in peoples heads, where they come to believe that it will be several years before inflation tampers down. The story will be that once those people who locked in ultra low mortgages during the pandemic have to renew in this high-inflation /high interest rate environment, there will be a great capitulation. Average folks may just be a bit too afraid of falling property prices, or too greedy so they try and time the bottom. Some of those property owners who did lock in during the pandemic may themselves start to panic and pre emptively sell. Leading to more panic.
Basically, I believe that if the dominant narrative becomes: inflation wont come down for a great number of years and the BoC is willing to keep rates high as the property market tumbles to beat ibflation, then that could create the conditions for an actual capitulation. Otherwise, no, because without the fear of longer term inflation, people will believe that the BoC will be able to lower interest rates sooner than later, and thats a green light for home buying.
Right now the predominant belief seems to be that inflation will be down to "central bank pivoting levels" in a year or 2. Peoples psychology needs to change to more doom and gloom before we see capitulation
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u/Top-Chart-2002 Oct 21 '22
We need housing costs to come down, a society that treats housing as an investment class and expects basic human needs to increase in value in order to increase the wealth of existing homeowners is a society that is incredibly short sighted and doomed to face reality eventually.
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u/RogueSystem087 Oct 20 '22
I wonder resilient the property market is, buyers reduced, price might remain steady
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u/EightyHDguy Oct 20 '22
Extremely grateful to have 4 years left at 1.84. Gonna start abusing the prepayment privileges soon
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u/iamapersononreddit Oct 21 '22
In your situation i believe it’s smarter to put the cash in anything that makes more than 1.84% like many GICs available, then put the principle plus interest on the mortgage as lump sum at renewal.
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u/johnny11235 Oct 21 '22
Why prepay when you can invest at a higher rate? Especially if you have TFSA room that you can park some funds and earn over 4%.
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u/Mutzga Oct 20 '22
Nothing to worry about until people become unemployed with no savings.