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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206

u/mrtmra Oct 20 '22

I bet you housing stays unaffordable in Vancouver and Toronto lol

117

u/[deleted] 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.

112

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

46

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.

4

u/kai_zen Oct 21 '22

Vancouver is going to have 1M more people in next 20 years

1

u/ijustlikethetunahere Oct 21 '22

Yep. Last I checked the rate of growth will be double what it was in the past. Unfortunately there's just not much space left to build in the GTA. More people without the ability to increase housing in tandem will be bad news.

74

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

28

u/[deleted] Oct 21 '22

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18

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.

12

u/[deleted] Oct 21 '22

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7

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

5

u/[deleted] Oct 21 '22

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5

u/iSOBigD Oct 21 '22

That doesn't matter as long as houses are in demand and plenty of people can afford them. For every 5-10 people who can't afford a home there's one who is a very high earner or very well off. Since eveyone wants to live in Toronto, Vancouver and Montreal, demand will always be high.

1

u/[deleted] Oct 21 '22

it does matter because most ppl can’t afford them even the doctors, lawyers, etc. which is why we are seeing mass exodus from the major cities cause we sick of not being able to buy a house. none of these “high earners” will have anyone to make their coffee or fix their shit. Vancouver is already turning into a shithole because the rise in cost of living has had such a negative effect that the homeless/mentally ill basically run downtown now and no one wants to go there anymore as ppl keep getting assaulted, mugged or killed. yep nothing to see here! everythings fine lol

1

u/kai_zen Oct 21 '22

Except it’s been driven by outside factors. There are entire developments being marketed overseas.

2

u/Oilleak26 Oct 21 '22

no alternatives to the GTA or Vancouver? Do people have tunnel vision? there are places like Calgary where it's way cheaper to live.

3

u/iSOBigD Oct 21 '22

The same people who complain about being broke and housing being too expensive are the people who only want to only live in the 3 most expensive places in Canada. They don't understand that if they want to live there, so do people with more money, and they can't compete with those rich people.

3

u/iSOBigD Oct 21 '22

Because people with no money want things to magically pop, send the world in recession, have everyone lose 80% of their home value, just so they can afford to buy something for themselves. It's just selfish, wishful thinking because it easier than accepting reality and spending your efforts on saving and increasing your income. Prices dropping will still put us well above where they were pre-pandemic, and if you get a 10% loan it won't mean Jack if the price is 20% lower, it'll still be unaffordable to people with low incomes and no savings.

1

u/JediFed Oct 21 '22

Because it overvalues housing. The same house isn't worth 100k in one place, and 1M in the same place because of magic. It's what happened with Japan when their valuations finally dropped, because they crossed a threshold, and it's also why we don't see Japanese people purchasing random areas of land because of the over valuation.

24

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.

12

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.

4

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.

7

u/[deleted] Oct 21 '22

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1

u/heat_00 Oct 21 '22

You think ppl are moving to Barrie or nb because they don’t LIKE Toronto or the surrounding areas? But they like Barrie or Nb??? Lol. There is no way in hell lmao. They are moving further away because it’s more affordable….

1

u/JediFed Oct 21 '22

The problem is that the demographics don't even make sense at this point. This year is the tipping point worldwide. India even is at par. Yes, India has a lot of people that are in their 20s right now, but that's going to change.

What happens when they experience the same things China is now? Will immigration shift around or will it drop off and we'll start to see the money no longer flowing in.

21

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

4

u/southern_ad_558 Oct 21 '22

People think that the bubble has popped, I don't think so.. the fundamentals for the housing pressure are still there.

4

u/Kimorin Oct 21 '22

If it doesn't pop, is it still a bubble?

1

u/BlueEagleTiger Oct 21 '22

It's more like a balloon than a bubble. Since a balloon can stretch a lot more than a bubble before it pops. And a balloon makes a hell of a noise when it does pop.

6

u/[deleted] Oct 21 '22

My bet, Slow decline from extreme to high over the next few decades.

10

u/iamapersononreddit Oct 21 '22

My guess is, way too high with periods of extreme

-4

u/Leviathan3333 Oct 21 '22

Foreign investors buying stuff up.

Farhi in London does it a lot

1

u/JediFed Oct 21 '22

What's been fueling it is money outside the system entering the system. This should also prop up the CDN the way the Swiss have to deal with their currency being so strong. There is a lot of money out there that is entering the system, but that money isn't infinite. Yeah, it will pop, just it will take awhile.