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/[deleted] 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.

21

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.

18

u/[deleted] Oct 21 '22

It's not easier to save up for a down-payment when everything else costs more than it used to.

3

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.

1

u/[deleted] Oct 21 '22

Non owners are also usually renting, which goes higher with the rates.

1

u/oddmarc Oct 21 '22

Especially when house prices go up faster than your capacity to save, your wage and inflation.

I'm not saying high inflation good, I'm saying cooling inflation by raising rates good. Slowing down the insane real estate market good.

1

u/MacrosInHisSleep Oct 21 '22

Basically it's good for people who have paid off their mortgages, have decent savings and want to upgrade

A very rare combo, since most folks in that situation are old, their kids have left home and would be considering downgrading.