[Acura604]

What's everyones take on this and for those with variable rate mortgages, are you locking in to a fixed rate?


Canada?s long ride with rock-bottom interest rates appears to be ending | Financial Post (http://business.financialpost.com/news/economy/canadas-long-ride-with-rock-bottom-interest-rates-appears-to-be-ending/wcm/8a96c286-0e67-454a-af60-c0b99aeaa0bb)


Canada’s long ride with rock bottom interest rates appears to be coming to an end.

Stephen Poloz, governor of the Bank of Canada, has dropped a big hint that for the first time in seven years, the bank will be pushing Canadian interest rates higher.

The loonie rallied as high as 76.71 U.S. cents on Wednesday, its highest level against the U.S. dollar since February.

[cdizzle_996]

It's coming...

Even a minimal hike will hurt a lot of people that are at their limits with mortgages.

[murd0c]

and this is the big reason why when I bought my house last year I went with a locked in mortgage :fuckyea:

[Rallydrv]

hmm with oil in slump/ and added tariff on lumber to US. i dont know if its gonna happen this soon. maybe .05 or <.25

that said, high interest rates (what you parents paid >6-7-13% are gone. never gonna happen).

locked 5 years at 2.39 2-3 weeks ago

[blkgsr]

i'm locked in at 2.49 as of 2 years ago

[Tapioca]

The impact won't be felt for at least 3 years. When the first wave of fixed mortgages at these high prices come up for renewal, people who are really leveraged will just refinance since their equity will likely be substantial enough to do so. Everyone else who bought using CMHC insurance has already been stress tested.

It will take more than just a 2 percent rise in interest rates to crash the housing market. We would need to see stagflation for anything significant to happen.

[hud 91gt]

The impact won't be felt for at least 3 years. When the first wave of fixed mortgages at these high prices come up for renewal, people who are really leveraged will just refinance since their equity will likely be substantial enough to do so. Everyone else who bought using CMHC insurance has already been stress tested.

It will take more than just a 2 percent rise in interest rates to crash the housing market. We would need to see stagflation for anything significant to happen.
You make some valid points, but putting all CMHC insured owners as stressed tested in one statement is a bit false. This is true for owners who've purchased in what, the last year?

[MG1]

Try 18 to 21% mortgage rates. That's what they were a couple of years after my wife and I bought our first house in Walnut Grove. It just skyrocketed without much warning.

We nearly didn't make it. Just to think how thinly stretched we were back then makes me cringe.

[Tapioca]

You make some valid points, but putting all CMHC insured owners as stressed tested in one statement is a bit false. This is true for owners who've purchased in what, the last year?

Yes.

As we know, the prices for attached properties have gone up another 20-30% over the last year. Those who were not stress tested still have another 3-4 years left remaining in their fixed mortgages. When those come up for renewal, if they need to, they will likely be able to refinance because of the equity they have put in plus market appreciation.

[tiger_handheld]

if ya'll really think bank will up their key rate so much so that it will have a material impact - yall be cray.

[quasi]

5.7% for 5 years on my first place, even if they raise them some I'm conditioned to think there dirt cheap.

[Hehe]

Yes.

As we know, the prices for attached properties have gone up another 20-30% over the last year. Those who were not stress tested still have another 3-4 years left remaining in their fixed mortgages. When those come up for renewal, if they need to, they will likely be able to refinance because of the equity they have put in plus market appreciation.

In short term, maybe, but in long term, higher rate always meant a more suppressed RE market because people simply can't afford unless there's a significant spike in overall income.

Let's just look at pure numbers, a 1M property with 20% down at 2.5% interest rate, it works out roughly 3600/mth in mortgage payments. Let's say we go back to 4.5% in 5yrs, which is the norm just 10yrs ago. It means that the payment after renewal would be ~4400/mth.

Hence, assuming everything else stays equal, a family would have to come up with $800 more per month just to keep the payment going.

For most ppl here on RS, I'm sure $800 more per month isn't a problem. :fuckthatshit: but a lot of folks that I met who basically live paycheck to paycheck, that 800 would make their life very miserable to say at least.

And that's the scenario if price stays the same. If the price drops, they have to factor in the difference on shortfall that allowed them to avoid paying CMHC. Else, add whatever CMHC asks them to pay.

Even in the scenario that the market grows, say that 1M house is worth 1.6M in 5yrs, the owner still has to come up with that $800. Sure they can tap into their "equity" and use their home as ATM, but that's basically borrowing money at a even higher rate than their mortgage. Unless the market can grow indefinitely, the problem would come back to bite at them one day.

Remember, we all love the word "soft-landing"... but the truth is, it has never occurred in the history of economics and I really don't think it ever will. There's always a catastrophic event happening before market coming back to normal. Because shit happens when the market is not logical.

if ya'll really think bank will up their key rate so much so that it will have a material impact - yall be cray.

The bank can do whatever it wants, but higher inflation means higher cost of obtaining funds. Banks are out there to make money. They are not going to give you 2.5% rate when it cost them 3% to borrow.

[Rallydrv]

We will need at least 3-4 increases before making impact. 2012 interest rates were about.75 higher than now..and market was golden. Sure atmosphere has changed but not so much to make a dent.
This is more for short term impact

I just upped amortization from 25 to 19. might as well try to pay off sooner. Glad I didn't have to pay cmhc.

[PeanutButter]

There's no way they're going to increase the rate by more than 25 points.
That 1/4 of a percent will make a small impact. People are stretched as it is, a $1million home is just too much for most people, and adding another 25 points isn't going to help.

It will probably cool the market a degree or two, but I think the prices are staying as they are for the most part. I guess for those who can afford a $1million home, it'll help them

[Spoon]

The landscape's not decided by owner's of a single property. There's players holding on to multiple properties and they will decide on the outcome.

When investors see the BOC on the verge of hiking rates and there's little to no chance that rates will ever get lower; it's time to bail. Increased rates also reduces the amount buyers can borrow. Chances are, you'll see inventory creep up and reduced demand in the short term.

[jasonturbo]

BOC .25 rate increase hike does not translate to .25 increase in typical mortgage rates, it's more like .50 or more.

[unit]

don't we already have an RE thread?

[hud 91gt]

We need a new one. All us negative thinkers are hiding as we've been proven wrong for too long. Hahaha.

On that note, applied for another pre-approval. You know... Just incase.

[MG1]

This thread is now about the Canadian Dollar rising due to the announcement.

Damn, it is at 77.xx and climbing. Just hang in there, Loonie, until the end of today when trading stops and we go cross border shopping with a bit more cash, lol.

Will I see parity one more time before I die?

[Great68]

I locked in back in 2013 not expecting rates to go any lower back then. I guess they'll just be back to where they were when I renew next year. Shouldn't affect me too much.

[Hondaracer]

In b4 all the people hoping for a crash can no longer afford to get into the market due to higher rates and the people already buying properties are getting better deals because the portion of buyers who represented first timers fall into a lower price bracket

:troll:

[Acura604]

Bank of Canada raises interest rate for first time in 7 years to 0.75% (http://www.theprovince.com/bank+canada+raises+interest+rate+first+time+years/13691799/story.html)


OTTAWA — The Bank of Canada has hiked its benchmark interest rate to 0.75 per cent from 0.5 per cent, its first increase in nearly seven years, amid expectations of stronger economic growth this year.

Such a move is bound to increase the costs of mortgages, home equity lines of credit and other loans linked to the big bank prime rates.

The Bank of Canada cut interest rates by a quarter of a percentage point twice in 2015 to help the economy deal with a plunge in oil prices, but it said Wednesday that adjustment has been made.

“The very strong growth of the first quarter is expected to moderate over the balance of the year, but remain above potential,” the bank said in a statement.


“Growth is broadening across industries and regions and therefore becoming more sustainable. As the adjustment to lower oil prices is largely complete, both the goods and services sectors are expanding.”

In its outlook for the Canadian economy, the Bank of Canada estimated growth to be 2.8 per cent this year, 2.0 per cent next year and 1.6 per cent in 2019. That compared with its April forecast for growth of 2.6 per cent this year, 1.9 per cent next year and 1.8 per cent in 2019.
The rate increase, the first since September 2010, was widely expected by economists following “hawkish” comments by Bank of Canada governor Stephen Poloz and senior deputy governor Carolyn Wilkins in recent weeks.

The hike comes as inflation remains below the bank’s two per cent target, however it said it believes the recent softness is temporary, with the effects of food price competition, electricity rebates in Ontario and changes in automobile pricing expected to fade. The bank expects inflation to ease further this year due in part to Ontario electricity rebates, but return to close to two per cent by the middle of next year.

The Bank of Canada said it also anticipates exports to pick up in the coming quarters and make an increasing contribution to growth, while business investment is also expected to rise.

Consumer spending is expected to continue to be a significant contributor to the economy, but the bank said it believes high levels of household debt and a slowdown in the housing market will weigh on spending.

The announcement follows signs that the housing market, a key economic driver in recent years, is adapting to government changes meant to cool the real estate sectors of Toronto and Vancouver and help improve financial stability.

“Looking ahead, residential investment is anticipated to contribute less to overall growth,” the bank said. “Macroprudential and housing policy measures, as well as higher longer-term borrowing costs resulting from the projected gradual rise in global long-term yields, are all expected to weigh on housing expenditures.”

The Bank of Canada’s next scheduled rate announcement is set for Sept. 6.

[lowside67]

3 banks have already raised Prime; RBC, TD, and BMO... assume CIBC will be falling in very shortly.

Going to be interesting to see how this all works out.

Mark

[heleu]

It's too small of an increase to make a difference. Even if you're on variable, you would still be well below the previous fixed rate.

My mortgage broker sent an e-mail newsletter today; they're still offering 5 year variable terms at 2%.

[!LittleDragon]

lol... people think this only affects mortgage rates

[flagella]

Well, this is Vancouver, so people have little knowledge outside of real estate and mortgage.

[heleu]

lol... people think this only affects mortgage rates

Please enlighten us. I'd like to see what you think.

[Tapioca]

People who have HELOCs will just continue doing what they're doing until their interest payments are higher than the return on their equities or investment properties. We're a long ways from that. Market rents are still high enough to service higher borrowing costs. There's still insufficient rental stock in the Lower Mainland generally. Fixed leases remain legal for now.

If you had unsecured debt yesterday, it's more expensive to service today. But no one here fits that demographic as most of RS buys their sports cars in cash.

[Digitalis]

OMG it's trump ruining the world!

[MG1]

He's not destroying the world. He's making America Great Again.

Okay, I take that back.......... he's destroying everything that isn't America. Only if it benefits America does he care.

We serve America. Hail to the Chief.......... and may he have his face carved onto the rock face of Mt. Rushmore.

A president like no other...........god bless Donald Trump.



I hope he goes bat crazy and ends up in a straightjacket. He's the Joker!




WAIT!!!!! This isn't the trump thread............ :troll:

[!LittleDragon]

Most people are already expecting a rate hike in October but now there's a 50/50 chance of another hike in September. If the September hike happens, that's .75% in a matter of months.

4.5% growth is double the normal economic growth rate so the hikes may even be bigger than .25%...



Odds of a rate hike soar to almost 50% overnight after Canada?s growth wows economists | Financial Post (http://business.financialpost.com/news/bank-of-canada-rate-hike-odds-rise-after-blistering-gdp-growth-wows-analysts)

Canada’s economy grew at a 4.5 per cent pace in the second quarter, blowing past even the most bullish estimates and convincing economists the Bank of Canada will raise its benchmark interest rate before the end of the year, perhaps even next week.

The probability of a hike in September rose on Friday to nearly 50 per cent, data from the overnight index swaps market showed, up from around 20 per cent before the data on Thursday showing rapid domestic growth.

Much of the gains were connected with strong oil and gas activity, particularly in May and June. The manufacturing, construction and retail sectors were all strong, easily offsetting a slow down in real estate activity connected with government measures introduced to tame overheating housing markets in Toronto and Vancouver.

Economists had thought Canada’s economy would slow a bit with the approach of summer. Yet results for the month of June were surprisingly stronger than expected, and that sent economists racing to update their forecasts for the third quarter and the balance of the year.

Canada’s proposed tax changes are casting entrepreneurs as the bad guys — and that’s bad news for the economy
Oil markets to be disrupted for at least three months in wake of Harvey
“While we do expect growth to simmer down somewhat in the second half of the year, we would readily allow that all of the economic surprises have been to the high side in 2017,” said Douglas Porter, chief economist with BMO Financial Group. “In what has become almost a seemingly monthly ritual in 2017, we are nudging up our call on Canadian GDP growth yet again to 3.1 per cent for the year and 2.5 per cent for Q3 — and would readily allow that there is some upside risk.”


Avery Shenfeld, chief economist of CIBC Capital Markets, said gains in incomes and a rise in the savings rate give Canadian consumers more room to spend during the third quarter. In July, the Bank of Canada rose its benchmark interest rate for the first time in seven years. Most economists expect Canada’s central bank to raise rates yet again this year, but Shenfeld said the strong GDP data leads CIBC to forecast that next hike might come as early as next week, rather than the fall or later.

“We were sitting on the fence, but are now leaning towards a September hike, with some cautionary words in the statement to remind Canadian dollar bulls that they will be very patient on further hikes,” Shenfeld said.

The markets still think the Bank of Canada will hold off on raising rates until its Oct. 25 meeting. Heading into Thursday’s GDP report, the futures market had pegged the chance of a Sept. 6 Bank of Canada interest rate increase at only 26.5 per cent. Shortly after the GDP figures were released, the odds of a September hike to 1.0 per cent from the current 0.75 per cent climbed to 33.4 per cent.

Inflation remains low in Canada, while the Canadian dollar remains relatively high. BMO’s Porter said that gives the Bank of Canada room to be patient and not move as early as next week. Still, Porter adds the strong economic data “all but locks in” a rate hike later in the year.

Economists surveyed by Bloomberg had expected Canada’s second quarter GDP to grow by about 3.5 per cent, with the median of the 17 estimates at 3.7 per cent. The highest forecast in the data set was 4.0 per cent, an amount handily surpassed in Thursday’s release.

The big surprise on Thursday was the GDP strength in June, with 14 out of 20 economic sectors posting growth. Construction was the main contributor to June’s growth, Statistics Canada said. Economists had thought economic activity would soften with the approach of summer, and that this would herald a slowdown in third quarter growth. Now it looks like the summer was economically hotter than economists had expected.

“Wow. There seems to be no stopping Canada of late,” said Brian DePratto, senior economist with TD Economics. “The solid monthly data for June suggests that Canada still had solid momentum heading into the summer months, with very early tracking suggesting that Q3 growth could be around 2.5 per cent – a solid pace by any measure and one likely to push Canada into excess demand territory.”

DePratto said another rate hike in the fall is “almost certainly a done deal.”

[Blueboy222]

You better sell now before it's too late

https://i.imgflip.com/8qjli.jpg

[lowside67]

Most people are already expecting a rate hike in October but now there's a 50/50 chance of another hike in September. If the September hike happens, that's .75% in a matter of months.

4.5% growth is double the normal economic growth rate so the hikes may even be bigger than .25%.
I believe the new development is the odds of them hiking in September instead of October, not September AND October. I genuinely believe that while we had one good month of GDP information, it would take a LOT more sustained good news (and probably a US hike) before we hiked 3x in 2017.

-Mark

[nah]

and it happened today...

Big banks hike prime rates after Bank of Canada tightens monetary policy - Business - CBC News (http://www.cbc.ca/news/business/rate-hike-impact-1.4276931)

[twitchyzero]

82c on the greenback?
can we hit 90c in time for next Q2 :awwyeah:

[Ulic Qel-Droma]

more hikes please.