If the Bank of Canada follows through on rate hikes tomorrow and more in the coming months, it’s beyond a doubt that the housing market is going to take a beating. The mainstream financial media appears to be slowly waking up to this fact.
For borrowers with a variable rate mortgage, some tough choices may be on the horizon:
If the Bank raises its overnight rate by 50 bps tomorrow that variable rate rises to 1.65% and the monthly payment to $3,019, according to Ratehub.ca’s calculator.
That’s $172 more per month or $2,064 more per year in mortgage payments.
If the central bank hikes another 50 bps at its June meeting, as some expect, that would put the total rate increase this year at 125 basis points. The homeowner above would now have a mortgage rate of 2.15% and monthly payments of $3,197.
I have little sympathy for anyone who lives that close to the fiscal edge.
Exactly. I’ve always had money saved for a rainy day, but you hardly hear that phrase even uttered anymore, let alone put into practice. And literally at least half the population thinks the gubmint will just bale everybody out the next time the SHTF.
Exactly ….why they put themselves in that position? Some do it to impress their friends.Some just think they can afford it because their bankers told them they could?
Glad I just SOLD high in BC and moved to AB…..nice to have a nest egg in my homemade safe
That was my first thought as well. I have bought three houses in my life and each time I under-bought to be sure I could afford to keep my home if things got bad.
The immediate goal was always to pay down/pay off the mortgage ASAP. Did without many luxuries and pleasures to achieve mortgage-free status. It worked. It paid off. There is no substitute for a stress-free life. Most stress is caused by debt.
The educational system should be teaching about finances rather than gender swapping. It would be much more helpful ‘going forward’ as they say.
Debt is dangerous. It is currently destroying Canada at the hands of the little shit who is the ‘acting’ PM.
When I worked briefly in the mortgage securitization biz, back in the early 80s, the general rule of thumb in Canada was, anytime you can lock in your mortgage for 5yrs at less than 10%, it’s a no-brainer. Also, for your average Canuck then, there was no better investment in the world than prepaying your mortgage Prepaying a 10% mortgage is roughly the equivalent of earning 20% pre-tax, risk free.
Heh absolutely, my first mortgage was 12.75% locked in for 5 years, 13 years later my next home the mortgage was 5.75% locked in for 5 years and I was over the moon. There was plenty of incentive to double down and take advantage of paying it off as early as possible, and now have been mortgage free for 16 years in the largest home I’ll ever own, quite likely the last.
Your average Canuck is a no-brainer. Your average voter is Liberal/socialist because that promises someone is going to make things easy for them, and blames someone else when it turns out very not easy.
Good. The housing bubble must be burst. There must be pain. There will be lots of whining and crying but stupid money and stupid people need to disappear.
Savers and the patient and the smart will take over from here thank you.
Agreed, about time the savers are given a fair return.
if you weren’t talking to your mortgage provider months ago about locking in your rate, it might be too late…
the CMHC is probably going to take a bath too on all the mortgages that are marginal that they insure
https://www.cannex.com/public/mort02e.html
Posted rates for 34 lenders closed variable to five years.
Intetest rates are already going up because the banks are charging more for mortgages. This is occurring worldwide as central banks, especially the Fed, are no longer flooding the banking system with reserves. Interest is the inducement one receives to delay spending today in return for a financial reward tomorrow. That inducement must be higher than the inflation rate. Otherwise, people don’t save, banks don’t lend and the real value of the currency erodes.
Either interest rates rise to match the rise in international rates or the dollar falls.
Seeing Trudeau 2.0 behaving exactly as Trudeau 1.0 and with a memory of double-digit mortgage rates, last year I locked in my loans at either 0% (auto) or 2.1% (mortgage) for the longest terms available. One need only read one’s economic history to know that since the time of the emperor Diocletian “This time it’s going to be different” is the mantra of every economic illiterate from time immemorial, including or even especially, the numbskulls handed Nobel prizes in economics by the lefty cheerleaders club.
A house priced at $816,000 and a ten percent down, holy sh-t man. Who the hell makes that kind of income these day?
Sure as hell isn’t anyone in my family……
Back in the day first thing I would do is pay off the mortgage. Haven’t had one for 25 years.
It just makes sense since one can’t tell the future.
Denying oneself things is good for the soul. It’s certainly good for your fiscal health.
There’s a mort of tears coming for a lot of young families. Poor kids.
I celebrated 70 years in March. I tell (bore?) people in their 30’s to own the roof over their heads, to have other investments (DO NOT rely on the government) and to live below your means. They all smile (even my daughter) and assure me that “this time it is different from when you were our age.” We shall see.
Anybody who signed on to variable rate mortgage 10 years ago or so, made the smart(lucky) decision since fixed mortgage rates gradually decreased over that time period. I doubt, even by year end, will the variable rate be higher than the fix rate 3 years ago. I signed a fix rate back in Dec 2018 for 3.49% thinking, what a bargain. I doubt if fix rates will be above that when I renew in 2023. In saying that about the 3.49% rate, if I had shopped around instead of sticking with my bank, I probably could have gotten a lower rate, maybe 3.19% but I didn’t. Too lazy.