I doubt that a mortgage holder facing foreclosure is going to get much comfort out of viewing his situation as a “recalibration”. Because it takes time for rising interest rates to have an impact, in the interim we will continue to see the mainstream financial media parrot the notion of a “soft landing”. None of these pundits will recognize the train wreck until the moment it actually occurs.
Higher rates may cause a strain for highly indebted borrowers in the short run, but over time they may also help recalibrate housing budgets for borrowers based on real life monthly payments. This may also help stabilize the housing market, hopefully leading to a soft landing instead of a housing crash.
“None of these pundits will recognize the train wreck until the moment it actually occurs ”
Sure they will. The word “hopefully” gives their prescience away.
“hopefully leading to a soft landing”
“Sadly, ‘hopefully’ doth butter no parsnips”
Thanks, Arild.
I did not know that saying.
Empty words, indeed.
Parsnips, parsimony, par for the course.
Pardon me, pardner….
Classic, expertly delivered by Joe Lycett
https://www.reddit.com/r/videos/comments/4dhzte/comedian_joe_lycett_tells_a_hilarious_story/
The saying I learned was “Fine words butter no parsnips”.
There was always an easy way around this. Make mortgage hopefuls qualify at a 4.0% minimum interest rate. They never would have fallen into the trap in the first place. But that’s not the point.
They already had to qualify at an official posted rate that in practice nobody with good credit ever paid. You can see how little good that did.
The banks are to blame as well. Twelve years ago I qualified for an amount DOUBLE than what I actually mortgaged. When the loan officer said “You know you qualify for much more than you’re asking, you could get a bigger place”. When I said “what I’m asking for is sized fine for me and it’s what I can float if my job goes south and I’m waiting for a new one and I have to live on savings or other capital. Or if I take the larger amount will you accept charging me interest on the lower amount I’m signing for if I run into a rut?
He smiled and handed me the paperwork for the lower amount.
I locked into a nice low rate and if the rate is stupid high when it’s time to renew I might just pay things off if it makes financial sense.
It also makes financial sense not to mortgage yourself to the hilt and then panic when BoC raises prime starting at 0.5%
Of course, BoC wouldn’t need to raise its prime if the morons in ottawa didn’t run the cash printing presses 24/7 buying votes. But that’s the Idiot Left for you. But even they aren’t responsible for people getting into hock for dumb amounts they can’t manage when the rates jump a few points. It’s going to be tough on some people before this thing is done.
Maybe teenagers should be taught basic economics, time value of money and basic budgeting instead of how to roll a condom on a cucumber and the Baskin-Robbins 32+ gender flavors.
mhb23re
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually, then suddenly.”
Interest rates were absurdly low for so long because of what was coyly called the “global savings glut” by Ben Bernanke. The Chinese laundered the proceeds of slave labour into western government bonds to buy influence in the west.
Guess what? We’ve run out of cheap Chinese labour, thanks to Wuhan flu.
And because China has no interest in helping finance the War of Chrystia’s Grandpa, we’re now out of cheap Chinese credit.
We now have to live within our means. What that means in practice may be observed at any gas station today, and at any realtor’s office tomorrow.
How many Canadians currently have variable mortgage rates?
Probably most people with mortgages.
Too many grasshoppers.
Not enough ants.
The few ants will be forced to save the grasshoppers.
MikeT, the more things change, the more they stay the same.
More money for one’s mortgage payments means less money for other things. With prices rising sharply for other things, a depression is not far off.
Gary
Exactly, I have my money almost liquid,just waiting. May just make a bit off this stupidity!
The bill for Canada’s absurd housing market has been past due for years. The Covid lockdowns baked a severe recession or even depression into the cake. One could also argue that western society never let the real recession that we needed post 2008 happen either; it just got papered over with stupid low interest rates and massive deficits.
All the bills are coming due now. This is going to be a bad, bad decade. Probably the only sure bet you can make is that any & all actions governments and central banks take to try & make it better will actually do the opposite.
Yea my first home was locked in at 12.75% with a 5 year amortization, I didn’t bother asking for violins with my mac & cheese. Some people are going to need to suck it up and join the real world with a little less “kinglyness” on cheap borrowed money.
What multiple of your annual income did you have to pay for a house back then?
When I bought my house 16 years ago it cost me about twice my annual income. I couldn’t afford my house now, as its “worth” about 8 times my annual income.
@Rusty Shackleford – “What multiple of your annual income did you have to pay for a house back then?”
About x1.
I bought cheap and affordable after much shopping around for the best deal in “not the worst part of town” but the next community over. I paid it off in 11 years, lived in it for 2 additional years mortgage free and saved a very good down payment for my upgraded home in “not quite the best part of town” but the next community over. That mortgage was 5.75% locked in for 5 years and I was over the moon happy with the world (it was a new build). I paid the mortgage off 100% in 5 years and have been mortgage free in the biggest house I’ll ever own for the last 17 years now.
Would love to see some interest rate increases on my savings since then. Living well enough but below your means is the key.
Bought the farm in 1994, 1st mortgage was over 13percent, thought it was a bargain. Lot of struggles with crappy grain prices, depended on lots of off farm income. Can’t fathom the ‘fundementals’ of today’s economy other than a whole lot of pain hurtling down the tracks and a dangerous mixture of imbecility and evil actors populating our political class.
From 1970 onward I bought eight houses and a couple of apartments and never had a mortgage under 8.25%, one was almost 15%.
idiot
Fine words butter no parsnips.
I first encountered this saying years ago in Peter Newmans Excellent trilogy on the HBC. And what truly excellent people are our Scottish ancestors. They are a formidable people.
It was spoken by some Scottish Factors wife in some dreary mosquito infested fort away in the wilderness.
Had 35 000 open mortgage in 1980…..was laid off in the accompanying recession….oh how I struggled. Hung in there with two jobs and a good wife and was mort free in semi waterfront home in a toney part of town by 1999.
If there’s a lesson here I dunno. Mortgages by law were limited by law to 4% at one time in Canada.
Any higher rate was considered “usury”. I believe the law was changed in the late 60s ?
Back in the day, our first mortgage was 9.5%; admittedly (and this is very much back in the day) our first home cost $24,000; our family income wasn’t great either. Fast forward eight or so years, and we’ve upgraded (sold first house for triple paid for and bought otherwise unaffordable home)and now the rates are rising. Fortunately, we were by this time with a credit union which had let us pay more than the “minimum” on our mortgage which allowed us to ride the rates up to 16% and back down. We’re in that house still.
Back in the day, Dad came home from the war and we lived in various digs (friends until an apartment came up) until “Wartime Housing” was built in a local community and we moved in. The houses weren’t totally finished (do feel sorry for the poor men doing the stuccoing – base coat then covered by rock and glass chips – as they were accompanied by a horde of young’uns who found this totally fascinating) and really basic; but the need was such that – once inhabitable – they were occupied. Initially, it was rentals only. However, the decision was made that the occupants could actually buy them, and my parents (I suspect they had been saving up for a down payment against this option) chose so to do. I think the house cost $3,500 back then, and the very long-term (I suspect 40 years) and fixed rate mortgage was something like 3.5%.
This was my parents’ home until my Dad died. They became enthusiastic gardeners and terraced our hilly lot beautifully. They renovated the kitchen; they put on an addition. But still the old mortgage kept churning on, with very small payments at a very small rate of interest. The bank kept asking Dad to just pay it out, but Dad could get more for his money by investing elsewhere so he just let the mortgage keep going until – finally – it was paid off. A lawyer friend did the necessary paperwork, and there was a ceremonial burning of the mortgage.
@Frances – “and there was a ceremonial burning of the mortgage.”
Heh, an interesting old school take, thanks for sharing.
I paid off two mortgages as I had mentioned above, I had received a bland form letter with each in the mail, read once and stuffed in a file folder never to be seen again. I do recall on each the disappointment that party poppers and Jamaican music didn’t explode out of the letters when I opened them, just a generic and bland “you’re done, bye”.
Boomers better finish off the greatest wealth transfer on history before it’s too late. What a legacy. Buy a house out of highschool sell it for 2 million to some young couple who’ll die well before paying it off and retire. Good job boomers. Better ship the last remaining well paid jobs overseas and bring in more third worlders to look after you too.
Keep voting Liberal and mind your pronouns and I am sure things will be better for your generation.
I struggled and scrimped for years, but finally got my mortgage paid off. No one in this thread has mentioned annual Municipal taxes. I live right on the west coast about a hundred kliks north of the Van Lotusland area. This year, my taxes skyrocketed up 67%, because my house was re upped in value due to the mind numbing housing market. My original mortgage in 1984 was for $39,000. I’m now informed the house is valued at over five hundred grand. I did protest, and got the valuation percentage reduced a bit, but not by much. Now that I’m retired and on a fixed income, I can envision the WEF great reset where I’ll own nothing and be miserable happening because the annual taxes will eat me alive. Just wondering, has anyone elsewhere had such large re evaluations of their house taxes like this? I’m also expecting the housing market to crash in the very near future due to all the financial shenanigans. I wonder what the evaluation will then be for my house. I’m betting they won’t want to downgrade the value as they will lose a big chunk of taxation cash. I guess we’ll just have to wait and see. Anyone else have thoughts on these exorbitant house taxes, surely it’s not just my area?
The word “unexpectedly” makes a comeback. Such as I’m unexpectedly bankrupt because I have to borrow to live. I need a bail out.