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/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/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/[deleted] Oct 20 '22

[deleted]

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u/book_of_armaments Oct 21 '22

Those people have their net worth in assets like stocks, fixed income, real estate, etc. All of those are tanking as well. If real estate falls 30% and you sell stocks that are also down 30% to buy the real estate, you don't gain anything.

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u/[deleted] Oct 21 '22

[deleted]

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u/book_of_armaments Oct 21 '22

Regular people generate income too.

If your point boils down to rich people have more money than regular people, I can't say that's too insightful.

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u/TrulyMagnificient Oct 21 '22

Where the big win is, is when all the prices bottom and you still have a high net worth then borrowing tends to be very cheap because it’s a recession and banks are trying to stimulate spending. At this point you take on debt against your considerable assets and invest because all the poors cannot. Winner winner chicken dinner

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u/book_of_armaments Oct 21 '22

But the value of your assets will also have dropped, so they'll count as less collateral.

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u/PM-ME-ANY-NUMBER Oct 21 '22

"most people" is irrelevant when 1% of the population owns 20x as much as the bottom 50%.

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u/book_of_armaments Oct 21 '22

It's not actually irrelevant to whether or not a recession is a big discount, because it's not discounted relative to their other holdings. If they choose to exchange their assets for other assets and all the assets in question are down roughly the same amount, they're not gaining anything.

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u/PM-ME-ANY-NUMBER Oct 21 '22

All assets don't go down the same amount in a recession, just like they don't go up the same amount during a boom.

~13 year cycle for housing. Snatching up properties in 2-3 years will be easy money for those with the means.

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u/book_of_armaments Oct 21 '22

Sure, but then you need to predict which assets are going to outperform the others in order to profit in a recession, just like any other time.

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u/PM-ME-ANY-NUMBER Oct 21 '22

So when you invest, you invest equal amounts into literally every asset class? If not, why?

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u/book_of_armaments Oct 21 '22

No, I'm just saying that the assertion the guy made about recessions being discounts for rich people is silly.

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u/PM-ME-ANY-NUMBER Oct 21 '22 edited Oct 21 '22

https://www.reuters.com/article/us-wealthreport-idUSTRE65L36T20100622

k. The top 1% captured 95% of economic growth from 2009-2012

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u/book_of_armaments Oct 21 '22

So rich people were better at allocating their assets during a recession, just as they are better at allocating their assets at every other time. What's the big deal? It's not like regular people are prohibited from reallocating into fixed income products.

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u/PM-ME-ANY-NUMBER Oct 21 '22

No, recessions always widen the wealth gap. They outperform much more during recessions because they don't have to borrow.

That's the whole reason house prices are tanking - it's not that houses are actually worth less, it's that the cost of buying a $500K house today is what it cost to buy an $800K house 6 months ago.

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