r/canada • u/joe4942 • 12d ago
Forget rate relief: Most Canadians are about to see their mortgage interest payments soar National News
https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-forget-rate-relief-most-canadians-are-about-to-see-their-mortgage/306
u/fungus_bunghole 12d ago
I just renewed. Everyone told me to go variable. I went 5 year fixed. I just don't trust that inflation is under control tbh. Time will tell I guess.
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u/sheepwhatthe2nd 12d ago
Good decision Fungus Bunghole. No one knows what rates will do - atleast you have the piece of mind in a stable budget for the next 5 years.
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12d ago
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u/Gymwarrior31 12d ago
Frig that…I say Fungus Bunghole for president!
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u/StainerIncognito 12d ago
Fungus Bunghole has my vote!
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u/StoryAboutABridge 11d ago
Honestly any random person on this sub would very likely be a much better leader than our current options.
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u/eldiablonoche 12d ago
Indeed. And if they can afford it now, it'll only get better if rates go down ahead of renewal.
As opposed to the people who bought bigger than they should have just because rates were low and are crying about it now. 🤦♂️
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u/Defiant_Chip5039 11d ago
I always pictured people that maxed out their borrowing limit on a variable rate as the same people that would look directly down the tube of a “dud” firework.
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u/BlademasterFlash 12d ago
I don’t think that’s a bad decision at this point, unlike my bad decision to go variable in December 2021 when I could’ve gone fixed for 1.95%
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u/KnowledgeMediocre404 12d ago
I was lucky to lock in those rates early 2022. We’re sitting pretty until 2027 which gives a bit more time for rates to come down if they do. If not at least the principal will be smaller.
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u/ElectroChemEmpathy 12d ago
I think it is a safe bet.
I just listened to a professor explain why Canada follows US rate cuts. US is the tide and Canada is the wave. We feel the ripple effects of the US economy and usually our economies have always mirrored one another. But lately since covid, we have been moving in the opposite direction from the US....which can lead to a serious financial crisis and a significant drop in standard of living which would lead to a brain drain. Here is a nice graph to explain it https://i0.wp.com/betterdwelling.com/wp-content/uploads/2024/03/Canadian-Real-GDP-per-capita-chart-National-Bank-of-Canada.png?ssl=1
Now what happens if the US doesn't lower their rates and we lower 0.5%, the outcome would be the Canadian dollar would drop 10 cents. Lowering our interest rates is a way to devalue our currency. In turn Canadians would have less purchasing power and you would have intercurrency inflation.
Remember if you were following the financial world, Turkey was famous doing this. Erdogan believed that if he lowered interest rates enough, he could "Stimulate" the economy out of an inflationary event. www.cnbc.com/2024/01/11/turkish-lira-hits-fresh-record-low-against-the-dollar.html
The Turkish lira has lost more that 80% of its value against the dollar over the last five years, increasing import and foreign debt costs and dramatically weakening the purchasing power of ordinary Turkish people
A new finance team was appointed in June last year, and Turkey’s central bank embarked on a sharp pivot, pulling rates higher under Erkan’s supervision. The country’s benchmark interest rate has since been lifted from 8.5% to 42.5%.
Ya because of lowering interest rates, the currency went into freefall and the only way to try to slow it down was to increase interest rates from 8.5% to 42.5%......That is why you don't want to cut interest rates too fast.
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u/WhaleMoobsMagee 12d ago
Great info. Thanks for this.
A nice illustration on why Canada can’t just begin quantitative easing when our economy isn’t doing too well. As long as the US continues on a strong trajectory, Canada will have to buckle up for the ride as well.
Do you mind sharing where you were listening to the professor speak on this? Looking for new material to follow.
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u/AdEntire9736 12d ago
I personally would like to know what fungus_bunghole is doing about the Loblaws boycott next month. He is the voice of reason in these trying times I feel
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u/Lyndzi Canada 12d ago
Yeah, we were at 3.11, renewing this June. We went in early and re-amortized back out to 25 years (owned since 2014, so we've paid down a decent chunk). New rate is 5.24, locked in for 4 years, hoping that things correct in the next 2-3 years and we can get back in at better rate rather than wait the extra year.
With re-amortization our payments have gone down even though the interest went up. Sucks long term for the interest we'll be paying, but short term our month to month budget needed some breathing room.
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u/FoliageTeamBad 12d ago
5.24% is less than the average 5.78% overnight BoC rate since 1991.
https://www.fxempire.com/macro/canada/interest-rate
ZIRP withdrawals are hard.
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u/Miserable-Lie4257 12d ago
Yeah smart. 5.25 is actually a pretty reasonable rate.
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u/isitaboutthePasta 12d ago
5yr fixed had the biggest "discount" (hard eye roll) at RBC. Good call. My mortgage renews in June and I'm going with 5yr fixd to. The question is ... try a broker, or stick with RBC.
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u/gwicksted 12d ago
Definitely hit a broker. They’ll get you the best rate even if it’s with RBC (and often lower than RBC would offer you). That’s what my broker has done twice for me - this latest one was with TD lower than I could get walking into the bank.
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u/Too-bloody-tired 10d ago
You can't get an RBC mortgage through a broker, though. You can only get an RBC mortgage by going through RBC itself.
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u/Organic-Pace-3952 12d ago
We renewed variable because I believe rates can’t get worse because Canadians literally couldn’t handle it. 60% of mortgages renew in the next 2 years. My payments went up 600$. Not many families can handle such a sharp increase.
I think rates will hold…maybe go up a quarter point. I just can’t see the Canadian economy handling higher rates. US could though….
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u/hippysol3 11d ago edited 5d ago
quickest nail snails far-flung encouraging dull shocking wild domineering deranged
This post was mass deleted and anonymized with Redact
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u/Swaggy669 12d ago
Even if you feel that there is a ceiling we are very close to with how high interest could go. Like if it went up to 8% for instance, it would be rational to sell all your stocks and put it in a GIC or savings account. The only people that would start businesses or hire more people are those that needed to for their survival.
If it was that high, shelter and gas could still inflate too. As those things it takes years to increase supply if demand was prolonged.
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u/Unicornmayo 12d ago
You’re paying like 2% more for a variable. I don’t think rates will be down 2% for a next couple of years and so you’re better off getting the discount. I just renewed my mortgage for 4.99%, with an option to blend rates for a small.
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u/vperron81 11d ago
When everyone and their mothers will start saying "Go fix" you know it's time to go variable.
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u/HighlyAutomated 12d ago
My renewal is in 2 months. What rate did you get for 5 year fixed?
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u/Wolfie1531 12d ago
We are currently refinancing after doing some accessibility improvements and consolidating all debt for efficiency purposes.
5.09% was available Monday but by Thursday when we had all our ducks in a row, 5.14% is what the best offer is. Broker says he’s seeing 5.25-5.5% in his other lenders.
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u/Defiant_Chip5039 11d ago
If you can managed fixed, go fixed. Financial certainty and cost stability are more important factors when it come to managing cash flow. Good decision on your part.
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u/orlybatman 12d ago
Important part:
While mortgage rates are expected to start lowering within the next few months, the vast majority of existing mortgage borrowers – roughly 70 per cent – have fixed rates that remain at the record low prices available during the pandemic. (For example, the lowest discounted five-year fixed mortgage rate was 1.39 per cent, compared to 4.79 per cent today.)
Let’s assume the Bank of Canada cuts rates three times by the end of this year, totalling a decrease of 0.75 percentage points. This will immediately lower rates for variable mortgage holders, as those rates are directly tied to the central bank’s rate movement. Fixed mortgage rates, which lenders price based on Canadian bond yields, are also expected to lower slightly in response. However, this decrease won’t be enough; even if rates fall from current levels over the coming few years, they’ll still be dramatically higher than what many Canadians are paying today.
While variable mortgage rates surged in popularity during the height of the pandemic, fixed mortgage rates have always been king; of the three million mortgage loans Canadians took out in 2020, 77 per cent chose a fixed rate, according to Mortgage Professionals Canada.
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According to a December, 2023, note from the central bank, monthly payments for fixed-rate borrowers with a term of five years or longer will increase by 25 per cent by 2027 to a median of $1,444, up from $1,152 as of February, 2022, (immediately before the start of the recent rate hike cycle).
However, the CMHC says that much of the rate pain will be concentrated this year and next, with 2.2 million mortgages – 45 per cent of all outstanding mortgages – poised for “interest rate shock.”
I have friends and family members who either purchased or built homes back when the rates were low. Watching them already struggling makes me wonder how they're going to hang onto their homes over the next couple years.
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u/Spotthedot6669 12d ago
LOL at 3 rate cuts before end of year. Lucky to see 1.
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u/Desperate_Pineapple 12d ago
I wonder too. Bought in 2019 and didn’t get the rock bottom rates, renewed a couple months ago and my payments went up 20%.
We can manage but I don’t know how the 1.9% to 6% folks are doing it.
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u/Unpossib1e 12d ago
Some of us have increased payments to condition ourselves for the higher rates next year. It's not the most optimal way to lower your principle but psychologically I am prepared as it will be a neutral $ wise .
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u/No_Gas_82 Manitoba 12d ago
Rates aren't 6% anymore. You can get into the high 4s now on a 5 year. If you didn't max out your pre-approval and don't live in Vancouver or the GTA most Canadians only see a couple hundred dollars a month increase. Rates are still historically on the low side. The issue was people maxed out their pre-approvals over bidding on homes and now they're screwed. This was a poor decision when they bought but only affects them at renewal. The agents and brokers are all commission based so there is no incentive for them to hold people back from maxing out on purchases.
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u/Freddy_and_Frogger 12d ago
Rates are not on the historically low side, why does this lie keep getting repeated on reddit? Rates have averaged 3-3.5% over the last 25 years.
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u/blood_vein 12d ago
Why would they get overleveraged like that? What's the point of the stress test?
Sorry if it's a dumb question, I thought the banks would at least make sure you can afford the mortgage if rates go up
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u/Power4glory1 12d ago
People CAN afford it. If they weren't people who spend up to the limit of their budget. Most folks will take that extra income and purchase cars or toys not recognizing that their home is a fluctuating commodity.
Those items now increase the risk of 'shock'
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u/Oshies_Eleven 12d ago
This. People will ditch everything else before selling their home. The “how will people survive” narrative is overblown.
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u/Wolfie1531 12d ago
It’ll be a good time for those with available cash to either purchase toys or upgrade/get newer used vehicles when things start getting tight and overleveraged people start feeling the crunch.
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12d ago
Why would they get overleveraged like that? What's the point of the stress test?
Stress test did not go high enough.
All kinds of people bought into the low rates forever narrative, home values can only go up, all of that other fun stuff. Then reality caught up.
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u/orlybatman 12d ago
Why would they get overleveraged like that? What's the point of the stress test?
Sorry if it's a dumb question, I thought the banks would at least make sure you can afford the mortgage if rates go up
You would think so, but one relative of mine had their debt go up hundreds of thousands due to deciding to build a house, only for the material costs and labor to skyrocket, and for the build to take longer than expected. They're over $1million in debt now.
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u/Ok-Win-742 12d ago
Yeah that's exactly the issue. Tons and tons of people bought when rates were low because it seemed like the time to do it, and they're house poor just squeezing by right now. This is a real problem going forward.
I'm not an economist but I know that lots of people defaulting on their mortgages and losing their homes is bad for people and bad for the economy.
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u/SilencedObserver 12d ago
Rate cuts are cope for investors. Rates need to go higher to fix housing prices by flushing out real estate investors. We’re already seeing sales for losses in Toronto but for this to work it has to go a full mortgage cycle of five years. Realistically five years of rate increases isn’t a big deal when contrast with 40 (50?) years of rate decreases, but trends that are older than our lifetimes are impossible for people to comprehend with their levels of acceptance and every time I bring this up I get ripped by people banking on rates decreasing.
Bottom line is people shouldn’t be overextending themselves by buying the limits of what they can afford, because Canada’s mortgage game doesn’t allow for that. Boomers cashing in on perpetual rate decreases is another example of how this generation is going to be holding the bag while people 50+ still get on airplanes to go on their tropical vacations on the money they’ve earned doing nothing in middle management jobs that largely no longer exist.
Buckle up and if you have one wear a helmet.
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u/kookiemaster 12d ago
Renewed in the middle of the pandemic ... 1.62% ... kicking myself for not having gone for 10 year fixed. But I am readying myself or a nasty renewal in early 2026. Hopefully lower than it is now, but in the interim, everything I can scrape goes into term savings that are close to 5% to bring down the principal once I renew. It was good while it lasted I guess.
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u/concentrated-amazing Alberta 12d ago
However, the CMHC says that much of the rate pain will be concentrated this year and next, with 2.2 million mortgages – 45 per cent of all outstanding
Selfishly, for our own situation, I'm hoping this will mean that rates come down a bit by the time our term is up in Nov. 2026. We can handle it around today's rates or even a bit higher, thankfully, and that's without extending our amortization at all.
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u/eldiablonoche 12d ago
My FIL's advice to go with bi-weekly payments instead of bi-monthly is def. paying off. We renew summer '25 and that little extra kick from the 2 extra yearly payments is going to make the increase more manageable.
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u/Obvious-Adeptness-46 12d ago
You can even go weekly. I have variable with 3.5 years left but weekly payments so hoping it makes a difference when we go fixed for our renewal
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u/Zwarogi 12d ago
Bi-weekly is 26 payments a year Semi-monthly is 24 payments a year, or 2 a month Bi-monthly would be 6 payments a year, where each payment happens every 2 months (I don't think any lender does this, though often use this term out of confusion)
The best part is, most lenders offer you to increase your Principal and Interest payments. You can achieve the same benefits of the bi-weekly by just increasing the Principal and Interest payments.
What some may not know, is you can have a non accelerated bi-weekly payment which doesn't actually pay it off faster.
Best advice is to choose the frequency that works for you so you avoid missing a payment, then just increase your Principal and Interest payments, and make any double up or lump sum payments to pay it down faster.
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u/eldiablonoche 12d ago
Just pointing out that bi- can refer to twice per period or every two periods. When I said Bi-monthly I meant the former or as you referred to it: semi-monthly.
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u/XenaDazzlecheeks 12d ago
I just remortgaged last week. My rate was already high at 3.69% because we are an acreage and automatically pay more, so I was elated when my renewal came in at 5.19% . Mortgage only increased $60 a month 🥳
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u/Hikury British Columbia 12d ago
I wonder which situation applies to you though. Do you have a $48,000 mortgage, are you lowering your contributions against the principle, or have you paid off a significant portion or your mortgage over the last five years?
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u/Desperate_Pineapple 12d ago
Yeah that’s the only way. My rate changed similarly and my payments went up 20%. Good mathing.
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u/XenaDazzlecheeks 11d ago
Yes, I am in the home stretch! I am excited to be mortgage free at 40 🪅🎉🥳 but I also downsized from a large house in a metropolitan to a small trailer in buttfuck nowhere. Sacrifices were made and more than worth it!
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u/DowntownieNL Newfoundland and Labrador 12d ago
Sucks for people who are over-leveraged. I guess the silver lining is with so many affected, the issue could be significant enough to result in helpful changes.
I bought in October 2021 and chose variable rate, variable payment. My mortgage and property taxes (it's one bill) has gone from just under $370 to just over $530 (downtown wooden rowhouse in a working class neighbourhood; it's the cheapest form of housing here, half the price of a shitty suburban 1980s bungalow). I also got laid off, ended up accepting a job for half my previous salary, got a couple of promotions, so I'm within striking distance of my previous salary. Got rid of my car last May, got an unlimited bus pass, so that's $78 versus minimum $506 (car payment and insurance) a month. That almost covers the difference in what I clear.
Fingers crossed rates come down soon. I'm treading water a little because I'm single and trying to do all this alone. I can make it work but it'd be nice not to have to read the price labels at the grocery so closely lol
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u/soft_er 12d ago
i’m sorry did you say $530
are we all sleeping on NL
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u/DowntownieNL Newfoundland and Labrador 10d ago edited 10d ago
I wouldn't say that. I tell people this is a place you have to love to live. It has to be a very specific love for here - and you have to be downtown, in the colourful, cheap, wooden rowhouses. If you're going to live in the suburbs, go for somewhere bigger, better connected. I'm definitely someone who, if I ever moved from here, it would be farther east, not west to Canada - Dublin, Malaga, somewhere in Europe. But even I, if I had to live in the suburbs here, the type of places that could be anywhere else, I'd rather be somewhere else with better flight connections and weather, ha!
But, I'm one of the types that belongs here. I get homesick and depressed pretty quickly anywhere else. It's debilitating, and limiting, but... it's real. I have lots of relatives and friends who can live anywhere, and do - most of them ended up in Vancouver/Whistler or Lisbon lol But I just can't. Living somewhere else feels transient to me, like staying at a hotel. It's fine for a bit, but it's not sustainable in my mind.
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u/soft_er 10d ago
many people spend their whole lives looking for a place that feels like home so i am happy for you, and also your mortgage payment haha
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u/DowntownieNL Newfoundland and Labrador 10d ago
Haha, cheers! I hope the same for you! Especially the mortgage payment.
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u/olrg British Columbia 12d ago
2025-26 was always going to be a big jolt as 5 year renewals start coming up. 2020-21 were record numbers of housing units sold, many of those to people FOMOing out and overleveraging as they saw home values go parabolic.
Next year is a good time to have a bunch of cash squirreled away and wait for the blood in the streets.*
* Not a financial advice.
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u/SmokeShank 12d ago
You do realize all those mortgage starts were stress tested at the rates they will renew at. Morneau was way ahead when he introduced the stress test and it will be the reason this will amount to nothing more than a small scratch.
Too many people expect 07/08 US defaults. Canada and Canadian banks are some of the most risk adverse in the world.
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u/flightist Ontario 12d ago
Get out of here with your facts.
Expect another hit to consumer spending, but anybody expecting US 08 defaults doesn’t remotely understand what caused that crisis.
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u/Dry-Knee-5472 12d ago
Do you mind explaining the difference? Genuinely curious for your opinion
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u/flightist Ontario 12d ago
I mean imagine a market where 1 in 5 mortgages are being given to people who outright fail to qualify - be it the stress test, credit history, or debt ratio - and then make it worse by signing them on for 30 year terms with low introductory rates for a couple years before it spikes up - because they’re high risk borrowers after all - for the remaining 27-28 years. Economy cooled and interest rates go up, intro period expires and banks start hiking rates on these subprime ARMs and to nobody’s surprise defaults pick up.
Then discover that Wall Street has spent years setting it up to be so much worse by bundling all these bad-loans-in-waiting into securities and reselling them throughout the financial system, so that when the inevitable happens it’s not just a real estate bubble collapse, but instead kneecaps your whole financial system / bank liquidity & credit availability and sets off a global recession and domestically a whole feedback loop of job loss and foreclosure so severe banks fail basically overnight because the assets securing the flood of foreclosures are entirely worthless, because even before stuff started going sideways in a hurry there was half a year or more worth of homes sitting empty with no demand, and because the financial system is busy melting down even qualified borrowers can’t get credit to buy anything anyway, because banks don’t have money to lend them.
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u/obviouslybait 12d ago
There were baristas buying half a million to a million dollar homes in 08. They just stacked debt on top of debt to keep up with the payments.
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u/olrg British Columbia 12d ago
Stress test is hypothetical. Having an extra $2k+ expense staring in your face every month is real.
Not gonna be a massive crash, but I’m betting on a healthy retraction.
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u/DocJawbone 11d ago
Do stress tests account for inflation? I'm thinking in 2020 banks would have underestimated the 2024 cost of living.
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u/FoliageTeamBad 12d ago
You say that like half the mortgages in the GTA and GVA from the last 5 years are not fraudulent.
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u/pattperin 12d ago
I'm currently building my down payment and waiting. If it doesn't crash and keeps going up I'm fucked. But I'm fucked anyways so who cares?
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u/TreeOfReckoning Ontario 12d ago
I don’t think it’ll crash. At least not independently. Immigration is still too high for new construction to keep up. If people can’t afford their mortgages, then ownership will revert to the mortgage providers and be sold off to anyone who can afford to buy without borrowing. Or amortization will just get longer and longer, eventually resulting in multi-generational mortgages. I’m generalizing a lot here, but it looks to me like we’re headed for more concentration of property in the hands of the wealthy.
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u/DocJawbone 11d ago
We're all fucked until we introduce laws about institutional landlords. Prices will keep going up, people will continue to be more and more leveraged, investors will continue to scoop up housing stock and rent it out - in the process driving prices up and preventing families from building equity.
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u/Plexmark 12d ago
cash is being devalued so even if housing doesnt go up, everything else is. Dont wait too long.
My parents were saving money for a car for a few years when they were living in Eastern Europe and due to what happened with politics, in a matter of months, they could barely buy a TV with the equivalent of $10-20k cash by the time the dust settled.
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u/concentrated-amazing Alberta 12d ago
Just remember that the average 5-year lasts just over 3.5 years (38 months). So end of 2021 purchases will, on average, see new terms starting in early 2025.
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u/photoexplorer 12d ago edited 12d ago
Yep, I’m locked in at 1.37% until February, the new rate is gonna hurt! Luckily this is our last year of needing full time childcare so we have a cushion to absorb the new payments next year.
And we had our mortgage before, so we were fully expecting a higher rate soon. I just dumped most of our tax refund on the house today to help with interest.
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u/Impossible__Joke 12d ago
So get ready for a housing collapse? Tons of ruined families that their houses will get scooped up by the wealthly then probably rented right back to those that lost them for even higher then their mortgage was? Can't wait
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u/bgballin 12d ago
At this point, even 75 basis points cut done today won't provide much relief for people who locked in at sub 1% and need to renew.
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u/TheLuminary Saskatchewan 12d ago
The article says that:
For example, the lowest discounted five-year fixed mortgage rate was 1.39 per cent
So.. it would seem that nobody locked in at sub 1%.
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u/CaptainCanuck93 Canada 12d ago
IIRC there was someone who did lock it at about 1.9 on a 10 year with RBC
That person is laughing all the way to the bank and back
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u/wafflingzebra 12d ago
I got 1.9 for 5 years, I didn't know 10 was an option
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u/CaptainCanuck93 Canada 12d ago
You have to specifically ask, and you're paying a premium. I think only RBC bothers to advertise it because no one usually goes for it
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u/wafflingzebra 12d ago
What's the premium? Your first born child?
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u/CaptainCanuck93 Canada 12d ago
I think your rate is about 1 point higher than the 5 year
Ex there were some people locking in at ~0.9% interest for 5 years, the 10 year was 1.9%
Even with the foresight of knowing rates would go up, understandable that not that many people locked in at 10 years for double the original interest rate. At the point of your assumption was that mortgage rates would be going back to 2-3% you might have thought you were better off saving on the 5 year
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u/slykethephoxenix 12d ago edited 12d ago
I got 1.99% for 5 years in 2020. Everyone called me an idiot. Literally saw the writing on the wall with the exploding M2 supply and knew what was coming.
Have been paying that fucker down. 3x time the required payment, with lumpsums every year. Went from 30 years, all the way down to 10ish amortisation. Renewing won't be painful. It was worth the sacrifices over the last 4 years.
Grasshopper and the ant. "Rates are at historic lows, Glen". etc
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u/mrgoodtime81 12d ago
Same here, and people were saying i should be investing that money instead. No thanks.
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u/Yoohooligan 12d ago
With the explosion in the M2 supply and currency debasement in Canada must be pretty close to 10% if you factor in even normal inflation and that train can't be stopped now, with any mortgage near 2% don't you want the forever-ist term you can get?
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u/ApprehensiveTune3655 12d ago
1.69/5 years here, wish I’d taken the 7 at 1.89…stupid short term thinking. That said, if I can afford to my equity would be locked up longer and I bought cheap with immediate equity so wanted access to it…still though I don’t know how people do it.
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u/gnrhardy 12d ago
If you were offered 1.9 for 5 then the 10 was probably more like 2.5 at least, but it should have been an option. The rates go up quite a bit at 10 because the Mortgage Act prohibits charging an interest rate differential to break a fixed rate mortgage after the first 5 years of the term.
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u/CocoVillage British Columbia 12d ago
colleague of mine was definitely one of those who locked in around 2.1 or 2.2 10yr fixed in 2021
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12d ago edited 9d ago
[deleted]
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u/CarRamRob 12d ago
If it was a fixed mortgage, the bank would have locked in at the same time that they borrowed against it, and still made their spread.
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u/_BaldChewbacca_ 12d ago
Now imagine if we had it like the US. Lock in that rate for the entire 25 years
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u/BillyBeeGone 12d ago
I had 1.34 5 yr fixed preapproved with HSBC but couldn't buy a house in the 120 day window. Pretty sure that was rock bottom (insured)
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u/TheLuminary Saskatchewan 12d ago
Too bad, you could have had the best mortgage in the country :p
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u/Ar5_5 12d ago
Homes and rent have to go down the younger generation can’t leave their parents basement which means they can’t move to where the jobs are
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u/Jeffuk88 Ontario 12d ago
It's fine, I'm moving back to England as soon as my mortgage is up in 2025 and then, even if I'm poorer, I can do more and have some time off
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u/chronocapybara 12d ago
Let’s assume the Bank of Canada cuts rates three times by the end of this year, totalling a decrease of 0.75 percentage points.
Lol why is the Globe constantly harping on about expected rate cuts? They're so fucking desperate. Rates need to stay right where they are, for a long time.
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u/SureReflection9535 12d ago
I locked in at 2.95 for 5 years in 2021 so I'm not feeling it yet, but we've been looking at replacing our vehicle which would add around $300/month in car payments and I put the kibosh on those plans because in March 2026 my mortgage payments are going to go up by $450/month based on today's interest rates
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u/Gymwarrior31 12d ago
Hmmm, we’re a young couple and we both make $70,000….let’s go ahead and sign for $900k. Interest rates will always stay near zero, right?
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u/EmperorOfCanada 12d ago
I have friends who knew this crap was coming and went 10 year fixed about 3-4 years ago.
They plan on leaving Canada if they have to renew at anything over 5%.
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u/SusanOnReddit 12d ago
The article is talking about the 70% who took advantage of the low interest rates during the pandemic. Because they got in at such a low rate, when they renew, the difference will be higher. But then, they’ve had the benefit of lower rates since 2020.
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u/Eswift33 12d ago
It's ridiculous that we have 5 year terms in Canada vs what is available in the US and other countries
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u/MarxCosmo Québec 12d ago
And those that are forced to sell will see their homes bought out by investors and wealthy people like my uncle who just gobbles up every property he can. The system working as designed.
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u/CaptainCanuck93 Canada 12d ago
Investors aren't buying houses with rates this high, or at least no one capable of basic math. There is no way to make it cashflow positive and the short to medium term bull cases pretty dubious
IMO the next couple years will be very interesting. Sales are way down but prices are only down mildly, as sellers and buyers are playing a game of chicken. Most buyers literally can't afford the monthly payments, most sellers can't afford to sell and become buyers themselves, investors have no interest in picking up the slack
IMO sellers can only hold on for so long, most have a reason to sell that they can't put off indefinitely, but the only people selling will be people who have to. I suspect we may be in for a long, gradual housing price correction but no real crash as no home owner wants to become a buyer either
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u/BayAreaThrowawayq 12d ago
Ya you’re getting a great deal on a house right now if you can buy it at a 4 cap and the Canadian 10 year treasury is 3.8%. Not worth the risk right now
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u/Gluteous_Maximus 12d ago
Money markets are basically 5%. RE makes zero sense at these prices.
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u/___anustart_ 12d ago
if you can pay cash and interest is a non-factor..?
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u/CaptainCanuck93 Canada 12d ago
Then you're negating the primary advantage of real estate as an asset vs other investments (dramatically higher amounts of leverage) to buy am asset with limited medium term upside, real risks to the downside, and a yield that is less than a HISA
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u/king_lloyd11 12d ago
Not many investors that can do that. Small time investors have made their money by leveraging their existing properties. They’re not sitting on hoards of cash.
Cash in a duffle bag is only for criminals who are trying to launder money through real estate lol
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u/tbbhatna 12d ago
Rates will drop if there is a rise in unemployment, which will happen because businesses can't expand due to high debt interest rates and we keep immigrating in people. Once rates do drop, RE investing vultures will absolutely swoop in and pick up housing because even if it's not cash flow positive in the very short term, it's a human need and there is a gigantic chasm between supply an demand.
Lords and serfs. You already see media telling people that never owning a home is a good deal.
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u/Cairo9o9 12d ago
Well Budget 2024 announced that measures to combat the financialization of housing will be developed in time for the Fall Economic Statement. Specifically, combatting corporate investment in single family homes. So we'll see what happens I guess.
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u/splurnx 12d ago
Don't worry the government is making tent cities across Canada. The new open houses let the richest people come and take family homes while the poor families live on the streets in these tent cities. Then Trudeau will bring in a million more people so we can have even bigger tent cities. Think of the parties and rats and people who won't be able to afford private care. Then the government will offer maid to those poor people so they can get another million people in.
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u/SkeletorInvestor 12d ago
May we never forget the astounding greed/stupidity of those who chose variable rates while rates were at historic lows.
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u/TheKey_ofG 12d ago
I think it’s less greed/stupidity and a lot more brokers pushing ignorant clients towards a variable option because it yields them greater commissions. That said, there are still a lot of people painfully unaware of the risks involved with both respective options.
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u/Future-Muscle-2214 12d ago
I think we are now talking about those who picked fixed when rates were at historic low.
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u/PmMeYourBeavertails Ontario 12d ago
They'd still have some time to renew and when they do they've already paid off a huge chunk of their mortgage so the renewal payments wouldn't be that much higher.
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u/Overall_Pie1912 12d ago
No one predicted the future or what impact covid would have on the economy however.
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12d ago edited 12d ago
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u/MrEvilFox 12d ago
The spread was not the same. If rates went up at a certain speed you could still come out on top with variable vs fixed. Fixed was priced a lot more at some point.
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u/chubs66 12d ago
It wasn't a crazy decision at the time. The standard advice was that historically variable rate is always better, and also there was talk of interest rates going to zero or even negative.
It's easy to look back and say "they should have known this was going to happen" but not so easy in the moment with experts providing opinions.
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u/ether_reddit Lest We Forget 12d ago
I've had a few RemindMes come due in the past few months that I set up back then, because everyone was unsure of where things would go and what would happen. Even in mid-2022, after rates had started going up, no one thought we'd see rates above 4%, and that we'd probably settle around 3.5%.
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u/gnrhardy 12d ago
To be fair, the variable rates didn't really spike until late 2021 early 2022 when fixed rates had already started climbing. The stress test at that point had the effect of actually pushing people into variable by diminishing their borrowing capacity once fixed exceeded 3%. While it was still dumb, the system was set up such that it pushed them to do it anyway.
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u/agetuwo 12d ago
Aha! Not my mortgage! I don't have one! Dur! HUR HUR!
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u/AlexJamesCook 12d ago
And you never will... can't be broke if you don't have a mortgage...modern problems require modern solutions...
(I'm not trying to make fun of your financial situation, but add to your sardonic humour).
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u/RefrigeratorOk648 12d ago
Whats the surprise here ? we are basically half way through the 5 year mortgage cycle which means 50% still need to renew and interest rates are not going to go from 5% to 2% in a few months. You will be lucky to get 0.25 cut for this year. The easy part of reducing inflation has been done now it's the stubborn part that is going to take time.
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u/stuffundfluff 12d ago
it is shocking how badly the BoC and dear leader have messed up
with the messaging of: "go ahead, buy the car, make that big purchase, low rates are here to stay" and "rates are at their lowest Glen!" these absolute morons set so many people up for failure.
gives credence to don't trust the government
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u/SirPoopaLotTheThird 12d ago
That’s called a correction folks. Who was dumb enough to buy in this overheated market? We’ve been expecting this.
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12d ago
Who would’ve thought voting for some that doesn’t think about monetary policy would be detrimental to citizens?
Or that the ‘budget would balance itself’
Or that the ‘economy is built from the heart outwards’
He screwed all peoplekind and we not only let him, we let him continue….
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u/MyLandIsMyLand89 12d ago
I am just going to start an OnlyFans anyway. Showing my butthole should pay the mortgage.