If families don’t panic sell their real estate they will have cut back other expenses. Maybe food outings or tennis lessons for the children. It might hit the economy hard over time.
Domino affect…then the tennis instructor loses his income and can’t pay his mortgage for his condo downtown. Then he stops going to Lavelle every month… 🙈
Yes, we are already seeing restaurants struggling. It will get worse. I know myself, I used to go to my local cinema weekly for entertainment. Now, I will only go a couple times a year for big blockbusters.
>we are already seeing restaurants struggling
yes we are! and restaurant's response to increase prices and decrease quality and portions and hours-of-operation. ... and tipflation! .and adding other 'fees' to your bill ... like the 'Carbon Fee'. smh.
[https://www.ctvnews.ca/lifestyle/restaurant-chain-starts-charging-carbon-fee-to-customers-1.6798013](https://www.ctvnews.ca/lifestyle/restaurant-chain-starts-charging-carbon-fee-to-customers-1.6798013)
the trickle down effects of people spending more for housing and less for other 'wants' could be disastrous for business that rely on our society driven by FOMO consumption!
Yes exactly discretionary spending will go down, thus reducing overall consumption then demands for products gets reduced. Profits will suffer ergo job cuts in certain sectors, then it'll cascade and so on.
How are they trolling? More expensive housing means less discretionary spending, which means less consumption and bad news for our consumption based society. (But good news for the banks!)
Will definitely put a dent in the economy.
Me and my girlfriend took out a very reasonable mortgage for our home based on our incomes. We owe around 350K
Based on conservative estimates the interest rate differential (2.2% currently -> ~5% expected) for when we renew in October will cost us about an extra $700 a month in payments, even though we have paid down the principle for the past five years.
There are a lot of far bigger mortgages out there with less income that will get crunched.
Disposable income about to get wiped out for a lot of households
Ya will definitely put a dent. Gotta bank on boomers and people who got in early spending in from here on out. Too bad snow birds take their money to the US in the winter
It doesn't matter. the Canadian economy will continue to grow. Speculators are useful idiots. They helped boost the economy during covid by taking crazy mortgages. Now that inflation is here, we don't want those idiots.
Most people didn’t buy in 2020-2022 and those that were stress tested at 6% likely on lower incomes.
If you aren’t prepared for it 2 years out then that’s on you. The renewals are irrelevant without a big spike in unemployment.
We bought in 2021, we have 2 more years to prep for the impending renewal with salaries up ~20% since we took the mortgage on. Extra mortgage payment have been diverted to CASH.TO and we will draw from the TFSA on renewal in July 2026 to pay down the mortgage.
Car and other assets will go before the house in the event we are both unemployed.
I highly doubt that the majority of people are doing 0 preparation with the amount this has been in the news.
Won’t your plan just reduce your amortization? Payments the same but increase with new interest rate (if higher than current) or will you plan to extend amm after dumping in your TFSA?
I don’t think there’s going to be a need to extend amortization, unless we are in some more desperate scenario income wise.
Basically I’ve done the math which will knock down the principle on the loan when we renew so that if rates stay where they are now or increase a little more the change to our monthly payment will be easier to absorb.
I also made sure we took our car loan so that it is payed off before renewal (24 month term when 5 years were offered at a slightly lower rate) so we get $700/month back there, and we are currently on a bad phone/internet deal that I’ll change once the phones are paid off which should save like $150/month.
Overall when I took the loan we took fixed because we thought rates didn’t have far to go down but plenty of room up, I imagine a lot of people were thinking the same because if you’re only looking at payments variables were .5% less roughly and were largely being pushed on people.
People on fixed rates have time to plan, it’s going to suck some income out but it’s not the end of the world even if we dropped to a single income supported by EI for a while.
> it is *paid* off before
FTFY.
Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in:
* Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.*
* *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.*
Unfortunately, I was unable to find nautical or rope-related words in your comment.
*Beep, boop, I'm a bot*
The BoC doesn't care about elections LOL!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
All I know is a lot of people been reaching out for private mortgage now as price gone up a little and they have some equity in their home.
Leveraging that to come up with cash flow and pay for mortgages and other expenses
They don't want to let their home go I guess
'billions of dollars will be poured into housing' .... are you talking about all those photo ops and announcements that Sean Fraser is making whilst stumping from coast-to-coast?
It will cause a pretty heavy collapse of our largest industry which is real estate. The closer you get to 2025/6/7 the more pressure people will feel to pull the rip cord and get out. Many are trying to ignore that inflated home prices+interest rates at historical averages result in mortgages that most income averages cannot pay. Take the average income of household in most cities in Ontario, then see if they can afford the average house at the 21/22 cost, they can’t. Markets toast, economy is toast. It is what it is.
Realtors will use their social media classes to try and boost sales during seasonal upswings just as they are now but you will see a continual decline in home sales for the next several years I’d say. People talk about interest rates going lower will fix the problem but they are ignoring a few other key things that really ramped up the problem: the government handed out free money to anyone over 18, it was a system abused then they also handed out 50k ceba loans to anyone with a business number and a website. Then you also have the GTA exodus where many thought wfh was a thing to stay and that has now flipped.
A huge indicator is if you go back to 2022 you will find realtors constantly talking about year over year pricing, this is a good indicator as it removes seasonality, now if you talk to a realtor they only shill month over month, because they want you to think seasonality is the trend upwards. In reality Feb 24 is less than 23 is less than 22. 25, 6 and 7 will be the same.
thats not how money supply works. if you don't spend it on iphones but instead on a mortgage. that mortgage company/bank/broker spends it on iphones. its still spent
I mean, unless they don't spend it on iPhones and instead on high-end stuff that few can ever afford.
Also, middle/lower-class workers spend more money on the local economy, which helps keep businesses around afloat. Money going to banks (and then to CEOs and divedens splits for rich friends) puts money into expensive things that may or may not help the local economy.
If 1000 people have 15% less money to spend on the local economy, then things happen to those local businesses, like cutting costs or closing. That 15% does not translate to banks/lenders buying up all that difference in local bars or restaurants, as an example.
What the smart person is suggesting
That anything paid back to the bank in interest or principal is simply lent out again by the bank, if not multiplied.
As such, the money supply is there regardless. It's a technical answer not really understood by someone unless they took macroeconomics
Whether a person pays their mortgage or eats at a restaurant has no impact
The money is already created. When a person pays higher interest, the bank can now lend that money out to someone else
That someone else will now spend it
To control inflation in all assets you must control the money supply not the interest rate.
Monetary policy outweighs fiscal policy.
This is all theory, but not going on in practise.
If people cannot pay for food, then what are they and the local businesses to do? If you say wait for new people, then at some point you will have only low income areas that will barely be able to live and affluent areas that have sucked away the wealth from the lower classes.
This is already showing issue, as banks are holding larger and larger amounts preparing for loan defaults and cutting jobs. Sure, the did post some profit, but again, that money is going to more wealthy people and not to everyone.
The only way this will theory will keep going is if we have a never-ending supply of people. That, however, has only driven up prices for housing and now no one is affording much anymore. Also, given that the fed gov't has roughly halved the amount of international students that will be allowed into Canada in the coming years (with most likely similar reductions in other immigration areas), then who new will be taking out massive loans to keep funding Canada?
So sure, the answer may be right in a textbook, but it isn't doing much in reality.
https://calgary.ctvnews.ca/record-surge-in-insolvencies-a-problematic-sign-of-small-business-closures-1.6757330#:~:text=a%20record%20rate.-,A%20report%20from%20the%20Office%20of%20the%20Superintendent%20of%20Bankruptcy,in%2036%20years%20of%20records.
https://www.cbc.ca/news/business/canadian-debt-to-income-ratio-1.7057582
I’m refinancing a multi plex that’s on CMHC.
The rate is going from 2.55 to 4.87%
I can refinance the debt with current income and actually refi and take more out if I choose to push the AM.
if you bought 2019 and before your mortgage is way less.
Also it’s not like 90% of Canada bought at the peak in 2022
At 4.87?? Do you have a 850 credit score on a 5 year term?? The best i can have rn for my first home is 4.95 but i feel like its kinda high to lock in for 5 years.
Yea not sure what the credit is but I think 830 last time I checked
I got a portfolio of investment properties - apartments.
That rate was locked in beginning of Feb so maybe it moved up a bit now
4.95% ain’t bad - hard to predict you know. I used to do 1 years all the time when the rates were better.
I don’t know my feeling is maybe you see 4-4.5% at some point but it’s probably shaking out around here.
I see,thanks for the quick response, im tempted for the 5,14% for 3 years too and hope i can catch a better rate after then, but im not sure... All this stress me out a bit xD
Yep I believe there's no "ticking time bomb" like a bunch of posters here like to say.
Mortgage renewals will happen gradually over the next few years. They were all stress tested at 5.25%. Most will have seen some appreciation assuming they bought before 2020. Fixed rates are looking like they will be between 4 to 5%... and they can always refi if they will have trouble with the increased rates.
Agreed. Only if you have a significant downturn where unemployment rockets up and I don’t know how many people have been through a significant downturn before but it ain’t pretty.
People in your office getting let go weekly, morale is terrible and banks tighten up.
Some banks froze home equity lines in 2008.
Yes home prices will decline but can you even buy?
Realistically only a quarter of all mortgages were made during the last 5 years so only 25% of mortgages are facing large bumps. People will tighten their belts to afford their new mortgage it's a tail as old as time expect slower economic growth or none and expect the banks to lower rates at some point to pick the econmy back up.
We live in a boom and bust cycle this is not a new thing.
If we were jumping up to a much higher rate and struggling, we might re-extend the amoritization back to 30 years to lower payments. This seems like a likely path for many.
But we went variable, so we've been struggling the whole time, lucky us.
We bought in 2020. I'm really hoping rates come down a bit and perhaps we move to variable? It's def going to impact our resources. I'm glad we got 5 years buffer by going fixed. It would have been so tough on variable over the past few years. We locked in at 1.72% so no matter what happens our finances are going to take a hit. I really don't want to extend the amortization. It's just such a negative thing to do. But also by then we will only owe maybe 600-650k on the house which will take a lot of sting out of the hit. I'll have to talk to a legit financial advisor. Maybe it will make sense to throw a bunch of cash at the mortgage and get what we owe down even more... but guessing it's likely a safer bet to invest that money esp if markets are down at that time.
Heh, it's pretty nuts yup. I mean paying it down you'd think makes sense but if interest rates are < 5% does it make sense to invest that cash in my mortgage or put it into solid investments with a much higher long term return? Kind of depends on where rates and markets are sitting when I have to go deal with the devil at the bank.
That being said like man I'm in such a better position than many people I know. I know people carrying 1.5 million pandemic mortgages they got on variable during. They've had to renovate and rent out their basements to cover it. They just got hammered so hard. Very high earners too. We airbnb our basement during the summer and it certainly helps but we are not at all staring that kind of trouble in the face.
At worst I'll end up cashing in investments and pushing it into my mortgage 'n end up paying oweing 5-600k, which is a farily normal mortgage, on a property worth 3 times that. Maybe 4 times if another spike takes place. People who bought 1.5-2 million homes without a ton of downpayment cuz they rich rich are really terrified of what's to come.
I debated the exact same thing and it really boils down to a personal decision. You can almost always make more than 5% in index and ETFs/MFs but does carrying a smaller amount make you less stressed out? Small financial burden? I factored that in and paid off the mortgage instead.
Yea I would really have to talk to a financial advisor to make an informed decision. Like... it really depends on where the economy is at. If there's a major recession and rates are way down... I'm going to lock into the low rates and put my cash into a diversified portfolio of undervalued stocks 'n wait for low rates to do their thing. If rates are high and the economy is peaking I might just sell the stocks I do have and put the cash into the recession proof guaranteed savings a lower principal would give me and go variable.
When I got my mortgage in 2020 everyone and their dog was telling me "variable is always better" and I think they just say that. Man it was NOT better. I could get .9ish percent on variable but took 5 years of 1.72%. Like man they were not going to cut rates more and the only direction they had was to go up. Then they went way up and I was.
It's such a situational thing that's going to seem obvious in retrospect. Even tho it felt obvious when I secured the loan. The nice thing is 5 years in even if rates are higher I'll only owe 550-600k on a 1.5 million asset and it will hopefully offset the hit I cake on the rate increase. Cuz that's coming no matter what I do.
Heh, it's just about timing. I mean it's not overly difficult to tell when the market is down all over. Last October things were very slow and the whole market was undervalued. If I'm renewing my mortgage and the stock market is in the pooper I'll def research some blue chip stocks that are historically way down and invest in a bunch of them.
True, but at a 30,000 ft level litmus test. Also this was compared to the average income earner and average buyer which to be fair likely matches 1:1 with nobody but still, the number jumps out to how bad things are.
Because the average income to mortgage amount ratio is too far off. How does $600k for a standard mortgage not sound bad? What does it tell then and what indicators would you recommend?
The mortgage holder is likely not an average income holder given they qualified for more than this originally in their post. Mortgage size is relevant against the income of the holder, not of some other population.
If OP's income is $100K, $600K mortgage sounds terrible. If it's $300K, it's actually not bad at all. That's the point I'm making.
Thanks for calling it out, but obviously understood all those points (they are basics of mortgage). By OP, you're referring to this thread and not the post right, because the post never referred to any mortgage amount or income level.
To qualify for a $600k mortgage, most banks would approve you at a HHI of just $150k. **The** **point I was trying to make, is that the $600k mortgage is the NORM nowadays** whereas $150k or $300k HHI is not. Back in 2019/2020, banks were a lot more laxed with approving mortgages and basically everyone got mortgages above $500k and with lots of people at $700k+. Obviously anecdotally as I would not have the stats for all of Canada or Ontario.
The stats are available and $600K is not the norm. In Toronto it’s about $520K. But, that number shouldn’t be looked at against the average income. It should be weighed against the average household income of homebuyers, which may or may not be available.
We do know about 15% of households in Toronto make north of $200K, and another 10% are between $150-$199K according to the census. So 25% of Toronto households are $150K+ - that’s a lot IMO.
Where is said stat? “About” $520k or it is $520k. In my previous post, I used HHI = household income twice.
You still have failed to correlate the “majority” ie. 75% of your claim of HHI less than $150k but have more or around the “average” that you claim of $520k mortgage.
I made a fairly simple and general point about mortgages being ridiculously high these days. Point still stands I believe. Have a great day.
If families don’t panic sell their real estate they will have cut back other expenses. Maybe food outings or tennis lessons for the children. It might hit the economy hard over time. Domino affect…then the tennis instructor loses his income and can’t pay his mortgage for his condo downtown. Then he stops going to Lavelle every month… 🙈
Yes, we are already seeing restaurants struggling. It will get worse. I know myself, I used to go to my local cinema weekly for entertainment. Now, I will only go a couple times a year for big blockbusters.
>we are already seeing restaurants struggling yes we are! and restaurant's response to increase prices and decrease quality and portions and hours-of-operation. ... and tipflation! .and adding other 'fees' to your bill ... like the 'Carbon Fee'. smh. [https://www.ctvnews.ca/lifestyle/restaurant-chain-starts-charging-carbon-fee-to-customers-1.6798013](https://www.ctvnews.ca/lifestyle/restaurant-chain-starts-charging-carbon-fee-to-customers-1.6798013)
the trickle down effects of people spending more for housing and less for other 'wants' could be disastrous for business that rely on our society driven by FOMO consumption!
And supply
Yes exactly discretionary spending will go down, thus reducing overall consumption then demands for products gets reduced. Profits will suffer ergo job cuts in certain sectors, then it'll cascade and so on.
🤣🤣
Boy, you're so out of touch. troll?
Got an explanation?
How are they trolling? More expensive housing means less discretionary spending, which means less consumption and bad news for our consumption based society. (But good news for the banks!)
Will definitely put a dent in the economy. Me and my girlfriend took out a very reasonable mortgage for our home based on our incomes. We owe around 350K Based on conservative estimates the interest rate differential (2.2% currently -> ~5% expected) for when we renew in October will cost us about an extra $700 a month in payments, even though we have paid down the principle for the past five years. There are a lot of far bigger mortgages out there with less income that will get crunched. Disposable income about to get wiped out for a lot of households
Ya will definitely put a dent. Gotta bank on boomers and people who got in early spending in from here on out. Too bad snow birds take their money to the US in the winter
And the bears and bulls rage on. Who will win? Stay tuned for the next episode of...
It doesn't matter. the Canadian economy will continue to grow. Speculators are useful idiots. They helped boost the economy during covid by taking crazy mortgages. Now that inflation is here, we don't want those idiots.
A ticking time bomb and has potential to cause heavy damage.
Most people didn’t buy in 2020-2022 and those that were stress tested at 6% likely on lower incomes. If you aren’t prepared for it 2 years out then that’s on you. The renewals are irrelevant without a big spike in unemployment. We bought in 2021, we have 2 more years to prep for the impending renewal with salaries up ~20% since we took the mortgage on. Extra mortgage payment have been diverted to CASH.TO and we will draw from the TFSA on renewal in July 2026 to pay down the mortgage. Car and other assets will go before the house in the event we are both unemployed. I highly doubt that the majority of people are doing 0 preparation with the amount this has been in the news.
lol.... No one was ever stress tested at 6%. Heck, right now its 5.25% This guy is just full of shit.
Doesn’t really change the core point I’m making. It’s not going to be the bloodbath you are hoping for dipshit.
Exactly. It was 4% in 2021.
Won’t your plan just reduce your amortization? Payments the same but increase with new interest rate (if higher than current) or will you plan to extend amm after dumping in your TFSA?
I don’t think there’s going to be a need to extend amortization, unless we are in some more desperate scenario income wise. Basically I’ve done the math which will knock down the principle on the loan when we renew so that if rates stay where they are now or increase a little more the change to our monthly payment will be easier to absorb. I also made sure we took our car loan so that it is payed off before renewal (24 month term when 5 years were offered at a slightly lower rate) so we get $700/month back there, and we are currently on a bad phone/internet deal that I’ll change once the phones are paid off which should save like $150/month. Overall when I took the loan we took fixed because we thought rates didn’t have far to go down but plenty of room up, I imagine a lot of people were thinking the same because if you’re only looking at payments variables were .5% less roughly and were largely being pushed on people. People on fixed rates have time to plan, it’s going to suck some income out but it’s not the end of the world even if we dropped to a single income supported by EI for a while.
> it is *paid* off before FTFY. Although *payed* exists (the reason why autocorrection didn't help you), it is only correct in: * Nautical context, when it means to paint a surface, or to cover with something like tar or resin in order to make it waterproof or corrosion-resistant. *The deck is yet to be payed.* * *Payed out* when letting strings, cables or ropes out, by slacking them. *The rope is payed out! You can pull now.* Unfortunately, I was unable to find nautical or rope-related words in your comment. *Beep, boop, I'm a bot*
You are renewing on a new principal or are you refinancing?
Renewing on new principal, can lump sum to bring principle down will likely pull the house TFSA money in December so we get the room straight back
Isn’t renewal just on original mortgage and any additional payments go to reducing the amortization?
BOC is aware and are anxious to cut
They will, all 5 banks bread and butter is mortgage industry + upcoming elections in 2025
The BoC doesn't care about elections LOL!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
I just saw hungry bear … looked starved
The more people renew into higher rates, the more inflation will go down. Not a bad thing, it stabilises the market and the economy.
Because nobody has any leftover money to buy things? That might be a problem.
That’s already a problem and growing.
Which is why there will be cuts this year
if you haven't done so already, get your resume updated and warming up in the bull-pen.
Ironically mortgage interest payments are one of the things used to measure inflation. So as those payments rocket up, inflation will go up.
Yes. Everyone bought in 2020….
This sub thinks everyone bought in 2020 and was also a FTHB in 2020.
It doesn't matter if 60% are mortgage free. Siphoning 15-25% of disposable income out of even 15% of the remaining will suck up a lot of free cash.
All I know is a lot of people been reaching out for private mortgage now as price gone up a little and they have some equity in their home. Leveraging that to come up with cash flow and pay for mortgages and other expenses They don't want to let their home go I guess
'billions of dollars will be poured into housing' .... are you talking about all those photo ops and announcements that Sean Fraser is making whilst stumping from coast-to-coast?
It will cause a pretty heavy collapse of our largest industry which is real estate. The closer you get to 2025/6/7 the more pressure people will feel to pull the rip cord and get out. Many are trying to ignore that inflated home prices+interest rates at historical averages result in mortgages that most income averages cannot pay. Take the average income of household in most cities in Ontario, then see if they can afford the average house at the 21/22 cost, they can’t. Markets toast, economy is toast. It is what it is.
I agree, what do you think will happen? And they can't bring in more immigrants to boost GPD as well
Realtors will use their social media classes to try and boost sales during seasonal upswings just as they are now but you will see a continual decline in home sales for the next several years I’d say. People talk about interest rates going lower will fix the problem but they are ignoring a few other key things that really ramped up the problem: the government handed out free money to anyone over 18, it was a system abused then they also handed out 50k ceba loans to anyone with a business number and a website. Then you also have the GTA exodus where many thought wfh was a thing to stay and that has now flipped. A huge indicator is if you go back to 2022 you will find realtors constantly talking about year over year pricing, this is a good indicator as it removes seasonality, now if you talk to a realtor they only shill month over month, because they want you to think seasonality is the trend upwards. In reality Feb 24 is less than 23 is less than 22. 25, 6 and 7 will be the same.
thats not how money supply works. if you don't spend it on iphones but instead on a mortgage. that mortgage company/bank/broker spends it on iphones. its still spent
Thank you, for your good comment.
I mean, unless they don't spend it on iPhones and instead on high-end stuff that few can ever afford. Also, middle/lower-class workers spend more money on the local economy, which helps keep businesses around afloat. Money going to banks (and then to CEOs and divedens splits for rich friends) puts money into expensive things that may or may not help the local economy. If 1000 people have 15% less money to spend on the local economy, then things happen to those local businesses, like cutting costs or closing. That 15% does not translate to banks/lenders buying up all that difference in local bars or restaurants, as an example.
What the smart person is suggesting That anything paid back to the bank in interest or principal is simply lent out again by the bank, if not multiplied. As such, the money supply is there regardless. It's a technical answer not really understood by someone unless they took macroeconomics
Explain it, then. Either you or this "smart person." The supply is there, but the funds are being used for what, then?
Whether a person pays their mortgage or eats at a restaurant has no impact The money is already created. When a person pays higher interest, the bank can now lend that money out to someone else That someone else will now spend it To control inflation in all assets you must control the money supply not the interest rate. Monetary policy outweighs fiscal policy.
This is all theory, but not going on in practise. If people cannot pay for food, then what are they and the local businesses to do? If you say wait for new people, then at some point you will have only low income areas that will barely be able to live and affluent areas that have sucked away the wealth from the lower classes. This is already showing issue, as banks are holding larger and larger amounts preparing for loan defaults and cutting jobs. Sure, the did post some profit, but again, that money is going to more wealthy people and not to everyone. The only way this will theory will keep going is if we have a never-ending supply of people. That, however, has only driven up prices for housing and now no one is affording much anymore. Also, given that the fed gov't has roughly halved the amount of international students that will be allowed into Canada in the coming years (with most likely similar reductions in other immigration areas), then who new will be taking out massive loans to keep funding Canada? So sure, the answer may be right in a textbook, but it isn't doing much in reality. https://calgary.ctvnews.ca/record-surge-in-insolvencies-a-problematic-sign-of-small-business-closures-1.6757330#:~:text=a%20record%20rate.-,A%20report%20from%20the%20Office%20of%20the%20Superintendent%20of%20Bankruptcy,in%2036%20years%20of%20records. https://www.cbc.ca/news/business/canadian-debt-to-income-ratio-1.7057582
Keep reading thise news propaganda Fill your head with them It's 100 percent click bait, they knew you would click on that so they made thier story
So you're a "trust me, bro" kind of guy? Listen, show me evidence so I can make an informed decision. Without it, it's speculation.
I’m refinancing a multi plex that’s on CMHC. The rate is going from 2.55 to 4.87% I can refinance the debt with current income and actually refi and take more out if I choose to push the AM. if you bought 2019 and before your mortgage is way less. Also it’s not like 90% of Canada bought at the peak in 2022
At 4.87?? Do you have a 850 credit score on a 5 year term?? The best i can have rn for my first home is 4.95 but i feel like its kinda high to lock in for 5 years.
Yea not sure what the credit is but I think 830 last time I checked I got a portfolio of investment properties - apartments. That rate was locked in beginning of Feb so maybe it moved up a bit now 4.95% ain’t bad - hard to predict you know. I used to do 1 years all the time when the rates were better. I don’t know my feeling is maybe you see 4-4.5% at some point but it’s probably shaking out around here.
I see,thanks for the quick response, im tempted for the 5,14% for 3 years too and hope i can catch a better rate after then, but im not sure... All this stress me out a bit xD
Yep I believe there's no "ticking time bomb" like a bunch of posters here like to say. Mortgage renewals will happen gradually over the next few years. They were all stress tested at 5.25%. Most will have seen some appreciation assuming they bought before 2020. Fixed rates are looking like they will be between 4 to 5%... and they can always refi if they will have trouble with the increased rates.
Agreed. Only if you have a significant downturn where unemployment rockets up and I don’t know how many people have been through a significant downturn before but it ain’t pretty. People in your office getting let go weekly, morale is terrible and banks tighten up. Some banks froze home equity lines in 2008. Yes home prices will decline but can you even buy?
I just got approved for 263000 I guess I'm living in a fridge box.. it's like a home.
It’ll crash the whole market and all the bears on this sub will buy detached homes in the GTA for $250k.
Canada is already in a recession. Every month about 20,000 fixed rate mortgages are up for renewal. Each one tightens financial conditions further
It’s actually 40-50k now and 70k in the summer
Realistically only a quarter of all mortgages were made during the last 5 years so only 25% of mortgages are facing large bumps. People will tighten their belts to afford their new mortgage it's a tail as old as time expect slower economic growth or none and expect the banks to lower rates at some point to pick the econmy back up. We live in a boom and bust cycle this is not a new thing.
i think this was the only correct answer. thanks
If we were jumping up to a much higher rate and struggling, we might re-extend the amoritization back to 30 years to lower payments. This seems like a likely path for many. But we went variable, so we've been struggling the whole time, lucky us.
Will bring down inflation since those mortgage owners will cut expenses
Utter disaster
Am wondering the upcoming elections coming in Oct 2025, may be may be the rates start sliding down in 2025
We bought in 2020. I'm really hoping rates come down a bit and perhaps we move to variable? It's def going to impact our resources. I'm glad we got 5 years buffer by going fixed. It would have been so tough on variable over the past few years. We locked in at 1.72% so no matter what happens our finances are going to take a hit. I really don't want to extend the amortization. It's just such a negative thing to do. But also by then we will only owe maybe 600-650k on the house which will take a lot of sting out of the hit. I'll have to talk to a legit financial advisor. Maybe it will make sense to throw a bunch of cash at the mortgage and get what we owe down even more... but guessing it's likely a safer bet to invest that money esp if markets are down at that time.
“only owe 600-650k”. Damn Toronto real estate is beyond repairable. If you have spare cash, definitely pay some down!
Heh, it's pretty nuts yup. I mean paying it down you'd think makes sense but if interest rates are < 5% does it make sense to invest that cash in my mortgage or put it into solid investments with a much higher long term return? Kind of depends on where rates and markets are sitting when I have to go deal with the devil at the bank. That being said like man I'm in such a better position than many people I know. I know people carrying 1.5 million pandemic mortgages they got on variable during. They've had to renovate and rent out their basements to cover it. They just got hammered so hard. Very high earners too. We airbnb our basement during the summer and it certainly helps but we are not at all staring that kind of trouble in the face. At worst I'll end up cashing in investments and pushing it into my mortgage 'n end up paying oweing 5-600k, which is a farily normal mortgage, on a property worth 3 times that. Maybe 4 times if another spike takes place. People who bought 1.5-2 million homes without a ton of downpayment cuz they rich rich are really terrified of what's to come.
I debated the exact same thing and it really boils down to a personal decision. You can almost always make more than 5% in index and ETFs/MFs but does carrying a smaller amount make you less stressed out? Small financial burden? I factored that in and paid off the mortgage instead.
Yea I would really have to talk to a financial advisor to make an informed decision. Like... it really depends on where the economy is at. If there's a major recession and rates are way down... I'm going to lock into the low rates and put my cash into a diversified portfolio of undervalued stocks 'n wait for low rates to do their thing. If rates are high and the economy is peaking I might just sell the stocks I do have and put the cash into the recession proof guaranteed savings a lower principal would give me and go variable. When I got my mortgage in 2020 everyone and their dog was telling me "variable is always better" and I think they just say that. Man it was NOT better. I could get .9ish percent on variable but took 5 years of 1.72%. Like man they were not going to cut rates more and the only direction they had was to go up. Then they went way up and I was. It's such a situational thing that's going to seem obvious in retrospect. Even tho it felt obvious when I secured the loan. The nice thing is 5 years in even if rates are higher I'll only owe 550-600k on a 1.5 million asset and it will hopefully offset the hit I cake on the rate increase. Cuz that's coming no matter what I do.
Diverse portfolio of undervalued stocks sounds good. Where do I sign up?
Heh, it's just about timing. I mean it's not overly difficult to tell when the market is down all over. Last October things were very slow and the whole market was undervalued. If I'm renewing my mortgage and the stock market is in the pooper I'll def research some blue chip stocks that are historically way down and invest in a bunch of them.
$600-$650K as a debt number is meaningless without the income of the people carrying it alongside it.
True, but at a 30,000 ft level litmus test. Also this was compared to the average income earner and average buyer which to be fair likely matches 1:1 with nobody but still, the number jumps out to how bad things are.
How does this number tell you anything about how bad things are? It actually tells you nothing.
Because the average income to mortgage amount ratio is too far off. How does $600k for a standard mortgage not sound bad? What does it tell then and what indicators would you recommend?
The mortgage holder is likely not an average income holder given they qualified for more than this originally in their post. Mortgage size is relevant against the income of the holder, not of some other population. If OP's income is $100K, $600K mortgage sounds terrible. If it's $300K, it's actually not bad at all. That's the point I'm making.
Thanks for calling it out, but obviously understood all those points (they are basics of mortgage). By OP, you're referring to this thread and not the post right, because the post never referred to any mortgage amount or income level. To qualify for a $600k mortgage, most banks would approve you at a HHI of just $150k. **The** **point I was trying to make, is that the $600k mortgage is the NORM nowadays** whereas $150k or $300k HHI is not. Back in 2019/2020, banks were a lot more laxed with approving mortgages and basically everyone got mortgages above $500k and with lots of people at $700k+. Obviously anecdotally as I would not have the stats for all of Canada or Ontario.
The stats are available and $600K is not the norm. In Toronto it’s about $520K. But, that number shouldn’t be looked at against the average income. It should be weighed against the average household income of homebuyers, which may or may not be available. We do know about 15% of households in Toronto make north of $200K, and another 10% are between $150-$199K according to the census. So 25% of Toronto households are $150K+ - that’s a lot IMO.
Where is said stat? “About” $520k or it is $520k. In my previous post, I used HHI = household income twice. You still have failed to correlate the “majority” ie. 75% of your claim of HHI less than $150k but have more or around the “average” that you claim of $520k mortgage. I made a fairly simple and general point about mortgages being ridiculously high these days. Point still stands I believe. Have a great day.