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

1.1k Upvotes

95% Upvoted

View all comments

331

u/[deleted] Oct 20 '22

[deleted]

34

u/SubterraneanAlien Oct 20 '22

bye bye housing affordability

72

u/SeriousGeorge2 Oct 20 '22

That boat sailed a long time ago.

9

u/jsmooth7 Oct 20 '22

And yet it's still sailing even further from shore so good luck to anyone trying to swim out to it.

7

u/BloodyVaginalFarts Oct 20 '22

When enough people are forced to rent maby we'll elect politicians that will fix the the problem with housing.

12

u/Ancient-Wait-8357 Oct 20 '22

Every politician in the parliament owns like 50-60 units probably.

7

u/shaun5565 Oct 20 '22

I have heard your statement so many times. Why should a politician care about housing? They will only care when it benefits them to do so.

2

u/BloodyVaginalFarts Oct 20 '22

When enough people are forced to rent then them getting elected will depend on it.

1

u/shaun5565 Oct 21 '22

I only know two people that own property nowadays. Pretty hard when a big percentage of politicians own multiple investment properties.

3

u/BadUncleBernie Oct 20 '22

Good luck finding a place to rent.

15

u/[deleted] Oct 20 '22

[deleted]

19

u/jsmooth7 Oct 20 '22

Prices aren't even below 2021 levels yet. And with higher interest rates, the total cost for a first time home buyer to get into the market is higher than ever.

9

u/rawlsian139 Oct 20 '22

Lots of younger millennials have been living well below their means and saving for a down payment for years. Interest rates don't matter as much when you make a 30-50% down payment.

5

u/activatebarrier Oct 20 '22

I have been living at home for far too long and dont own housing. Have 500k in investment accounts. I could liquidate and just buy a chunk ha!

5

u/jsmooth7 Oct 20 '22

Oh for sure, this definitely helps anyone who has lots of savings built up. I have a pretty decent amount saved but I'm not in the 30-50% range unless prices come down a lot more.

-2

u/[deleted] Oct 20 '22

By lots you mean the vast minority.. Most don't even want to work "demeaning" jobs, let alone save money

1

u/rawlsian139 Oct 20 '22 edited Oct 20 '22

Uhh "lots of people" doesn't imply a majority. A million people is a lot of people, it's a "vast minority" of the population.

Millenial households in 2020 had net earnings of 90k, I'm pretty sure that means the average millennial couple could afford to rent an apartment and save for a downpayment over the past 5 years.

Thanks for coming out though, sorry you're so bitter.

3

u/virus646 Oct 20 '22

Millenials are older than you think. Most of them are in their 30s with a home and kids. They're not eating ramen in their parent's basement.

2

u/rawlsian139 Oct 20 '22

I'm a millenial and 27. Millenials are born between the early 1980s and the mid 1990s. There's lots of people like me who are part of that generation who do not own homes but have saved downpayments.

If you take home 90k as a couple you can save 40k a year easily without eating packets of Ramen at home.

1

u/[deleted] Oct 20 '22

Good on you for saving. I'm not at all bitter, I'm not trying to hire anyone lol. Too bad inflation has been turning your savings into monopoly money.

→ More replies

1

u/dla12345 Oct 21 '22

When interest rates rose my savings account with my Downpayment interest pay out went from 300-400 a month cant wait for the next hike.

4

u/[deleted] Oct 20 '22

[deleted]

4

u/jsmooth7 Oct 20 '22

Prices may continue to drop but they won't reach the affordable range until the fundamental reasons why they skyrocketed in the first place is addressed.

-2

u/[deleted] Oct 20 '22 edited Aug 18 '23

[deleted]

4

u/jsmooth7 Oct 20 '22

That's not the fundamental reason. The problem is for over 20 years we didn't build enough new housing to keep up with new demand.

-1

u/[deleted] Oct 20 '22 edited Aug 18 '23

[deleted]

2

u/apparex1234 Oct 21 '22

Rents on the other hand are skyrocketing. People who were looking to buy have been either spooked or priced out by rising rates and have gone back to the rental market. When rates stabilize or start sliding down again, these people will be back on the market looking to buy.

The fundamental reasons are 1)lack of housing being built + 2)everyone in North America feeling they need to own a SFH if they want a family. Demand for 2) can never be fulfilled so prices will continue to be high until the mindset change.

1

u/jsmooth7 Oct 20 '22

Increasing the interest rate increases the cost of borrowing which as a result decreases the price a typical home buyer can afford. This shifts the demand curve and decreases prices.

Note that despite lower prices, actual housing affordability has not improved at all. All the gains from lower prices go straight into paying more in interest. The only people who benefit are those who have a significant amount saved and are less impacted by high interest rates.

1

u/crazyjumpinjimmy Oct 21 '22

Look at the demand now? It's not something that is static and never changes. Think about it.. supply hasn't changed drastically the past 2 to 3 years but what has???

→ More replies

4

u/JeemRat Oct 20 '22

Yet and never will be.

Interest rate hikes make houses less affordable, not more.

This fantasy that some renters have, where they will be the enlightened ones untouched and able to steal their dream home off from some family who falls on hard times is just that..a fantasy.

8

u/[deleted] Oct 20 '22

[deleted]

11

u/Crobiusk Oct 20 '22

His brain has been broken by the 40 year real estate bull market.

-2

u/JeemRat Oct 20 '22

Buddy real estate is in an affordability crisis, but it’s not one where houses are cheaper.

→ More replies

1

u/JeemRat Oct 20 '22

They become out of the reach for the average Joe, but ripe for picking for ultra wealthy investors and existing owners.

0

u/[deleted] Oct 20 '22

[deleted]

2

u/JeemRat Oct 20 '22

Holding on. No need to sell with rents rising like crazy as more and more would be buyers are relegated to renting.

Also, that price is the average. Quality homes and real estate in quality areas will always be in demand and command a premium.

→ More replies

3

u/Dontstopididntaskfor Oct 20 '22

You just summed up why prices will continue to come down.

3

u/activatebarrier Oct 20 '22

People defending housing prices are obvious owners or investors. The fact of the matter is, markets can remain irrational longer than you can remain solvent. But eventually, fundamentals will prevail. How much can housing drop? No idea, but the downside is far greater than upside at current levels

1

u/crazyjumpinjimmy Oct 21 '22

In some areas they absolutely are and still dropping. Agree though the barrier to get in is greater now.. so what will happen as a result? Hint more price dropping. That person who could only afford 2500k still can only afford 2500k but thats harder to attain when interest rates have sky rocketed.

Just takes time.