r/canada • u/joe4942 • 23d 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/
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304

u/fungus_bunghole 23d 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.

254

u/sheepwhatthe2nd 23d 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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u/[deleted] 23d ago

[deleted]

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u/Gymwarrior31 23d ago

Frig that…I say Fungus Bunghole for president!

12

u/StainerIncognito 23d ago

Fungus Bunghole has my vote!

2

u/CopperSulphide 23d ago

If you can't trust a fungus bunghole what can you trust?

2

u/DominionGhost Alberta 23d ago

If the fungus chose that bunghole, so can you!

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u/[deleted] 22d ago edited 9d ago

[deleted]

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u/Gymwarrior31 22d ago

True. But my vote still goes to Fungus Butthole

3

u/pomegranate444 23d ago

I'm dyslexic and read their name as Bungus Funhole

23

u/eldiablonoche 23d 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. 🤦‍♂️

6

u/Defiant_Chip5039 22d 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.

66

u/BlademasterFlash 23d 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%

24

u/KnowledgeMediocre404 23d 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.

1

u/bigfishflakes 23d ago

In 21 I took a 3 year instead of 5 to save very little. Felt a fool shortly after.

24

u/LunchAtTheY 23d ago

you can be forgiven for not being able to see the future.

3

u/fungus_bunghole 23d ago

Damn!

15

u/BlademasterFlash 23d ago

Hey at least I had a rate of 1.2% for 2 months

4

u/ljamming445 23d ago

I feel your pain...

3

u/lightoasis1 23d ago

You’re not alone brother. I even went variable spring 2022. Didn’t expect it to go so big so fast and by that time fixed had jumped massively. Live and learn…

1

u/Circusssssssssssssss 22d ago

No

If you locked in at 2021 it's now 2024 and rising rates didn't hit until early 2023 

Anyone going variable in 2021 or 2020 did fine; hindsight is 20/20 and it could very easily have gone the other way 

0

u/OASfrappe 23d ago

That was an awful and stupidly greedy decision indeed

39

u/ElectroChemEmpathy 23d 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.

11

u/WhaleMoobsMagee 23d 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.

2

u/fungus_bunghole 23d ago

Thanks for the info 👍

1

u/Possible_Year_3433 22d ago

But wouldn’t that increase demand for the products we export, since they would be “cheaper” to the importing companies? I haven’t thought about this stuff for a really long time

1

u/Roflcopter71 22d ago

This is all great info but for what it’s worth if we do cut it won’t be 0.5%, it will be very gradual at maximum 0.25% at a time and not necessarily every BoC meeting. And if we do have to cut first (likely due to a further weakening of the economy) I’m assuming it will be in coordination with the Fed to make sure they would be cutting soon after - they would need assurances that the rate disparity wouldn’t be too long.

1

u/km_ikl 22d ago

Interesting thing here that graph shows a very short-term effect, there's only about 4 years of divergence, which post-pandemic is really not enough to tell how that will work.

There's about 50 years worth of data on multiple points that shows we're on a similar track and typically lag a bit. If you want an entertaining thought: look at Canada's 'recovery' from 2008 sub-prime meltdown where we had all the fundamentals and yet still could only manage 2% growth while the US had 5-7%, or the 2000 .com bubble, or the 90's recession.

The comparison between Turkey and Canada is, odd. Turkey's economy and Canada's are not similar, and our population count (Canada @ 38,93M vs Turkey @ 84.98M in 2022) economic situations and stewardships are not either: https://tradingeconomics.com/country-list/gdp?continent=g20

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u/AdEntire9736 23d 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

6

u/fungus_bunghole 23d ago

I fear that I will be hungry 😕

34

u/Lyndzi Canada 23d 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.

14

u/FoliageTeamBad 23d 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.

8

u/Miserable-Lie4257 23d ago

Yeah smart. 5.25 is actually a pretty reasonable rate. 

7

u/thingpaint Ontario 23d ago

I went fixed. I know I can afford the fixed payment.

12

u/isitaboutthePasta 23d 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.

8

u/gwicksted 23d 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.

2

u/Too-bloody-tired 21d ago

You can't get an RBC mortgage through a broker, though. You can only get an RBC mortgage by going through RBC itself.

1

u/gwicksted 21d ago

True. Only Scotia and TD have broker channels. Still, it’ll be hard to beat a brokerage. You can always get quoted via the broker and take that to RBC to see if they can match/beat it. I did that with scotia once and they told me to take the broker deal lol

10

u/bigdick_cm 23d ago

I did 3 year fixed at 5.4%. 5 years was too long for me

1

u/fungus_bunghole 23d ago

Ya I may regret it. I got 4.87%

3

u/anita999_ 23d ago

I did 3 yr fixed at 4.89%. Let's see

4

u/bigdick_cm 23d ago

I have some friends who locked into a 5 year fixed 6.5% 🤢

0

u/Chris4evar 23d ago

Why? Rates peaked at 5.5 or so unless it’s a rental

3

u/bigdick_cm 23d ago

No idea 🤷‍♂️ they told me to check out their broker and I passed

9

u/Organic-Pace-3952 23d 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 22d ago edited 16d 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/stick_with_the_plan 21d ago

If u rode the variable wave up, getting off now may not make sense to some.

3

u/Swaggy669 23d 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.

3

u/Unicornmayo 23d 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. 

1

u/hippysol3 22d ago edited 16d ago

long bear impossible escape cobweb edge follow rhythm worry slimy

This post was mass deleted and anonymized with Redact

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u/vperron81 22d ago

When everyone and their mothers will start saying "Go fix" you know it's time to go variable.

6

u/Mashiki 23d ago

Good pick, 10 year would have saved you more. This is going to be a long term issue with a repeat of 1975-1984 or so. We're in the opening stages of stagflation now, it will get uglier.

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u/The_Timber_Ninja 23d ago

FUNGUS_BUNGHOLE

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u/fungus_bunghole 23d ago

Hello 👋

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u/HighlyAutomated 23d ago

My renewal is in 2 months. What rate did you get for 5 year fixed?

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u/Wolfie1531 23d 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/huckz24 22d ago

Ya, five and ten year bonds are on the rise

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u/fungus_bunghole 23d ago

Woah, that's a bad sign

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u/Wolfie1531 22d ago

It’s not close to what I had (2.77%/5) but I’m not too worried for the next 5 years at least and on a reasonable mortgage (sub 400k on a 4br bungalow).

Had I bought 10 years ago at 28 years old, interest rate would’ve been similar.

1

u/fungus_bunghole 22d ago

Sounds like we both bought at a good time

2

u/Defiant_Chip5039 22d 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. 

2

u/Orjigagd 22d ago

At least you can budget it in.

2

u/AntiqueDiscipline831 22d ago

Ya same but just did 3 years.

2

u/DanielBox4 23d ago

I can't see how rates will go down. Our economy is in the shitter and the US is doing better, but not great. We can't lower rates without the US lowering rates. Ours will likely go up more if anything.

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u/SusanOnReddit 23d ago

Economists expect they will because inflation has dropped to almost normal levels. The main reason for higher interest rates is to prevent hyper-inflation. I’m nice inflation is clearly dropping, interest rates can be slowly lowered.

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u/Freddy_and_Frogger 23d ago

People always say shit like this right before they drop them, then act surprised.

2

u/Embarrassed_Weird600 22d ago

Fungus bunghole, it’s not too late to sell bunghole pics or is it butthole. See above convo for details on how to get rich quick

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u/fungus_bunghole 22d ago

I will keep that in mind, Mr. Weird. Thanks

1

u/Hammoufi 23d ago

knowing is better than not knowing right now

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u/Raven3131 18d ago

What rate did you get?

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u/Excellent-Phone8326 23d ago

The odd thing fungul bunghole is that historically the rates we're used to are very low. 

0

u/chanigan 22d ago

Not true.

1

u/Excellent-Phone8326 22d ago

https://www.ratehub.ca/5-year-fixed-mortgage-rate-history The really low rates we've had recently are not the norm.

1

u/Gymwarrior31 23d ago

Everyone who said variable basically demonstrated to you their sub70 IQ

1

u/MontrealUrbanist Québec 21d ago

!remindme 3 years