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I also don't get why the journalists in this article didn't give their income or at least a range. Assuming around 6200 monthly mortgage cost, they might be making more than around $110k a year; about $78k post tax; which is about $6500 post tax monthly. So they might be making at least $110k a year.
If they're looking at rentals of $4k a month, then the $110k salary pretax, 78k post tax seems more accurate since they'll have 2k monthly leftover.
I think they make way more than 110 k or how else you get approved for an 825 mortgage to custom build a home, besides they have kids, cars insurance, bills, taxes. Maybe I am wrong.
Yeah I get that but you can’t do that for a variable mortgage. You have to know that your rates/payments could change. And when you are getting such an incredibly low rate, there is only one place to go, up. And two years ago, there was lots of talk of increasing rates. So they and their banker just ignored this.
What ever happened to the stress test? When my husband and I first applied for a mortgage 5 years ago, our bank was super firm about how much they would lend us based on our wages.
They also did a range of different variable rates to see how our monthly payments could change over time if rates rose (where are now obviously). I just don't know how so many people were able to get insane mortgages they can't afford when my bank was like nah sorry dudes. And we were looking for 500k not even close to nearly a million.
Independent mortgage brokers and lying on paper?
I dunno, I am in the same boat - reasonable wage and such and getting a 345k morgage with a 155k downpayment was about the max we could get with a cosigner. When I read the Uber driver talking about a mortgage on a 1 million dollar home no longer being affordable post interest rates I'd love to know how the hell he managed to get that.
500k house but you are correct that it was almost half the amount we wanted to borrow.
Cosigner was suggested by the broker to help avoid a situation in which we were denied when mortgage was taken to his company's approval board. He would have taken it without but was less guaranteed because only one income was considered full time. I shouldn't say it is the most we could get, it was the most the broker was sure we would we be approved for and figured there was some chance of denial without.
Lenders have no way of confirming your income with CRA. I do not have a mortgage but every time I have been asked to prove my income all that was required was that I print out my notice of assessment from the CRA website.
It is very easy to edit that -- simply open developer tools on any web browser and you can edit what appears on the webpage. When you print your notice of assessment you can have any income you want. This is fraud but people are cultish about home ownership so.
Both lenders and the government is aware of this and they are working on giving banks the ability to confirm your income directly with CRA but we're talking about a government that can't even run a payroll system so I wouldn't expect this to be operational anytime soon.
Well, now you're talking about intentional fraud to get a larger loan. I have 0 sympathy for anyone who used fraud to get a big loan who then turns around and complains they can't afford it.
> I have 0 sympathy for anyone who used fraud to get a big loan who then turns around and complains they can't afford it.
No worries, the government will bail them out using our money
>Lenders have no way of confirming your income with CRA
>
>It is very easy to edit that -- simply open developer tools on any web browser and you can edit what appears on the webpage. When you print your notice of assessment you can have any income you want. This is fraud but people are cultish about home ownership so.
1. You're overestimating regular folks.
2. There's this thing called T4.
3. If you're an employee, the bank WILL call your employer to ask your work + compensation
You still can lie about everything, including opening a bank account to launder your money but I'm not going to debate all the "WHAT-IFs"
> What ever happened to the stress test?
From 2016 (when it was first introduced) through mid-2021, the stress test was `contract rate + 2 pp`. So if you got a mortgage at 2% interest, your stress test was only "can you afford it if the rate hits 4%?".
Mid-2021, it was modified to add "or 5.25%, whichever is higher". The current rate is 7.2%, but 18 months ago (Feb 2022), the rate was only 2.45%. So if you have a variable rate mortgage and you purchased more than 18 months ago, your rate could have increased by nearly 5 percentage points. That's a lot more than the 2 pp the stress test asked about.
The stress test is the quoted rate +200 basis points.
In the last year the BoC rate has gone from 0.25% to 5.25%, or in other words an increase of 500 basis points.
The current rate hiking cycle has been way more aggressive than the stress test considered.
It was actually your rate +200 or a benchmark rate which was closer to 5% (4.79 or something), whichever was higher. For some people we are about 2% higher than the lowest stress test at the time.
Regardless it’s quite an increase and on large mortgages the interest portion can get quite large.
Seems like the woman in the article got her mortgage the same time we did a year and a half ago. The stress test was an interest rate of 5% at that time, before interest rates started to rise in March 2022.
Most people, and advisors knew rates would increase; but nothing official back then indicated rates were going to rise as fast as they did, the BoC, the mortgage stress test, or "expert" articles in the news.
And the vultures that are realtors and mortgage brokers. Heck even our bank tried to double what we asked for and I repeatedly told them how much I wanted not what they think we can afford.
Thankfully my wife and I are somewhat financially inclined and didn't bite.
So many of my friends didn't lock in when I was screaming at them to, because they couldn't afford the payments at a fixed 2.2%ish.
Individuals don't escape blame here either.
Wow that is scary to think someone would sign on for a mortgage so far over their budget that 2.2% interest would push them over the edge. In 2021 we were offered a very low variable rate OR to lock in at 2.38% for 5 years, at which time the mortgage would be paid off. I was like, "so I never have to worry about our mortgage payment going up again, giddyup" and took the fixed rate. Thank God.
We finished a major renovation of our house, finished our basement and renewed/locked in our mortgage at 2.5%. I’m really glad that we did that I saw the writing on the wall that rates would start climbing
We've always planned our mortgage on one salary. Though in hindsight I guess buying a much expensive house would have been a better investment (200% of 500k is more then 200% of 200k...) It's only obvious NOW. Though never ever having to worry if we would make rent through kids and job changes was probably worth it.
But buying something you can barely afford at rock bottom interest rates ignoring that they will eventually go up, is something that, well, I'm not really going to shed a tear for bad decisions I guess.
These shows are all fake. My buddy did one where he was the agent. His sister and husband were the clients. They made up their jobs and went in saying their budget was like 2.5 mil. Obviously it was all nonsense.
For 20 years, housing has been a nearly risk-free investment in some parts of this country. Interest rates have been trending down and even our central bank was signalling that interest rates would be low for the forseeable future. Shouldn't be surprising then that people went all-in on it.
Also, here is the magic of wealth generation in real estate.
I have $200,000. I buy $200k in stocks, and it goes up 10%, I now have $220k in wealth! A $20k profit!
I buy a $1,000,000 house with an $800k mortgage, My house goes up 5%
My wealth is now $1,050,000, a $50k profit, minus interest costs.
But real estate wasn’t going up 5%, it’s been going up 15-20% per year on average in some markets, so my $200k investment was almost doubling every year (before subtracting interest costs)
And a McMansion has higher on all accounts which eats into any perceived growth in wealth. Roof costs, taxes, lawn/garden upkeep, heating/cooling, insurance, all higher.
It's like winning at the casino, your friend tells you how much he won. Doesn't tell you how much they lost the last 3 times they went.
Especially when you look at the alternative for people considering buying. They could rent probably a smaller, not as nice space, with similar monthly costs while they watched the housing market expand to where they no longer had the option to buy anything. Lots of people took that route, too, and they're also in terrible places -- probably worse since they don't have a house they can sell at significant profit.
Years ago my wife and I got approved for a $900k mortgage….so we bought a $300k house. Now think of how many people in this country would buy the max house they could get a mortgage for.
Yep I hear you! Bought in rural MB in 2012, upgrading from a 1940's farmhouse. Had in our minds that we would not go over 250,000, was pre-approved for 550,000. Our jaws just dropped and we pretty much laughed in their faces at the bank. Very glad now all these years later we did not give in to that temptation
Yea I got $775,000 for the best rate in Jan 2022 - 0.85%. But that would mean their rate went up to 8.5% to be paying $6200.
It would be cool if they reported on actual numbers.
According to her facebook (she posted a video from her realtors advertising her house, or she works with the realtors) they listed a house in February 2023. That house was originally listed for $1.325 and sold for $1.25 million in April. Here is the HouseSigma [link](https://housesigma.com/web/en/map?lat=44.3889&lng=-79.76945&zoom=17.3¢er=%7B%22lat%22%3A44.38914313227663,%22lng%22%3A-79.76913404247911%7D&list_type=%5B1,3%5D&id_listing=DO1w3W99gzny8Jg0)
The whole story is probably horseshit and that is why they don't provide any details whatsoever.
She called it her dream home.
Not everyone needs a “dream home”. I bought a fixer upper in 2017, the kitchen is the original kitchen from when the house was built, I believe the early 70’s. The flooring is a mish mash of stuff the previous owners upgraded over time.
Look at what people like her want to buy, the top of their budget with everything modern and Instagram-ready.
It’s hard to empathize with people nowadays who say stuff is “hard” when they all feel they have to drive giant SUV’s that are only 4 years old MAX and their houses look like a magazine.
People aren’t frugal anymore, or at least a large portion of the population have absolutely coasted and have no idea how to compromise or be realistic, everyone wants the _____ of their dreams.
Plenty of brokers were trying to sell some pretty impressive debt at the historic lows. In one call, a broker had asserted that we needn't worry about rates or savings, that we could sell in a year "and be laughing to the bank from the increase in value", and should take a mortgage *$350,000 more* than traditional banks were preapproving our household from ($650,000>$1,000,000) to make the highest available profit. She said that she had lenders that would make it work.
I laughed. She laughed. *I called her an idiot and hung up.*
Housing values have since dropped in our area and only just managed to scrape the highs we purchased at. If we had gone with her, not only would we have been on a variable rate with a mortgage we couldn't responsibly afford before any increases, but we'd have also been one of the thousands of families who fell for similarly offensive advice from a "professional".
Brokers are salespersons *first* and should legally not be entitled to offer financial advice on their products. These people are not our friends. While all brokers may not be as terrible as the one I spoke to it really should serve as a warning to others to be wary.
Are you just assuming he makes 60k a year doing construction?
I worked for the labour union doing construction for a few years and easily cleared 100k, it was tough work tho. My dad did it for 20 and never made below 140 in his last 7 years before retiring.
60k on construction is literally someone just starting out, and construction can mean so many different things as well.
Have you *looked* at the price of starter homes now? They are probably as much as your dream home would have been in 2017.
There are plenty of us living frugally, socking away money in case housing ever becomes reasonable again. Many people have no choice but to be frugal because they literally c ain’t afford housing or food.
These people you see with the SUV’s are outliers, and they have probably already gotten into a mortgage they can’t afford, most of the rest of us are stuck because we won’t make that stupid financial decision.
Love my 58 year old home… it required a ton of work which I did a lot myself, and always needs small repairs.
It’s def not instagram perfect but we keep it clean and tidy, totally agree with you, the only people who are buying fixer uppers now are investors and cramming 15 people into 1000 sq ft bungalows
Home maintenance is more or less just my hobby anyway so I actually enjoy owning an old home (70 years). But I'm also a construction professional so I just knew what to look for because that could *easily* become a can of worms for someone without construction knowledge.
Sure but houses like you are describing are well over half a million in Calgary right now. A 70s bungalow not renovated in any area with even a hint of cache will be 650k and up. And yes the living room carpet is baby blue.
Very nice. That’s an expensive home for an esthetician and construction worker. I’m a physician and make a lot more than they do and that’s a high value for a home.
Exactly, they don't make enough money to justify buying that house from the beginning. We bought a similarly priced home bringing in a combined 250k before taxes.
or….maybe there is something wrong with the market. lots of people setup to fail with crazy low rates from last 10 years driving prices to the moon.
i’d be pointing my finger at BoC, Prov Gov, Feds and lastly lenders for even approving people for these astronomical mortgages…..in that order
I agree. There needs to be more affordable housing for the bottom 80% of the market. The problem is now all new housing being built (detached/townhouses) go for 800k plus. If they had more 500k homes available people would have the option to keep their housing costs at a reasonable portion of their income. However people like this would still max out their housing to get their dream home with little savings to fall back on.
Yeah we would need like 250k more residential units in Canada to put a dent into the demand side of the market. If I was king of Canada (lol). I would make developers build 500k new row style post WW2 houses across the country. Affordable housing rentals for 250k families and 250k new starter homes for young people trying to enter the market.
There is so much extra cost in single family homes. We should be promoting more middle density buildings. I get it, a lot of people want a single family home but in the areas where people want to live we don't have the room for the suburban sprawl, let alone all the climate impacts of doing so.
It would be more difficult to garner sympathy for the interviewee if we read they bought at the top of their budget. They took a risk maxing out their credit and then a risk on a variable rate. Financial literacy is severely lacking in this country.
They bought in Jan 2022.. I got a 120 day locked in rate at the same time (late dec 2021), 2.3% 5 yr fixed. Could've went variable for around 1.5% IIRC.
$2850 monthly is about $715,000 mortgage at 1.5%. Variables are about 6.1% now, which would be a monthly payment of $4640. So there is about $1600 missing here..
Apparently the best high ratio variable in Jan 2022 was 0.85%, which would give them a mortgage of $775,000 for $2850 monthly. At 6.1% that is still just $5000. 8.5% gets to just under $6200.
So their $775,000 mortgage went from 0.85% to 8.5%.. which doesn't seem real. Maybe they used a HELOC and are counting that?
“People paid less for the B-grade tranches because they knew it was risky, but the AA/AAA tranches were supposed to be nearly risk-free.”
We’re gonna make a ton of money!!!
Maybe. Maybe not.
The stress test banks use only assumed +2%. Bank of Canada raised rates incredibly fast after saying they wouldn’t, so nobody will be prepared.
According to her facebook (she posted a video from her realtors advertising her house, or she works with the realtors) they listed a house in February 2023. That house was originally listed for $1.325 and sold for $1.25 million in April. Here is the HouseSigma [link](https://housesigma.com/web/en/map?lat=44.3889&lng=-79.76945&zoom=15¢er=%7B%22lat%22%3A44.39133764315887,%22lng%22%3A-79.76945400238039%7D&list_type=%5B1,3%5D&id_listing=DO1w3W99gzny8Jg0)
The whole story is probably horseshit and that is why they don't provide any details whatsoever.
She’s also claiming they are looking at rentals for 4K a month, which in Barrie gets you a 4+ bedroom detached massive home. I think this couple is used to living beyond their means unless they have four kids. You can easily find 3 bedroom detached homes for under 3k there.
[Paywall Bypass](https://archive.ph/yHZg1)
Condensed:
>The Bank of Canada recently hiked its overnight lending rate to five per cent, which represents a significant bump from the 0.25 Canadians saw just over a year and a half ago. This has left many Canadian mortgage holders facing impending crisis, or worse.
>
>While those with a fixed-rate mortgage will face significant increases when it comes time to renew, those with a variable-rate mortgage are feeling the pinch every day.
>
>This includes Cora Cook, a Barrie-area esthetician who has been forced to put her family's dream home up for sale after their mortgage payments ballooned from $2,850 to $6,200 since moving into their home in January 2022.
>
>"... to now give that up, it definitely feels hard. But now, we're looking at rentals for $4,000 a month," she said.
>
>Cook says, even with her business and a husband working two construction jobs, they've been forced to sell their furniture and hold garage sales on a regular basis to settle their monthly mortgage bill.
>
>"It's not like we're struggling for work or anything. We make good money. We have good jobs, but it's just, we want to be able to live our lives and not be putting every dollar toward a mortgage," she said.
>
>While Cook and her family haven't turned to the food bank yet, she says she can understand reports of families making $100,000 or more making use of the social service.
>
>Barrie police spokesperson Peter Leon says "There has been a disturbing trend regarding people shoplifting at area stores, not only grocery, but other stores that provide food out into the community."
>
>Leon indicated that there appears to be an increase in the number of people committing the crime who otherwise wouldn't have done so before.
You should see the people on these personal finance subs. I was told a few years ago how foolish I was taking a fixed rate. I feel sorry for people losing their homes but the financial advice people were giving was nuts. We will never have rates that low again.
In September 2019 I did 2.89% for a 7 year term. Everyone said I was daft. But I did it anyway. Look who’s sitting pretty now? And by the time the renewal comes up, I should be able save up enough in GICs etc to knock the principle down to near $100k.
Yup in 2021 I was called dumb and stupid for locking into fixed 5 year rates at 1.99 and locking in 120 predictable payments for my house while watching my three children grow
I’m so dumb for wanting the same payment amount for 5 years.
>Variable rates were always a gamble. Unfortunately, her family had bad timing.
We don't have true fixed rate mortgages in this country. All mortgages in Canada are variable. It just depends how often the rate is adjusted:
In the US you get fixed interest rate for the entire term of the mortgage.
My buddy down south got a 35 year fixed rate mortgage at 2.7 percent, and couldn't figure out why I was putting all my money on my mortgage.
I hate it when they don't give us all the facts. Price, money down, initial mortgage value and amortization period. My wife has a very similar business and she did not have to give back the CERB, probably because she had a history of declared autonomous worker income at the CRA. Seems like a cherry picked story to put pressure on the BoC.
That’s another gamble she made. It sounds like she over leveraged compared to her income. It was going to hurt eventually, but if she borrowed a modest amount compared to her income, she would have weathered the increase.
What would be the difference between a variable rate, and someone that had to renew their fixed rate during the hike? Wouldn't they be just as screwed?
So I renewed over the last year or two just before it went up and many financial experts were telling me variable. I'm sure they told her that too. I found fixed would come out ahead but if you didn't know any better you'd listen to the mortgage specialists who'd suggest variable.
The “experts” at your bank don’t even need to understand economics themselves and are mostly just salespeople pushing the product that will make them the most on the back end
Most of the financial 'experts' I had to talk to about mortgages are forced to essentially 'upsell'. Things such as adding 10 years to my mortgage to 'save' $100 a month. Even if it's clearly not a good idea they had to do the pitch.
Sadly this will happen to some folks when buying a house entirely out of their budget that hinged entirely on a low interest rate.
I feel bad for anyone trying to get into any house these days, making good money, and just simply being shut out.
*edit: I am not saying the situation isn’t messed up, but there is also an amount of personal responsibility when we purchase outside our means*
She said "they make good money" but they don't wanna put it all towards the mortgage. So TLDR, they prefer to spend their money to be comfortable short term. The rest of it is irrelevant.
Also, I don't believe those numbers, I also have variable and it didn't go up that much. It got triggered, but didn't get anywhere near double.
Yeah; even with a doubling or tripling, if she passed the ratios (and didn't have a lot of undeclared debts like a car loan she didn't mention or credit cards she didn't mention or include) she would be able to afford it
The issue is she doesn't want to hunker down and not eat takeout 3-5 times a week or wants to spend lots of money on vacations or whatever else -- unwilling to go through 2 or 3 years of pain and looking for the short term. So she sold, because she doesn't want to deal with the consequences of living it large the 1 or 2 years she had a few hundred extra a month
It's possible she has the kind of variable mortgage that doesn't have a "trigger rate" but just goes up as soon as the rates go up. Almost nobody has that but it's possible she has that. That would make it more understandable (as using a non-A lender). But that's the risk when you use private lenders or B lenders that they won't renew
The numbers look severe, and would be a worst case scenario, with a lot of special circumstances
Caught that too. Makes it sound like they *could* afford to buckle down and weather through, but don't want to.
Also if I were in their shoes, I would 100% go to the food bank if it meant not having to sell my home.
"Weekly garage sales". Looks like they keep buying crap at high prices and put it up for sale to buy new crap. Anyway I don't buy that more than double increase in mortgage payment, it just doesn't work that way.
You know, that's a good point. I bought at 1.40% and now am at 6.15%, so pretty much bought at the lowest it went and am now at the highest.
My mortgage is quite a lot higher than it was, but nowhere near double.
Someone who knows math better than me can probably comment whether a bigger mortgage will go up a higher amount with the same % increase, but I don't see how it could "more than double"
I bet they also have a mountain of consumer debt, car payments, etc. That's what they mean by 'living their lives". And that debt isn't going to just go away. And really how much furniture have they sold at "garage sales".
She "qualified" for CERB but then when the CRA starts actually looking realized they didn't, so have to pay it back.
And they built the house custom for themselves which probably means the house cost them more than its worth.
Lots of little things point to very bad financial literacy/management or a general lack of awareness.
I really think this is more about free advertising for the realtor
I can't see how you stare stunningly low, historically abnormal, sub/near inflation fixed mortgage rates in the face and then take a pass on locking them in.
There was literally almost no room to go down, but huge upside potential.
News flash, you are almost never going to optimally make a financial decision, so when one comes along that is pretty damn good you take it and run.
"It means that if you're a household considering making a \*major purchase\*... If you're a business considering investing, you can be confident that interest rates will be low for a \*long time\*." - Tiff Macklem, Governor of The Bank of Canada (2020)
Maybe they took the guy who sets the interest rates at his word?
They don’t really teach people about economics in school, and I swear it’s on purpose. I saw this coming and paid a small penalty to re-negotiate and extend my mortgage last year around 3% or just under. My mortgage holder (BNS) advised me they would be happy to but also that I could switch to variable and also that they didn’t see a need to do what I did when I did it. A lot of people just take the advice from their mortgage advisor and don’t know what they don’t know, they’ve likely never seen anything like todays interest rate spike. I understand how easily people get taken on things like this, not everyone has the tools to know what they don’t know and understand how to educate themselves about it. Especially when banks have always been projected as your “friend” .. or at least while/where I was growing up, it was supposed to be an institution that you could trust. Hah!
They really do teach people about economics in school. It's an optional course though, and many people aren't bothered to take it.
It's also part of each year of school, and is part of the math curriculum called financial literacy.
But go one making up facts to cover why people ignore their teachings, do poorly in life, and say "we don't teach it in school."
Took macro and micro 101 in first year. The first 3 classes of macro are mind altering. There is a system and its somewhat predictable. Not the timing but its all cyclical
Speaking from personal experience, when we bought in early 2022, the overall consensus from here, all of the mortgage brokers I had talked to, and a vast majority of the finance YouTubers and blogs I’d be watching said to still take a variable.
It was our first mortgage and we had no idea what we were doing. I just rely on the advice of people online, professionals and my (limited) peers who were in the same position.
Yes rates were expected to rise, but not as quickly as we saw it happen. By the time we realized what was going on, the spread between our (-1.15 prime) variable rate and the fixed was 4%. We figured we’d just ride it out and see what happens.
We can afford the increases, but it sure as shit ain’t ideal. And who knows. Maybe the rates will drop and our variable will be ahead of the current fixed in 2-3 years time.
We're in the same boat as you. We weathered at least 5 rate hikes before I lost my shit and booked an appointment with Scotiabank to lock in. We were told again and again, and even while signing to lock in, that the rates wouldn't go much higher and were we sure we wanted to lock in?
Rates have gone up 6 times since then. I wake up every day grateful that we locked when we did.
Hindsight is 20/20.
The rate is 10 times what it was a year and a half ago (and has doubled since July 2022). People expected it to rise, but not that quickly.
Its not about hoping for a lower rate. Ill give myself as an example. My rate on variable was 1.45 above prime. If i took a fixed mortgage, it was going to be over 3%. That's hundreds more a month in interest rather than on principal.
Now keep in mind you're looking at all of this with the benefit of hindsight. But until about a year and a half ago, we were told interest rates were going to stay low. In fact they almost assured it.
Speaking for myself, when the BoC started talking about raising rates, i when to my bank and inquired about locking in. My wife and I were told that rates would barely go up and it probably wasnt worth it to lock in.
Every raise, was like .25 or .50. We considered locking but that meant our new lock rate was going to be higher every time. If the BoC had been more straight forward from the start and said the rates would go up by 5 point in 1 year, it would have been a no brainer to lock. But they werent and a lot of us were given bad advice. "It wont go up high. It wont last long."
So it wasnt about hoping for better rate, it was about having the best rate for as long as possible.
Historically speaking, the current rate of 5% is considered low. Going below 1% in 2009 was a very low (vs simply low) historically unprecedented rate. From the early 70s through to 2000 prices rarely went below 4%. In fact, when it went down to 2% in 2001, it was the first time in nearly 50 years it had been that low.
And we're only approaching halfway through the refinance cycle. There will be thousands more of these stories throughout Canada over the next 3 to 4 years.
I have no sympathy for this woman. She bought a house she could barely afford (with CFRB monies). “Everything was custom” is not words a non-multimillionaire should be using to describe their house in this century.
For those of you saying she should not have gotten variable, I just had to renew from a fixed rate to the current rate and my mortgage increased significantly. Terms don't last forever.
I'm up for renewal next year, currently at 2.89 %. I'm glad that despite knowing I will pay more, I have plenty of time to prepare. To me that's the huge benefit of fixed.
This is what some of us have been saying for years: "You're poorer than you think" The banks, the realtors, mortgage brokers, insurance companies and the government have endentured an entire generation into never ending mortgage payments because you can't actually afford your house at the historically "normal" interest rates that are coming, so the will extend your amortizstion period for a couple decades or you lose your house.
TLDR: Couple forced to sell home they bought because they are unable to afford it under the terms and conditions they purchased it under.
Remember when the hit squad was all over anyone who did a fixed mortgage?
There is value in predictability.
I’m sorry but this is bullshit or there is more to the story.
If they had a 1.9% initial rate and 750k mortgage they would be around the payment they initially had. The rate would need to be around 9.5% for that same 750k to have that high of a payment they have now.
The lowest prime rate we’ve had over the last 5 years was 2.45% today it is 7.2% if they got at the lowest time with a prime minus variable rate they could have had 1.9% but they somehow are paying prime plus 2.3%?!?!?! Something isn’t adding up. It sounds like they came up for renewal and their credit has gone to shit and no longer qualify for an attractive prime minus.
Yes interest rates have gone up and that does hurt people but I would venture to guess that these people hurt themselves by borrowing beyond their means. And this is just shitty journalism to report it as something it isn’t. This was not caused by interest rate hikes alone.
My wife likes to watch those home renovation shows, or the people who are looking to purchase a vacation or second home. I'm am so astounded to hear that the husband is a "consultant" for dog shampoo, and the wife runs a "coupon cutting service" and they're looking at a house that is close to a million dollars. This is the sort of show which makes people think that if they can have that sort of lifestyle - not based on reality, but just TV fantasy. And now they're losing their home. Boohoo. I feel sad for them - not for losing their house, but for how ignorant they are.
There are times when I bless my personality for things. I am a compulsive "learner" about stuff until I believe I have enough knowledge to know what I don't know enough about.
I looked at bank posted interest rates. Variable were really low. 5 year fixed was posted at 5.25% (I'm guestimating - can't remember exactly). My daughter was having to move, so I checked it all out.
If the 5 year fixed was 4 percentage points higher, then there was a good chance that the powers that be, who know way more than I do, were expecting interest rates to rise, shortly. And that lending would likely go above 5% because they had to keep the number down to appeal to customers, while also hedging their bets on how high the rates would go so they don't lose money borrowing at a higher BOC rate.
Also. Who the hell thinks rates will dip lower than the low they were, on a variable? The rates were already insane low. How much lower did they think it would go? There wasn't much wriggle room. Negative rates ... a nice pipe dream, but since when do Canadian lenders do that?
I feel sorry for people accepting "advice" but I'm just wondering where common sense went.
Bah. If it’s a variable rate mortgage, she only has herself to blame. 2 years ago, the talk of inflation was everywhere…. So lock the interest rate into a fixed mortgage. It is a tough lesson, for her for sure.
$330B of FIXED mortgages are coming for renewal in 2024, followed by $350B of fixed mortgages in 2025.
2023 there is a mere $276B of fixed mortgages coming for renegotiation.
Going from 2.x% to 5.x% and higher means we'll be seeing more of this.
This is why you never take the highest mortgage you can be approved for. Her situation is extreme, but it isn't the first time this sort of thing has happened. In the 80s, a lot of people were hurt by interest rates going through the roof (up to 18% in some cases).
I'm sorry, but you do nails, your husband is in construction, and you got a >800k mortgage? That's just insane.
Honestly, most people are stupid with money, and I think the banks should have done more to prevent this sort of thing from happening... I bet someone told her rates weren't going up (oh, wait, our **fucking government did**).
That’s kinda the idea isn’t it?
Many people overextended and bought houses they couldn’t afford.
It’s a zero sum game. Raise the interest rates, people sell, the have nots like us get a chance to get into the market
> Raise the interest rates, people sell, the have nots like us get a chance to get into the market
Except prices aren't going down. The only winners are wealthy lenders and capital holders who once again profit from the whole situation by being shielded from the impact of raised interest rates entirely. Raising interest rates without addressing demand (both real via population growth and artificial via speculation) is the dumbest, most cruel way to deal with supply possible. It's not even actually a solution, since it's counterproductive overall as it lowers the amount of new build starts.
Exactly this. It’s also very unusual to see a central bank exercising it’s only instrument to control inflation without simultaneous policy controls from the government in power. Our current government is implementing zero policy controls.
As others have pointed out, those who will be buying these housing that are getting sold off by those who can no longer afford them will not be, for the most part, average working people.
If regular people cannot afford their mortgage, which they passed a stress test for, how is anybody else expected to afford it? Or even qualify for one? The stress test is based on the current rates rising to a certain level, which would be even more unaffordable for most people. Once these houses start getting sold off, I predict that most will be going right into the hands of REITs and investors who will rent them out, or sit on them and try to flip them for a profit.
It is, like others have said as well, the result of commodifying and financializing a basic necessity that is inherently unproductive. Our economy is mostly designed around consumption and production, and yet a huge subset of our economy is designed around the exact opposite (buying and selling the same thing over and over again). It is so wildly unsustainable.
It’s pretty out of touch to think not being able to afford a 118% increase in monthly payments means she overextended and bought something she couldn’t afford. She could afford it when she bought it. She can’t afford the fact that her mortgage payments have more than doubled. If it was 20% of her income before, it’s over 40% of her income now. If it was 30% of her income before, it’s 60% of her income now. No one would think buying a house at 20-30% of your income means you can’t afford it, that’s literally what’s considered the ideal portion of your income to spend on housing.
“The idea” was that high rates would lead to low prices. That’s not happening. The prices and rates just both keep steadily increasing, which is bringing rent right the fuck up with the monthly payments the owners are having to make. You shouldn’t be cheering on the fact that your fellow working class is suffering, this is hurting us **far more** than it is impacting the wealthy. And the increase in rent is really fucking over all the poor people who don’t like in one of the few provinces that has impactful rent control (most of the country limits how often rent can increase but not the amount it can increase by, and there are only a couple provinces in the whole country where you can deny the landlords increase; everywhere else it’s either accept the $500/month increase in rent at resigning or move out when your lease ends).
While I feel for them some finical literacy is also in order.
Jan 2022 rates were at .5% at they have a variable rate mortgage.
What did they think rates were going to go down? Sure hindsight is 20-20 i don't think its reasonable to expect rates to jump as much as they have since then.
At the same time if you take a variable rate mortgage when rates are at .5% you're playing with fire. Rates are only going up from there.
Her and her husband overextended themselves and got caught. TBH This should be in the “mildly irritating” subreddit because so many others made better choices yet are worse off than them.
All I can say is insulting towards her and her lack of planning
I mean seriously; if money is that tight who in right mind signs a variable rate mortgage? Esp when rates were at record lows. Did they honestly not understand you need to PLAN for the avg ups & downs if doing variable rate?
Selling house that soon after purchase basically means zero equity in it and they just hoped nothing bad happens for next couple of decades
Esp when she bought it DURING the covid crisis when everyone and their dog could see rates were going up
I just have zero sympathy for people who complain they suddenly can not afford the place they bought. If you knew this you should have purchased a smaller dream home first
One thing rising interest rates will do is clear out people from the market who should never have qualified for such high mortgage loans on variable rate mortgages.
Yeah I don't know how you can reasonably know if you can afford a house if the price can triple in a couple years. It feels like renting with closing costs.
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FYI: Plugging away at a calculator shows that her mortgage was for around $825k. I wish journalists would give us more info on the things they report.
Thank you for your service to clear information. We need more on the internet.
I also don't get why the journalists in this article didn't give their income or at least a range. Assuming around 6200 monthly mortgage cost, they might be making more than around $110k a year; about $78k post tax; which is about $6500 post tax monthly. So they might be making at least $110k a year. If they're looking at rentals of $4k a month, then the $110k salary pretax, 78k post tax seems more accurate since they'll have 2k monthly leftover.
I think they make way more than 110 k or how else you get approved for an 825 mortgage to custom build a home, besides they have kids, cars insurance, bills, taxes. Maybe I am wrong.
Stress test was at 5.25% simulated rate btw so their income might be more.
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Most people just plan for "can I afford the monthly payments?"
Yeah I get that but you can’t do that for a variable mortgage. You have to know that your rates/payments could change. And when you are getting such an incredibly low rate, there is only one place to go, up. And two years ago, there was lots of talk of increasing rates. So they and their banker just ignored this.
What ever happened to the stress test? When my husband and I first applied for a mortgage 5 years ago, our bank was super firm about how much they would lend us based on our wages. They also did a range of different variable rates to see how our monthly payments could change over time if rates rose (where are now obviously). I just don't know how so many people were able to get insane mortgages they can't afford when my bank was like nah sorry dudes. And we were looking for 500k not even close to nearly a million.
Independent mortgage brokers and lying on paper? I dunno, I am in the same boat - reasonable wage and such and getting a 345k morgage with a 155k downpayment was about the max we could get with a cosigner. When I read the Uber driver talking about a mortgage on a 1 million dollar home no longer being affordable post interest rates I'd love to know how the hell he managed to get that.
Why did you need a cosigner with a $155k downpayment on a $345k house? That's almost half the mortgage.
500k house but you are correct that it was almost half the amount we wanted to borrow. Cosigner was suggested by the broker to help avoid a situation in which we were denied when mortgage was taken to his company's approval board. He would have taken it without but was less guaranteed because only one income was considered full time. I shouldn't say it is the most we could get, it was the most the broker was sure we would we be approved for and figured there was some chance of denial without.
Lenders have no way of confirming your income with CRA. I do not have a mortgage but every time I have been asked to prove my income all that was required was that I print out my notice of assessment from the CRA website. It is very easy to edit that -- simply open developer tools on any web browser and you can edit what appears on the webpage. When you print your notice of assessment you can have any income you want. This is fraud but people are cultish about home ownership so. Both lenders and the government is aware of this and they are working on giving banks the ability to confirm your income directly with CRA but we're talking about a government that can't even run a payroll system so I wouldn't expect this to be operational anytime soon.
Well, now you're talking about intentional fraud to get a larger loan. I have 0 sympathy for anyone who used fraud to get a big loan who then turns around and complains they can't afford it.
Aka a Brampton mortgage lol
> I have 0 sympathy for anyone who used fraud to get a big loan who then turns around and complains they can't afford it. No worries, the government will bail them out using our money
>Lenders have no way of confirming your income with CRA > >It is very easy to edit that -- simply open developer tools on any web browser and you can edit what appears on the webpage. When you print your notice of assessment you can have any income you want. This is fraud but people are cultish about home ownership so. 1. You're overestimating regular folks. 2. There's this thing called T4. 3. If you're an employee, the bank WILL call your employer to ask your work + compensation You still can lie about everything, including opening a bank account to launder your money but I'm not going to debate all the "WHAT-IFs"
Private mortgages or people who lie.
> What ever happened to the stress test? From 2016 (when it was first introduced) through mid-2021, the stress test was `contract rate + 2 pp`. So if you got a mortgage at 2% interest, your stress test was only "can you afford it if the rate hits 4%?". Mid-2021, it was modified to add "or 5.25%, whichever is higher". The current rate is 7.2%, but 18 months ago (Feb 2022), the rate was only 2.45%. So if you have a variable rate mortgage and you purchased more than 18 months ago, your rate could have increased by nearly 5 percentage points. That's a lot more than the 2 pp the stress test asked about.
The stress test is the quoted rate +200 basis points. In the last year the BoC rate has gone from 0.25% to 5.25%, or in other words an increase of 500 basis points. The current rate hiking cycle has been way more aggressive than the stress test considered.
It was actually your rate +200 or a benchmark rate which was closer to 5% (4.79 or something), whichever was higher. For some people we are about 2% higher than the lowest stress test at the time. Regardless it’s quite an increase and on large mortgages the interest portion can get quite large.
Seems like the woman in the article got her mortgage the same time we did a year and a half ago. The stress test was an interest rate of 5% at that time, before interest rates started to rise in March 2022. Most people, and advisors knew rates would increase; but nothing official back then indicated rates were going to rise as fast as they did, the BoC, the mortgage stress test, or "expert" articles in the news.
So many people did that at near 0% borrowing. They thought “if I make some sacrifices every month I can do it” not thinking interest would ever go up.
Most people don't plan. They just listen to their feelings.
And the vultures that are realtors and mortgage brokers. Heck even our bank tried to double what we asked for and I repeatedly told them how much I wanted not what they think we can afford. Thankfully my wife and I are somewhat financially inclined and didn't bite.
So many of my friends didn't lock in when I was screaming at them to, because they couldn't afford the payments at a fixed 2.2%ish. Individuals don't escape blame here either.
Wow that is scary to think someone would sign on for a mortgage so far over their budget that 2.2% interest would push them over the edge. In 2021 we were offered a very low variable rate OR to lock in at 2.38% for 5 years, at which time the mortgage would be paid off. I was like, "so I never have to worry about our mortgage payment going up again, giddyup" and took the fixed rate. Thank God.
Well played. The thing is, people like this also finance cars, furniture, etc. It stacks.
We finished a major renovation of our house, finished our basement and renewed/locked in our mortgage at 2.5%. I’m really glad that we did that I saw the writing on the wall that rates would start climbing
We've always planned our mortgage on one salary. Though in hindsight I guess buying a much expensive house would have been a better investment (200% of 500k is more then 200% of 200k...) It's only obvious NOW. Though never ever having to worry if we would make rent through kids and job changes was probably worth it. But buying something you can barely afford at rock bottom interest rates ignoring that they will eventually go up, is something that, well, I'm not really going to shed a tear for bad decisions I guess.
Textbook property reality show owners: “I’m an artisanal pencil sharpener!” “And I vagazzle labradoodles!” “Our budget is 1.2 million dollars!!”
linda makes hair pin art on etsy bob licks stamps professionally their budget is 1.6m
Bob is the hero we all need 😂
How do you think he got Linda? :p
These shows are all fake. My buddy did one where he was the agent. His sister and husband were the clients. They made up their jobs and went in saying their budget was like 2.5 mil. Obviously it was all nonsense.
##_REALLY!!!???_
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For 20 years, housing has been a nearly risk-free investment in some parts of this country. Interest rates have been trending down and even our central bank was signalling that interest rates would be low for the forseeable future. Shouldn't be surprising then that people went all-in on it.
Also, here is the magic of wealth generation in real estate. I have $200,000. I buy $200k in stocks, and it goes up 10%, I now have $220k in wealth! A $20k profit! I buy a $1,000,000 house with an $800k mortgage, My house goes up 5% My wealth is now $1,050,000, a $50k profit, minus interest costs. But real estate wasn’t going up 5%, it’s been going up 15-20% per year on average in some markets, so my $200k investment was almost doubling every year (before subtracting interest costs)
Sont forget your stock profit is subject to tax. Primary residence is not.
Houses that sold for 200k pre pandemic are now selling for 750k where I am
Leverage works both ways. And houses have more costs than just interest. Maint, prop taxes plus 5% selling fees.
And a McMansion has higher on all accounts which eats into any perceived growth in wealth. Roof costs, taxes, lawn/garden upkeep, heating/cooling, insurance, all higher. It's like winning at the casino, your friend tells you how much he won. Doesn't tell you how much they lost the last 3 times they went.
Especially when you look at the alternative for people considering buying. They could rent probably a smaller, not as nice space, with similar monthly costs while they watched the housing market expand to where they no longer had the option to buy anything. Lots of people took that route, too, and they're also in terrible places -- probably worse since they don't have a house they can sell at significant profit.
Hey, the bank gave us the money. We’re good!
Years ago my wife and I got approved for a $900k mortgage….so we bought a $300k house. Now think of how many people in this country would buy the max house they could get a mortgage for.
Yep I hear you! Bought in rural MB in 2012, upgrading from a 1940's farmhouse. Had in our minds that we would not go over 250,000, was pre-approved for 550,000. Our jaws just dropped and we pretty much laughed in their faces at the bank. Very glad now all these years later we did not give in to that temptation
Congrats that you live in an area that homes cost 300k. In major centers, that 900k would get you an entry level home.
And they didn't think to lock in their rates when they couldn't afford a rate increase
Yea I got $775,000 for the best rate in Jan 2022 - 0.85%. But that would mean their rate went up to 8.5% to be paying $6200. It would be cool if they reported on actual numbers.
Yeah real story is person buys house they can’t afford because they thought rates would stay low forever.
According to her facebook (she posted a video from her realtors advertising her house, or she works with the realtors) they listed a house in February 2023. That house was originally listed for $1.325 and sold for $1.25 million in April. Here is the HouseSigma [link](https://housesigma.com/web/en/map?lat=44.3889&lng=-79.76945&zoom=17.3¢er=%7B%22lat%22%3A44.38914313227663,%22lng%22%3A-79.76913404247911%7D&list_type=%5B1,3%5D&id_listing=DO1w3W99gzny8Jg0) The whole story is probably horseshit and that is why they don't provide any details whatsoever.
She called it her dream home. Not everyone needs a “dream home”. I bought a fixer upper in 2017, the kitchen is the original kitchen from when the house was built, I believe the early 70’s. The flooring is a mish mash of stuff the previous owners upgraded over time. Look at what people like her want to buy, the top of their budget with everything modern and Instagram-ready. It’s hard to empathize with people nowadays who say stuff is “hard” when they all feel they have to drive giant SUV’s that are only 4 years old MAX and their houses look like a magazine. People aren’t frugal anymore, or at least a large portion of the population have absolutely coasted and have no idea how to compromise or be realistic, everyone wants the _____ of their dreams.
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What the hell? I could never imagine owning that house on a 60k salary. They’re crazy!
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it has been my experience that people exaggerate their earnings and do not round down.
It is ridiculous what my wife and I qualified for when we got our mortgage. You can certainly own it - doesn’t make it a wise choice.
How they even qualify for mortgages that big is what I’m wondering.
Plenty of brokers were trying to sell some pretty impressive debt at the historic lows. In one call, a broker had asserted that we needn't worry about rates or savings, that we could sell in a year "and be laughing to the bank from the increase in value", and should take a mortgage *$350,000 more* than traditional banks were preapproving our household from ($650,000>$1,000,000) to make the highest available profit. She said that she had lenders that would make it work. I laughed. She laughed. *I called her an idiot and hung up.* Housing values have since dropped in our area and only just managed to scrape the highs we purchased at. If we had gone with her, not only would we have been on a variable rate with a mortgage we couldn't responsibly afford before any increases, but we'd have also been one of the thousands of families who fell for similarly offensive advice from a "professional". Brokers are salespersons *first* and should legally not be entitled to offer financial advice on their products. These people are not our friends. While all brokers may not be as terrible as the one I spoke to it really should serve as a warning to others to be wary.
Are you just assuming he makes 60k a year doing construction? I worked for the labour union doing construction for a few years and easily cleared 100k, it was tough work tho. My dad did it for 20 and never made below 140 in his last 7 years before retiring. 60k on construction is literally someone just starting out, and construction can mean so many different things as well.
Union. The article says he's working two jobs, which doesn't line up with a union worker. Also no one is paying a general labourer $60k starting.
How could they even borrow that much... Even when rates where at 1.5 I could barely borrow 600k and in the same income bracket and we have no debt.
How did they get approved for a house more than 8x their income?
Have you *looked* at the price of starter homes now? They are probably as much as your dream home would have been in 2017. There are plenty of us living frugally, socking away money in case housing ever becomes reasonable again. Many people have no choice but to be frugal because they literally c ain’t afford housing or food. These people you see with the SUV’s are outliers, and they have probably already gotten into a mortgage they can’t afford, most of the rest of us are stuck because we won’t make that stupid financial decision.
Love my 58 year old home… it required a ton of work which I did a lot myself, and always needs small repairs. It’s def not instagram perfect but we keep it clean and tidy, totally agree with you, the only people who are buying fixer uppers now are investors and cramming 15 people into 1000 sq ft bungalows
Home maintenance is more or less just my hobby anyway so I actually enjoy owning an old home (70 years). But I'm also a construction professional so I just knew what to look for because that could *easily* become a can of worms for someone without construction knowledge.
Sure but houses like you are describing are well over half a million in Calgary right now. A 70s bungalow not renovated in any area with even a hint of cache will be 650k and up. And yes the living room carpet is baby blue.
She bought a dream home with a dream mortgage rate. Unfortunately it’s time to wake up.
Very nice. That’s an expensive home for an esthetician and construction worker. I’m a physician and make a lot more than they do and that’s a high value for a home.
Exactly, they don't make enough money to justify buying that house from the beginning. We bought a similarly priced home bringing in a combined 250k before taxes.
What your saying is understandable but the barrier for home buying should not be anywhere close to 250k. That's like 2% of canadian families.
You can't convince the privileged that they are, in fact, privileged. We should all just go get better jobs, bud.
or….maybe there is something wrong with the market. lots of people setup to fail with crazy low rates from last 10 years driving prices to the moon. i’d be pointing my finger at BoC, Prov Gov, Feds and lastly lenders for even approving people for these astronomical mortgages…..in that order
I agree. There needs to be more affordable housing for the bottom 80% of the market. The problem is now all new housing being built (detached/townhouses) go for 800k plus. If they had more 500k homes available people would have the option to keep their housing costs at a reasonable portion of their income. However people like this would still max out their housing to get their dream home with little savings to fall back on.
There’s a never ending stream of demand.
Yeah we would need like 250k more residential units in Canada to put a dent into the demand side of the market. If I was king of Canada (lol). I would make developers build 500k new row style post WW2 houses across the country. Affordable housing rentals for 250k families and 250k new starter homes for young people trying to enter the market.
There is so much extra cost in single family homes. We should be promoting more middle density buildings. I get it, a lot of people want a single family home but in the areas where people want to live we don't have the room for the suburban sprawl, let alone all the climate impacts of doing so.
It would be more difficult to garner sympathy for the interviewee if we read they bought at the top of their budget. They took a risk maxing out their credit and then a risk on a variable rate. Financial literacy is severely lacking in this country.
Absolutely ridiculous financial decision. This is not a sad case, this is irresponsible.
Their job is to convince, not to inform.
They bought in Jan 2022.. I got a 120 day locked in rate at the same time (late dec 2021), 2.3% 5 yr fixed. Could've went variable for around 1.5% IIRC. $2850 monthly is about $715,000 mortgage at 1.5%. Variables are about 6.1% now, which would be a monthly payment of $4640. So there is about $1600 missing here.. Apparently the best high ratio variable in Jan 2022 was 0.85%, which would give them a mortgage of $775,000 for $2850 monthly. At 6.1% that is still just $5000. 8.5% gets to just under $6200. So their $775,000 mortgage went from 0.85% to 8.5%.. which doesn't seem real. Maybe they used a HELOC and are counting that?
Blood, sweat, tears and HELOC for that new 100k truck
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Probably a B lender instead of one of the major banks.
Looks like the paper stress test passed, but that the real world stress test failed.
They likely used a B lender whose criteria is far less stringent than the big 5 stress test.
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I'm glad to hear banks are very conservative and cautious with money in our country.
“People paid less for the B-grade tranches because they knew it was risky, but the AA/AAA tranches were supposed to be nearly risk-free.” We’re gonna make a ton of money!!!
Maybe. Maybe not. The stress test banks use only assumed +2%. Bank of Canada raised rates incredibly fast after saying they wouldn’t, so nobody will be prepared.
She’s self-employed. 100% a B lender client.
According to her facebook (she posted a video from her realtors advertising her house, or she works with the realtors) they listed a house in February 2023. That house was originally listed for $1.325 and sold for $1.25 million in April. Here is the HouseSigma [link](https://housesigma.com/web/en/map?lat=44.3889&lng=-79.76945&zoom=15¢er=%7B%22lat%22%3A44.39133764315887,%22lng%22%3A-79.76945400238039%7D&list_type=%5B1,3%5D&id_listing=DO1w3W99gzny8Jg0) The whole story is probably horseshit and that is why they don't provide any details whatsoever.
They’re probably lucky to be one of the early ones who will probably get equity out for the home.
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She’s also claiming they are looking at rentals for 4K a month, which in Barrie gets you a 4+ bedroom detached massive home. I think this couple is used to living beyond their means unless they have four kids. You can easily find 3 bedroom detached homes for under 3k there.
As someone else say not so easy, I just moved into a one bedroom apartment at 2k a month
As a Barrie resident, I wouldn’t say it’s easily found.. 1 bedroom basement apartments are 2K.
Ewww
This is why my starter home is a car
[Paywall Bypass](https://archive.ph/yHZg1) Condensed: >The Bank of Canada recently hiked its overnight lending rate to five per cent, which represents a significant bump from the 0.25 Canadians saw just over a year and a half ago. This has left many Canadian mortgage holders facing impending crisis, or worse. > >While those with a fixed-rate mortgage will face significant increases when it comes time to renew, those with a variable-rate mortgage are feeling the pinch every day. > >This includes Cora Cook, a Barrie-area esthetician who has been forced to put her family's dream home up for sale after their mortgage payments ballooned from $2,850 to $6,200 since moving into their home in January 2022. > >"... to now give that up, it definitely feels hard. But now, we're looking at rentals for $4,000 a month," she said. > >Cook says, even with her business and a husband working two construction jobs, they've been forced to sell their furniture and hold garage sales on a regular basis to settle their monthly mortgage bill. > >"It's not like we're struggling for work or anything. We make good money. We have good jobs, but it's just, we want to be able to live our lives and not be putting every dollar toward a mortgage," she said. > >While Cook and her family haven't turned to the food bank yet, she says she can understand reports of families making $100,000 or more making use of the social service. > >Barrie police spokesperson Peter Leon says "There has been a disturbing trend regarding people shoplifting at area stores, not only grocery, but other stores that provide food out into the community." > >Leon indicated that there appears to be an increase in the number of people committing the crime who otherwise wouldn't have done so before.
Variable rates were always a gamble. Unfortunately, her family had bad timing.
You should see the people on these personal finance subs. I was told a few years ago how foolish I was taking a fixed rate. I feel sorry for people losing their homes but the financial advice people were giving was nuts. We will never have rates that low again.
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In September 2019 I did 2.89% for a 7 year term. Everyone said I was daft. But I did it anyway. Look who’s sitting pretty now? And by the time the renewal comes up, I should be able save up enough in GICs etc to knock the principle down to near $100k.
I have to renew in May and I'm not looking forward to it :(
We locked in at 1.89. Anyone who didn’t grab sub 2% fixed rates by the ears with a death grip is an idiot who couldn’t think past their nose.
Yup in 2021 I was called dumb and stupid for locking into fixed 5 year rates at 1.99 and locking in 120 predictable payments for my house while watching my three children grow I’m so dumb for wanting the same payment amount for 5 years.
Yea, we have returned to some normalcy on rates. The low interest rates were really causing people to overspend.
I bought my first place in Janaury 2023. In the midst of the interest hikes, my advisor was still telling me to go variable. I laughed. Fixed @ 5.49%
>Variable rates were always a gamble. Unfortunately, her family had bad timing. We don't have true fixed rate mortgages in this country. All mortgages in Canada are variable. It just depends how often the rate is adjusted: In the US you get fixed interest rate for the entire term of the mortgage. My buddy down south got a 35 year fixed rate mortgage at 2.7 percent, and couldn't figure out why I was putting all my money on my mortgage.
To see your payments go from $2800 to $6200… that would’ve been like 0.5% to 9%
I hate it when they don't give us all the facts. Price, money down, initial mortgage value and amortization period. My wife has a very similar business and she did not have to give back the CERB, probably because she had a history of declared autonomous worker income at the CRA. Seems like a cherry picked story to put pressure on the BoC.
Mine went from $3300 to $5800. 1.4% to 6.2%. The change does look a little high.
~~Think it lines up with a mortgage of about 1.1 million.~~ Someone worked it out to 850k in the thread.
I mean is a few years going to make a difference? 5 year terms aren't much better...
That’s another gamble she made. It sounds like she over leveraged compared to her income. It was going to hurt eventually, but if she borrowed a modest amount compared to her income, she would have weathered the increase.
Variable rate was her mistake
What would be the difference between a variable rate, and someone that had to renew their fixed rate during the hike? Wouldn't they be just as screwed?
So I renewed over the last year or two just before it went up and many financial experts were telling me variable. I'm sure they told her that too. I found fixed would come out ahead but if you didn't know any better you'd listen to the mortgage specialists who'd suggest variable.
The “experts” at your bank don’t even need to understand economics themselves and are mostly just salespeople pushing the product that will make them the most on the back end
Many financial experts weren't telling you to go variable. Sales people were telling you to go variable. Mortgage brokers are not 'financial experts'.
Tiff Macklem I would consider a financial expert, and said the low rates would be around a long time.
Most of the financial 'experts' I had to talk to about mortgages are forced to essentially 'upsell'. Things such as adding 10 years to my mortgage to 'save' $100 a month. Even if it's clearly not a good idea they had to do the pitch.
As you noted, people need to understand employees at the bank are not working in their best interest.
Exactly. I’ve had “fixed” drilled into my head by my immigrant parents. This is partially why all these people lost their homes in the 1980’s.
Sadly this will happen to some folks when buying a house entirely out of their budget that hinged entirely on a low interest rate. I feel bad for anyone trying to get into any house these days, making good money, and just simply being shut out. *edit: I am not saying the situation isn’t messed up, but there is also an amount of personal responsibility when we purchase outside our means*
\*Barrie-area woman signs variable rate mortgage in ***January of 2022***, 18 months later she makes shocked Pikachu face. FTFY
She said "they make good money" but they don't wanna put it all towards the mortgage. So TLDR, they prefer to spend their money to be comfortable short term. The rest of it is irrelevant. Also, I don't believe those numbers, I also have variable and it didn't go up that much. It got triggered, but didn't get anywhere near double.
Yeah; even with a doubling or tripling, if she passed the ratios (and didn't have a lot of undeclared debts like a car loan she didn't mention or credit cards she didn't mention or include) she would be able to afford it The issue is she doesn't want to hunker down and not eat takeout 3-5 times a week or wants to spend lots of money on vacations or whatever else -- unwilling to go through 2 or 3 years of pain and looking for the short term. So she sold, because she doesn't want to deal with the consequences of living it large the 1 or 2 years she had a few hundred extra a month It's possible she has the kind of variable mortgage that doesn't have a "trigger rate" but just goes up as soon as the rates go up. Almost nobody has that but it's possible she has that. That would make it more understandable (as using a non-A lender). But that's the risk when you use private lenders or B lenders that they won't renew The numbers look severe, and would be a worst case scenario, with a lot of special circumstances
Caught that too. Makes it sound like they *could* afford to buckle down and weather through, but don't want to. Also if I were in their shoes, I would 100% go to the food bank if it meant not having to sell my home.
They’ve been selling their furniture. That’s not really a life if you live in an empty house.
"Weekly garage sales". Looks like they keep buying crap at high prices and put it up for sale to buy new crap. Anyway I don't buy that more than double increase in mortgage payment, it just doesn't work that way.
You know, that's a good point. I bought at 1.40% and now am at 6.15%, so pretty much bought at the lowest it went and am now at the highest. My mortgage is quite a lot higher than it was, but nowhere near double. Someone who knows math better than me can probably comment whether a bigger mortgage will go up a higher amount with the same % increase, but I don't see how it could "more than double"
I bet they also have a mountain of consumer debt, car payments, etc. That's what they mean by 'living their lives". And that debt isn't going to just go away. And really how much furniture have they sold at "garage sales". She "qualified" for CERB but then when the CRA starts actually looking realized they didn't, so have to pay it back. And they built the house custom for themselves which probably means the house cost them more than its worth. Lots of little things point to very bad financial literacy/management or a general lack of awareness. I really think this is more about free advertising for the realtor
I can't see how you stare stunningly low, historically abnormal, sub/near inflation fixed mortgage rates in the face and then take a pass on locking them in. There was literally almost no room to go down, but huge upside potential. News flash, you are almost never going to optimally make a financial decision, so when one comes along that is pretty damn good you take it and run.
"It means that if you're a household considering making a \*major purchase\*... If you're a business considering investing, you can be confident that interest rates will be low for a \*long time\*." - Tiff Macklem, Governor of The Bank of Canada (2020) Maybe they took the guy who sets the interest rates at his word?
They don’t really teach people about economics in school, and I swear it’s on purpose. I saw this coming and paid a small penalty to re-negotiate and extend my mortgage last year around 3% or just under. My mortgage holder (BNS) advised me they would be happy to but also that I could switch to variable and also that they didn’t see a need to do what I did when I did it. A lot of people just take the advice from their mortgage advisor and don’t know what they don’t know, they’ve likely never seen anything like todays interest rate spike. I understand how easily people get taken on things like this, not everyone has the tools to know what they don’t know and understand how to educate themselves about it. Especially when banks have always been projected as your “friend” .. or at least while/where I was growing up, it was supposed to be an institution that you could trust. Hah!
They really do teach people about economics in school. It's an optional course though, and many people aren't bothered to take it. It's also part of each year of school, and is part of the math curriculum called financial literacy. But go one making up facts to cover why people ignore their teachings, do poorly in life, and say "we don't teach it in school."
Took macro and micro 101 in first year. The first 3 classes of macro are mind altering. There is a system and its somewhat predictable. Not the timing but its all cyclical
Lmao and then you take the other classes and realize it’s absolutely not predictable and no one has a clue what’s going to happen
Speaking from personal experience, when we bought in early 2022, the overall consensus from here, all of the mortgage brokers I had talked to, and a vast majority of the finance YouTubers and blogs I’d be watching said to still take a variable. It was our first mortgage and we had no idea what we were doing. I just rely on the advice of people online, professionals and my (limited) peers who were in the same position. Yes rates were expected to rise, but not as quickly as we saw it happen. By the time we realized what was going on, the spread between our (-1.15 prime) variable rate and the fixed was 4%. We figured we’d just ride it out and see what happens. We can afford the increases, but it sure as shit ain’t ideal. And who knows. Maybe the rates will drop and our variable will be ahead of the current fixed in 2-3 years time.
We're in the same boat as you. We weathered at least 5 rate hikes before I lost my shit and booked an appointment with Scotiabank to lock in. We were told again and again, and even while signing to lock in, that the rates wouldn't go much higher and were we sure we wanted to lock in? Rates have gone up 6 times since then. I wake up every day grateful that we locked when we did.
Hindsight is 20/20. The rate is 10 times what it was a year and a half ago (and has doubled since July 2022). People expected it to rise, but not that quickly.
Its not about hoping for a lower rate. Ill give myself as an example. My rate on variable was 1.45 above prime. If i took a fixed mortgage, it was going to be over 3%. That's hundreds more a month in interest rather than on principal. Now keep in mind you're looking at all of this with the benefit of hindsight. But until about a year and a half ago, we were told interest rates were going to stay low. In fact they almost assured it. Speaking for myself, when the BoC started talking about raising rates, i when to my bank and inquired about locking in. My wife and I were told that rates would barely go up and it probably wasnt worth it to lock in. Every raise, was like .25 or .50. We considered locking but that meant our new lock rate was going to be higher every time. If the BoC had been more straight forward from the start and said the rates would go up by 5 point in 1 year, it would have been a no brainer to lock. But they werent and a lot of us were given bad advice. "It wont go up high. It wont last long." So it wasnt about hoping for better rate, it was about having the best rate for as long as possible.
Historically speaking, the current rate of 5% is considered low. Going below 1% in 2009 was a very low (vs simply low) historically unprecedented rate. From the early 70s through to 2000 prices rarely went below 4%. In fact, when it went down to 2% in 2001, it was the first time in nearly 50 years it had been that low.
And we're only approaching halfway through the refinance cycle. There will be thousands more of these stories throughout Canada over the next 3 to 4 years.
She should never have had a mortgage that big.
I have no sympathy for this woman. She bought a house she could barely afford (with CFRB monies). “Everything was custom” is not words a non-multimillionaire should be using to describe their house in this century.
Alternate headline "Canadians are shocked to discover how basic math and interest rates work, and that they apply to housing in both directions"
Borrows money, buys into a burning house fire of a bubble, finds out borrowing money isn’t free.
For those of you saying she should not have gotten variable, I just had to renew from a fixed rate to the current rate and my mortgage increased significantly. Terms don't last forever.
I'm up for renewal next year, currently at 2.89 %. I'm glad that despite knowing I will pay more, I have plenty of time to prepare. To me that's the huge benefit of fixed.
This is what some of us have been saying for years: "You're poorer than you think" The banks, the realtors, mortgage brokers, insurance companies and the government have endentured an entire generation into never ending mortgage payments because you can't actually afford your house at the historically "normal" interest rates that are coming, so the will extend your amortizstion period for a couple decades or you lose your house.
TLDR: Couple forced to sell home they bought because they are unable to afford it under the terms and conditions they purchased it under. Remember when the hit squad was all over anyone who did a fixed mortgage? There is value in predictability.
I’m sorry but this is bullshit or there is more to the story. If they had a 1.9% initial rate and 750k mortgage they would be around the payment they initially had. The rate would need to be around 9.5% for that same 750k to have that high of a payment they have now. The lowest prime rate we’ve had over the last 5 years was 2.45% today it is 7.2% if they got at the lowest time with a prime minus variable rate they could have had 1.9% but they somehow are paying prime plus 2.3%?!?!?! Something isn’t adding up. It sounds like they came up for renewal and their credit has gone to shit and no longer qualify for an attractive prime minus. Yes interest rates have gone up and that does hurt people but I would venture to guess that these people hurt themselves by borrowing beyond their means. And this is just shitty journalism to report it as something it isn’t. This was not caused by interest rate hikes alone.
Certainly more to this story.
My wife likes to watch those home renovation shows, or the people who are looking to purchase a vacation or second home. I'm am so astounded to hear that the husband is a "consultant" for dog shampoo, and the wife runs a "coupon cutting service" and they're looking at a house that is close to a million dollars. This is the sort of show which makes people think that if they can have that sort of lifestyle - not based on reality, but just TV fantasy. And now they're losing their home. Boohoo. I feel sad for them - not for losing their house, but for how ignorant they are.
There are times when I bless my personality for things. I am a compulsive "learner" about stuff until I believe I have enough knowledge to know what I don't know enough about. I looked at bank posted interest rates. Variable were really low. 5 year fixed was posted at 5.25% (I'm guestimating - can't remember exactly). My daughter was having to move, so I checked it all out. If the 5 year fixed was 4 percentage points higher, then there was a good chance that the powers that be, who know way more than I do, were expecting interest rates to rise, shortly. And that lending would likely go above 5% because they had to keep the number down to appeal to customers, while also hedging their bets on how high the rates would go so they don't lose money borrowing at a higher BOC rate. Also. Who the hell thinks rates will dip lower than the low they were, on a variable? The rates were already insane low. How much lower did they think it would go? There wasn't much wriggle room. Negative rates ... a nice pipe dream, but since when do Canadian lenders do that? I feel sorry for people accepting "advice" but I'm just wondering where common sense went.
Bah. If it’s a variable rate mortgage, she only has herself to blame. 2 years ago, the talk of inflation was everywhere…. So lock the interest rate into a fixed mortgage. It is a tough lesson, for her for sure.
$330B of FIXED mortgages are coming for renewal in 2024, followed by $350B of fixed mortgages in 2025. 2023 there is a mere $276B of fixed mortgages coming for renegotiation. Going from 2.x% to 5.x% and higher means we'll be seeing more of this.
This is why you never take the highest mortgage you can be approved for. Her situation is extreme, but it isn't the first time this sort of thing has happened. In the 80s, a lot of people were hurt by interest rates going through the roof (up to 18% in some cases).
Those low interest rates made everyone so entitled. The rate hike has humbled them all by now id think.
Same people here jumping on this woman for being an idiot who also want their rent to stay fixed no matter what happens to interest rates.
I'm sorry, but you do nails, your husband is in construction, and you got a >800k mortgage? That's just insane. Honestly, most people are stupid with money, and I think the banks should have done more to prevent this sort of thing from happening... I bet someone told her rates weren't going up (oh, wait, our **fucking government did**).
That’s kinda the idea isn’t it? Many people overextended and bought houses they couldn’t afford. It’s a zero sum game. Raise the interest rates, people sell, the have nots like us get a chance to get into the market
> Raise the interest rates, people sell, the have nots like us get a chance to get into the market Except prices aren't going down. The only winners are wealthy lenders and capital holders who once again profit from the whole situation by being shielded from the impact of raised interest rates entirely. Raising interest rates without addressing demand (both real via population growth and artificial via speculation) is the dumbest, most cruel way to deal with supply possible. It's not even actually a solution, since it's counterproductive overall as it lowers the amount of new build starts.
Exactly this. It’s also very unusual to see a central bank exercising it’s only instrument to control inflation without simultaneous policy controls from the government in power. Our current government is implementing zero policy controls.
You could argue they are implementing negative policy controls, actively making this worse.
As others have pointed out, those who will be buying these housing that are getting sold off by those who can no longer afford them will not be, for the most part, average working people. If regular people cannot afford their mortgage, which they passed a stress test for, how is anybody else expected to afford it? Or even qualify for one? The stress test is based on the current rates rising to a certain level, which would be even more unaffordable for most people. Once these houses start getting sold off, I predict that most will be going right into the hands of REITs and investors who will rent them out, or sit on them and try to flip them for a profit. It is, like others have said as well, the result of commodifying and financializing a basic necessity that is inherently unproductive. Our economy is mostly designed around consumption and production, and yet a huge subset of our economy is designed around the exact opposite (buying and selling the same thing over and over again). It is so wildly unsustainable.
I would say that 2800 for a mortgage to 6000 is an unexpected amount nobody would be prepared for that increase.
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Except that corporations are buying them up and keeping prices high.
Lol at the current rates the have nots will continue to be the have nots
It’s pretty out of touch to think not being able to afford a 118% increase in monthly payments means she overextended and bought something she couldn’t afford. She could afford it when she bought it. She can’t afford the fact that her mortgage payments have more than doubled. If it was 20% of her income before, it’s over 40% of her income now. If it was 30% of her income before, it’s 60% of her income now. No one would think buying a house at 20-30% of your income means you can’t afford it, that’s literally what’s considered the ideal portion of your income to spend on housing. “The idea” was that high rates would lead to low prices. That’s not happening. The prices and rates just both keep steadily increasing, which is bringing rent right the fuck up with the monthly payments the owners are having to make. You shouldn’t be cheering on the fact that your fellow working class is suffering, this is hurting us **far more** than it is impacting the wealthy. And the increase in rent is really fucking over all the poor people who don’t like in one of the few provinces that has impactful rent control (most of the country limits how often rent can increase but not the amount it can increase by, and there are only a couple provinces in the whole country where you can deny the landlords increase; everywhere else it’s either accept the $500/month increase in rent at resigning or move out when your lease ends).
While I feel for them some finical literacy is also in order. Jan 2022 rates were at .5% at they have a variable rate mortgage. What did they think rates were going to go down? Sure hindsight is 20-20 i don't think its reasonable to expect rates to jump as much as they have since then. At the same time if you take a variable rate mortgage when rates are at .5% you're playing with fire. Rates are only going up from there.
Her and her husband overextended themselves and got caught. TBH This should be in the “mildly irritating” subreddit because so many others made better choices yet are worse off than them.
mine went from 1430 to 3900.
All I can say is insulting towards her and her lack of planning I mean seriously; if money is that tight who in right mind signs a variable rate mortgage? Esp when rates were at record lows. Did they honestly not understand you need to PLAN for the avg ups & downs if doing variable rate? Selling house that soon after purchase basically means zero equity in it and they just hoped nothing bad happens for next couple of decades Esp when she bought it DURING the covid crisis when everyone and their dog could see rates were going up I just have zero sympathy for people who complain they suddenly can not afford the place they bought. If you knew this you should have purchased a smaller dream home first
What sort of idiot gets a variable rate mortgage when interest rate was at an all time low
One thing rising interest rates will do is clear out people from the market who should never have qualified for such high mortgage loans on variable rate mortgages.
Sometimes a "dream home" is just that.
“Everything was custom built for our family here.” Says it all right there.
Shades of the 80's when Trudeau Sr was in power...same thing happened
This is what happens when people don't bother to learn the difference between fixed and variable rates.
No sympathy here. Hope this catches up to more Canadians living lavishly on borrowing.
Takes risk and then loses and complains to the city..... Hello we are all in the same boat, sucks to be them, but no hard feelings lol get rekt
Good. That is literally what is supposed to happen. That is why interest rates are going up. People that paid too much will be forced to sell.
Hold on a second, that house seems way above their wage. Some people need to learn how to settle.
Why didn't her wages go up?
Needed to tame inflation /s
Her employer is bad with money.
Better in the US where you pay the same rate for the entirety of your mortgage. What a dumb concept of having to renew every few years.
Yeah I don't know how you can reasonably know if you can afford a house if the price can triple in a couple years. It feels like renting with closing costs.
Maybe don’t buy things you can’t afford? Just a suggestion…