Interest Rates

[58thecat]

Originally Posted by SHEDHEAD

Im questioning this as well.

I have 3 properties with mortgages on them. Locked in rates 2 years ago so have 3 more to go. But if rates hit double digits im either forced to hike rent significantly or sell the house. Does a guy get out now?

Your locked in, got three more years, wait and see how things play out then make a decision.


Sent from my iPhone using Tapatalk

[fishtank]

So they planning the 0.5% hike on Oct 26 . Looks like they are not taking their foot off the pedal might even get a surprise .75 at the end of the year .
https://www.reuters.com/markets/us/b...es-2022-10-06/

[hogie]

Originally Posted by fishtank

So they planning the 0.5% hike on Oct 26 . Looks like they are not taking their foot off the pedal might even get a surprise .75 at the end of the year .
https://www.reuters.com/markets/us/b...es-2022-10-06/

Good news, that will lower gas prices and food. Should also help with production issues.

Or will only increase costs to Canadians.

Cereal box has more economic sense.

[fishnguy]

Don’t want to create a new thread, so asking here. What are the thoughts on the midterm interest rates?

Mortgage talks and going back and forth here. Looking at various rates, there is clearly an expectation of the rates to fall in the next couple of years. Fixed rates for 3, 4, and 5 year terms are all about 5.7%. 5 variable is at about 6.5%.

What are your thoughts?

[ak77]

Right now - crapshoot. Might as well go to the roadshow and pay .25c to Zoltar to answer your question. Over of my friends locked in ~5 for 5 years middle of '22, her advisor suggested by the time she had to renew again it would drop to more attractive levels. Another friend locked in 3.x for 3 yrsa bit before her, hoping for faster drop, but now his advisor says that they goofed up and that he may be looking at close to 10 when his time is up.
War in Ukraine, Saudis hinting on leaving OPEC, surprise federal election, Biden kicking the bucket, China, North Korea, Greta...

[roper1]

Q4 in Canada in recession territory. Canuck buck down $.02 last couple weeks. If the US hikes a bunch, we will have currency induced inflation. Uncle Sam would put a lot of pressure on us to raise our rates, internal damage be damned.

[I’d rather be outdoors]

Originally Posted by fishnguy

Looking at various rates, there is clearly FALSE HOPE of the rates to fall in the next couple of years.

^Fixed it. Reckless government spending for years on end will do that. Figure we’re in for a solid decade of high interest rates but that’s only if frivolous spending is stopped. Voting matters kids.

[fishtank]

bite the bullet on the higher rate for a shorter term 3 years .

[Penner]

Originally Posted by Big Grey Wolf

Most households will handle the 10-12% mtge rates, but may have to delay the new Quad, sled or boat purchase.

I believe the opposite is true, a lot of folks will be in trouble. If a recession hits those folks whom live pay check to pay check not only being hit with higher interest rates may also lose their jobs and this will spiral quickly through the economy. We are starting to see it now in retail and in tech as the job cutting begins.

Another thing is Canadian homes are seen to be over valued by 30% so if we see something that has never happened before essentially which is a prolonged or permanent decrease in real estate value, that could trigger something worse than a recession.

The Canadian big banks think along these same lines as they have all been actively hoarding cash in an effort to offset loan defaults that are anticipated to start to occur.

[big_plinker]

Originally Posted by fishnguy

Don’t want to create a new thread, so asking here. What are the thoughts on the midterm interest rates?

Mortgage talks and going back and forth here. Looking at various rates, there is clearly an expectation of the rates to fall in the next couple of years. Fixed rates for 3, 4, and 5 year terms are all about 5.7%. 5 variable is at about 6.5%.

What are your thoughts?

I would not be buying a new house right now.
In 2 years, if things don't improve interest rate wise (which they won't; the government's in this part of the world are ensuring that, using inflation to pay off their debt instead of the old fashioned way of fiscal responsibility), the price of houses will have dropped dramatically.
And if interest rates do improve, well, you'll still be better off having waited.

[Scott h]

Originally Posted by roper1

Q4 in Canada in recession territory. Canuck buck down $.02 last couple weeks. If the US hikes a bunch, we will have currency induced inflation. Uncle Sam would put a lot of pressure on us to raise our rates, internal damage be damned.

THIS ^^^^
The US Fed has pretty much told the world that they intend to continue to raise rates, and likely Canada will follow.

[I’d rather be outdoors]

Originally Posted by Penner

I believe the opposite is true, a lot of folks will be in trouble. If a recession hits those folks whom live pay check to pay check not only being hit with higher interest rates may also lose their jobs and this will spiral quickly through the economy. We are starting to see it now in retail and in tech as the job cutting begins.

Another thing is Canadian homes are seen to be over valued by 30% so if we see something that has never happened before essentially which is a prolonged or permanent decrease in real estate value, that could trigger something worse than a recession.

The Canadian big banks think along these same lines as they have all been actively hoarding cash in an effort to offset loan defaults that are anticipated to start to occur.

If the BoC pauses (as expected today) due to political pressure, things aren’t going to get better…it’s just delaying the pain for the lieberals advantage (in the interim), this thing is just at the start of coming home to roost. The bandaid will come off sooner of later and it looks like they’re taking the super painful slow route vs just ripping it off. I feel very sorry for people that got suckered into a false sense of security offered by the lieberals (that the housing market is absolutely bulletproof). Sad, but long term (maybe 20 years out) it might recover.

[Scott h]

Originally Posted by Penner

I believe the opposite is true, a lot of folks will be in trouble. If a recession hits those folks whom live pay check to pay check not only being hit with higher interest rates may also lose their jobs and this will spiral quickly through the economy. We are starting to see it now in retail and in tech as the job cutting begins.

Another thing is Canadian homes are seen to be over valued by 30% so if we see something that has never happened before essentially which is a prolonged or permanent decrease in real estate value, that could trigger something worse than a recession.

The Canadian big banks think along these same lines as they have all been actively hoarding cash in an effort to offset loan defaults that are anticipated to start to occur.

I tend to agree that home prices are out of sync with what the target purchaser can afford. Just out of curiosity I pulled up realtor.ca and searched an area in Calgary that I've owned homes in and the current asking price is anywhere from $550-$900K for a standard 1100 square foot bungalow. So just using TD's mortgage calculator, and their base 3 year rate of 5.59% a $500k mortgage that would be attached to one of those 1950's homes would come in at $3100/month. That's a fair chunk of change to start off owing every month before you add in all your other bills.
An even bigger issue is having to "qualify" for the mortgage at 2% above that rate (7.59%). On paper that mortgage payment now becomes $3700, and that number takes a large number of people out of the potential buyers category.

[CanuckShooter]

Originally Posted by Scott h

I tend to agree that home prices are out of sync with what the target purchaser can afford. Just out of curiosity I pulled up realtor.ca and searched an area in Calgary that I've owned homes in and the current asking price is anywhere from $550-$900K for a standard 1100 square foot bungalow. So just using TD's mortgage calculator, and their base 3 year rate of 5.59% a $500k mortgage that would be attached to one of those 1950's homes would come in at $3100/month. That's a fair chunk of change to start off owing every month before you add in all your other bills.
An even bigger issue is having to "qualify" for the mortgage at 2% above that rate (7.59%). On paper that mortgage payment now becomes $3700, and that number takes a large number of people out of the potential buyers category.

And yet people in Vancouver and Toronto kept buying, and for far more than in your examples.

I doubt there is going to be a seriously big correction [like down 30%] like some have put forward. Housing is a commodity and effected by supply and demand. Do the math, immigrants [legal and illegal] entering the country 500,000 per year, ""Feb 15, 2023 — Canadian housing starts came in at 215.4k annualized units in January,""

When you don't match housing starts with population growth it creates a shortage and prices only go up. Hold off hoping for a big drop and you'll end up paying more to buy and probably a lower mortgage interest rate.

[barsik]

banks are playing the entire population. it's the constant cycle of low interest rates and high real estate values followed by high interest rates and lower real estate value. the combination and sequence of these events are what create a financial transfer of funds from your pocket to the bank. the buzzphrase is "stimulate the economy" followed by "get inflation under control" how many of these cycles has society endured? after one or two of these cycles one would think that an interest rate could easily be calculated to provide long term stability for real estate and other assets. btw, the money that you borrow to buy a house doesn't exist until you sign the mortgage at the bank. then like magic it appears out of thin air. this is the reality of fiat currency, think about it.

[Scott h]

Originally Posted by CanuckShooter

And yet people in Vancouver and Toronto kept buying, and for far more than in your examples.

I doubt there is going to be a seriously big correction [like down 30%] like some have put forward. Housing is a commodity and effected by supply and demand. Do the math, immigrants [legal and illegal] entering the country 500,000 per year, ""Feb 15, 2023 — Canadian housing starts came in at 215.4k annualized units in January,""

When you don't match housing starts with population growth it creates a shortage and prices only go up. Hold off hoping for a big drop and you'll end up paying more to buy and probably a lower mortgage interest rate.

The Vancouver market was driven to it's insane levels by Chinese money. It was obvious in the 90's, and it has never let up. When you go to an open house and see 95% of those there speaking cantonese, it seems pretty obvious. Pre sales were also dominated by the same group. How do you compete when the guy ahead of you in the pre-sale line says "do I get a discount if I take 6?".
The issue with building a society like that is now the people who actually do the work have to commute in 2 hours, or rent from an offshore owner.

[Fish along]

I built my first house in 1970 for 20 grand,and now i would need that for the furniture,something is out a whack.

[I’d rather be outdoors]

Originally Posted by Scott h

The Vancouver market was driven to it's insane levels by Chinese money. It was obvious in the 90's, and it has never let up. When you go to an open house and see 95% of those there speaking cantonese, it seems pretty obvious. Pre sales were also dominated by the same group. How do you compete when the guy ahead of you in the pre-sale line says "do I get a discount if I take 6?".
The issue with building a society like that is now the people who actually do the work have to commute in 2 hours, or rent from an offshore owner.

No doubt there’s foreign money at play here. For people/corporations buying in the “bubble” cities, there’s no fundamentals to underpin current pricing. Largely it’s FOMO (fear of missing out) but they don’t see the long term implications of this behaviour, and it’s the small investor (recent immigrants for example that think trudolt has their back) that are having the wool pulled over their eyes and will be hurt the hardest. It’s a house of cards.

[Bigwoodsman]

I've been in the transport and warehousing business for 42 years. Our business has seen a 20 percent drop since January 1 over 2022 numbers. People are buy less, and businesses are stocking less. This is a sign I have seen repeatedly over the years that leads us into a recession. People are holding tight and spending less. Perfect storm for the coming recession.

BW

[fishtank]

Look like Canada is pausing the rate hike , prepare for the Lonnie to drop and inflation on all imports Especially food from the south .

[fishnguy]

Thought sbout most of the stuff posted above, lol.

Originally Posted by fishtank

Look like Canada is pausing the rate hike , prepare for the Lonnie to drop and inflation on all imports Especially food from the south .

-> a steeper hike later, one would think.

Originally Posted by fishtank

bite the bullet on the higher rate for a shorter term 3 years .

Have been leaning towards this. But can’t dismiss the 5-year in my head, lol.

[Drewski Canuck]

Rates are going up when Canada rolls over its Debt in the International bond market Canada will be competing with U S Bond yields.

The end result is that the cost to borrow for Canada will ho up despite our best efforts to avoid it in the short term.

No one can deny market forces in this dimension of reality..... well no one but a Government that is looking at the painfultruth they do not want the Citizens to know.

Drewski

[roper1]

Originally Posted by Drewski Canuck

Rates are going up when Canada rolls over its Debt in the International bond market Canada will be competing with U S Bond yields.

The end result is that the cost to borrow for Canada will ho up despite our best efforts to avoid it in the short term.

No one can deny market forces in this dimension of reality..... well no one but a Government that is looking at the painfultruth they do not want the Citizens to know.

Drewski

Don't rule out an election before the economy worsens

[dewalt18]

Originally Posted by ak77

Right now - crapshoot. Might as well go to the roadshow and pay .25c to Zoltar to answer your question. Over of my friends locked in ~5 for 5 years middle of '22, her advisor suggested by the time she had to renew again it would drop to more attractive levels. Another friend locked in 3.x for 3 yrsa bit before her, hoping for faster drop, but now his advisor says that they goofed up and that he may be looking at close to 10 when his time is up.
War in Ukraine, Saudis hinting on leaving OPEC, surprise federal election, Biden kicking the bucket, China, North Korea, South Korea, Marilyn Monroe...

We didn’t start the fire. . .

[ehrgeiz]

^

very good!

[Cement Bench]

Originally Posted by roper1

Don't rule out an election before the economy worsens

yup

[I’d rather be outdoors]

Originally Posted by roper1

Don't rule out an election before the economy worsens

Doubtful. The rodents are going for scortched earth on this term. If they try now, the party will implode Kathleen Wynn style.

[no-regard]

Originally Posted by roper1

Don't rule out an election before the economy worsens

Then they can blame the Conservatives who have to come in when it tanks, and do the dirty work of the clean up.

Round and round we go.

[big_plinker]

Originally Posted by no-regard

Then they can blame the Conservatives who have to come in when it tanks, and do the dirty work of the clean up.

Round and round we go.

$500000+ mortgages at 10+% interest, runaway inflation and every other symptom of a depression level recession, tells me this round might be a little different.

[Homesteader]

Originally Posted by Fish along

I built my first house in 1970 for 20 grand,and now i would need that for the furniture,something is out a whack.

While I agree, I also continue to forget that the younger guys I work with look at $20, like I look at a toonie. I miss walking around with a fin in my pocket and not a care in the world!! I know off topic, but the part about what a dollar buys these days does fit into all this interest debate.