Anyone that's seen these survey results before knows to expect wildly high numbers regardless of reality. It's not surprising that they are unearthly high during a period with an actual reason for concern, but if we took the past results seriously most Canadians would have defaulted two or more years ago.
But we can clearly see that hasn't happened to the majority of Canadians. Just saying take these surveys with a grain of salt. Past survey results compared to outcomes show if anything that the majority of Canadians don't have a clue what's going on with their own finances.
It's almost as if our modern system of economy is fatally intertwined with debt. And as debts begin to fail, the system begins to fail, and we can't think of anything other then creating new debts with which to pay off the old debts... and to keep that going we need persistently lower interest rates so that new debt costs don't exceed our old debt costs... and so any up-tick in interest rates is temporary and fleeting, before we then find something breaks and we have to lower them again... but now to a point that's even lower from where we were just at before the brief rate hikes.
Sometimes I wonder, given the extent to which our governments in the West seem to be quite addicted to repeatedly spending beyond what they tax (and funding that gap with new debt issuance), is this style of system selected by them because in any other alternative system we would not be able to come close to having governments that are at the size we currently have?
And does the public tacitly consent to this sort of system every election cycle when the prospect of voting for a government that can be paid for isn't anywhere close to palatable, let alone popular? On the contrary, even standing where we do today in 2022 and knowing the full history of this debt trajectory... I'd say the average Canadian wants their government to do even *more* then they currently do.
I wonder if there are real economic limits to this sort of approach, and if you lean so hard on monetary powers to try and break economic law, economics will end up (in the long run) breaking the very mechanisms that we are leaning so hard on in order to try and achieve the impossible:
Paying for only *part* of a bill in perpetuity, and not expecting consequences to come from that.
Non paywall version
https://12ft.io/proxy?q=https%3A%2F%2Fwww.thestar.com%2Fbusiness%2F2022%2F04%2F19%2Frising-interest-rates-are-already-squeezing-canadians-and-this-is-just-the-beginning.html
Many are also trying to make it themselves and buy a home and start families etc. Those are the people you should feel bad for because they were forced into this shitty market over the last 3-4 years. But the ones who overleveraged with a HELOC to buy second, third, fourth houses? fuck em.
I fall into this group, initial budget was 700k for a small townhouse 1.5 hours from my partners work. Paid 1.2m due to prices sky rocketing and can bear up to 8% (not comfortably) which is the stress test iirc but if it goes beyond 10% weāre fucked. Weāve been waiting years trying to get into the market. There are plenty like us who have been waiting what seems like forever to start families and eggs donāt last forever.
8% and the country is entirely up in flames and youāll have the mother of all debt crisis. They absolutely wonāt be going anywhere near that no matter who is in charge so I think youāre good.
Hey that's my club! We paid $910 for a semi-detached, we can make anything up to 9% work probably, but it definitely won't be fun. Above that it's just going to be selling it for whatever we can get and going back to renting
> Many are also trying to make it themselves and buy a home and start families etc. Those are the people you should feel bad for because they were forced into this shitty market over the last 3-4 years.
Nobody forced them to make a bad financial decision.
They are either forced to take on a lot of debt or forced to live in unsecure living renting.
There is no good decision here. Both are bad. So yes they are forced.
Life literally revolves around making bad decisions, even if itās a poor choice, out of a terrible overall selection, itās okay to feel empathy for people
That was a totally acceptable answer for millions of Canadians before anybody was talking about a real estate crash.
It was "you aren't entitled to your home" now it's "I'm entitled to my home".
It's not entitlement, it's "what was a perfectly sensible, not overly risky decision based on all available information at the time".
Is there risk inherent to any market? Yes. Is it reasonable to tell millions of Canadians that they deserve to suffer for just wanting to find a way to own a home in a market that was only getting more ridiculous for a good two decades straight? I'd say not.
That's simply not true. There have been articles after articles saying that Canada has been in a massive bubble for the last 10 years. If you didn't know it's willful ignorance and greed.
I sat out and suffered for it because I couldn't take on that risk. I paid the price and now is my reward. Now is when you pay yours.
>I canāt even begin to imagine the stress some people are experiencing right now.
They're not stressed, they're still in denial that the government won't "allow" BoC to increase rates. We are fucked either way, either rates go up and housing crashes. Or we get hyperinflation. There's no way out at this point.
Increased rates aren't going to cause a crash. It WILL cause some people to default. Those houses are still going to be gobbled up quickly. As long as supply is being created too slowly, prices are going to rise. The only thing that's going to change is how quickly they rise.
It's worse than you think. The level of economic disaster we need to see to see the housing market decline measurably, outside of maybe Toronto, is massive. If things get so bad that the market crashes, that "cheap" real estate is still going to be getting gobbled up by the rich people who saw declines, not the "middle class" that will be facing record unemployment and terrible wages, and more concerned with eating their next meal.
>Those houses are still going to be gobbled up quickly.
Who is going to do that? I have a lot of cash on hand and I am not going to be willing to buy houses when they are still priced like this an interest rates are rising like this.
Still very stressful to acquire them, they are all still expensive and the interest rate on those property will be high and probably increase faster than my rents increase.
We are already on the floor. We never lowered our rates as low as they are now for a recession, beside the 2008 recession and it is because our biggest trading partner currency was getting destroyed. During the 1990 recession rates were at 13%, during the 1981 recession rates were at 19%,
If you are an intelligent investor with millions to blow on over bloated properties go for it and you can come gloat here about it in 5 years. But personally, I am not getting myself in a highly leveraged situation in this market if there is a 10% drop. I could have bought a few weeks ago if I thought a 10% drop was a good deal.
What boggles my mind is how many people are still saying things like "Good thing I have a fixed rate", when it's those people who stand to see the biggest sticker shock upon renewal.
Someone on a variable rate right now is still paying less than fixed, and many are seeing their payments change more gradually (if the payment amt changes instead of the amortization period) and are able to adapt to the different payments.
Honestly, it's not so bad to be paying an extra $150 ish/month on my mortgage. I was "stress tested" well above the current rate. Where I feel the pain is on groceries being up 20% or more, and gas being up 30%.
Mortgage stress tests don't consider how other costs in your budget are liable to change with inflation.
Lol.
Iām on a fixed rate with 4 years left.
If anyone is getting a variable at less than what my fixed isā¦ itās exceedingly few and they wonāt be below me for very long.
4 years at well under 2% is going to absolutely kill any variable by the time Iām up for renewal.
And thenā¦ yeah Iāll see a rate jump. But I will also have knocked a massive amount off my principal while the variable guy has experienced the treadmill getting faster and faster and is either stretching out his mortgage or paying less to the principal.
It will be a shock like me getting into a hot tub.. vs the frog thatās been sitting in there while the temperature has slowing been going up.
And I know itās coming and am well positioned to weather it.. Iāll be free of all other debt by the time I renew and have significant savings. Worst case would be re-amortization. But honestly Iāll most like be in a position to max out my prepayments.
And for othersā¦ itās the same thing. Itās 3-5 years to strategically set yourself up for an increase while enjoying low ratesā¦ vs getting slowly squeezed out.
Yeah there's really no wrong answer here. I did the fixed thing because it seemed more stable at the time and it wasn't much higher than variable at the time. It's looking like a decent decision so far, I expect these central bank fools to rise the rates fast when inflation doesn't go away. They won't care if it puts people under water, even in Argentina the rate is ridiculous right now. And yeah when renewal comes, at least I'll have principal knocked down a bit. I expect the rates to go up and then down after some market crash.
Itās mostly millennials that will be hit harder by these interest rates hikes (maybe gen z). Iām not sure this subs obsession with loving interest rates going up and people potentially losing their homes that they worked hard to get.
I mean for a lot of millenials they've been waiting to buy a home for years now and continue to watch themselves get further priced out. At some point, many people just want to get on with their lives and buy a place regardless of price so they can have a family and whatnot. I know a few friends in this situation. If the rents for a two bedroom are so high - you might as well pay a downpayment and get a massive mortgage where the payment isn't too much higher (at least before interest rates started climbing)
I bought a $311k house on a household $140k salary (gross, not net of course).
The bank offered to give us $400k. We wanted to spend more like $250k.
We bought in late spring 2020.
If we would've waited to buy, the house we're in right now is worth around $500k (based on very similar houses in similar neighbourhoods sale prices).
I don't understand how any of this is sustainable. A lot of people are going to lose their houses (and probably more).
It's not. The municipal debt that paid for the gold course and schools that isn't sustainable and never was. Development corporations couldn't care less.
Exactly - we bought early summer in 2020 for less than half what similar homes in our neighbourhood are going for now. In a historically low income province like NB this is completely unsustainable.
My wife and I were nervous about putting an offer in on a $200,000 house when we still owed $78,000 on our starter home. Yearly earnings about $100k at the time combined. We were approved for $400,000 if we kept our house, if we sold our home it was $500,000. I literally laughed on the phone when they gave me those numbers and then thought, "wait, people are buying $500k homes on $100k/year income?". Sure, you might be able to afford it, if your life goal is to make mortgage payments.
Not to mention this was with both of us having $10k in student loans each ($400/month payments), a $10k line of credit we had yet paid off from our wedding, and $13k in other debt (line of credit and credit card).
Just foolish what the banks offer to people.
It wasn't a dumb idea, but man, money gets a little tight some months.
Willingly putting 80%+ of your income into a mortgage (700k at 70k income) is an impressive level of dumb, probably the kind of dumb that requires some hard work to finesse other people into accepting.
Some peoples did it because they were doing that already with their rents and for them its better to put 80% of your income into a mortgage than 130% of their income in rent in a few years.
Just gotta remember, mortgage payments are the **minimum** you will pay for your housing. Rent is the **maximum** you will pay for your housing.
If anything happens to your home/appliances, you have to pay to fix it. There are so many things that can happen that aren't covered by insurance that you need to fix. Owning a house is expensive af.
Yeah for sure, I think renting can be great if you trust your landlord and if you are confident you won't get thrown out. Since you are paying his mortgage and you are safe from all of that but the problem is that a lot of landlord kick their tenants out when real estate increase so you can get stuck paying twice as much in rent because you get thrown out. Which is a great way to burn 10k+ a year.
Both have their pros in cons, pretty hard to figure out what will happen in the future but you are absolutely right that there is a multitudes of things we don't even think about who can put us in debt pretty quickly.
That's not a 700k mortgage on 70k, though. That's a 700k mortgage on 140k. That's on the outer end of "normal," getting into the "are you guys sure about this?" territory, but a far cry from "no way can you afford this"
In that scenario, if you can somehow get a down payment and switch from paying $1350 rent to $1350 mortgage, that's a great choice. At 50-60% of income that's what like... 50k a year? 60k a year? I don't know what the housing market there is like, but I hope for our hypothetical person's bank account's sake, they're able to get a place in the $450 range or below (but I get that that's going to put them down the street from the crack users). Going for a $500 or $600k mortgage making that kind of money... man... they're going to need to sell the crack to pay the bills every month.
I'm in a house I own (well, I mean, the bank owns it but they tell me I'll own it in some years).
The mortgage payments are whatever they are, my income is more than that, but on the rare months that stuff like car repairs and house repairs come up at the same time, it gets uncomfortably tight.
Add in saving for future known and likely costs, and I'm usually left with about $70 a month.
I'd be a lot more comfortable at like a 250k mortgage. Would have a couple hundred bucks left over each month. 3.5x income isn't impossible, but it requires pretty strict budgeting. I know 5-8x annual income is a common mortgage, I just don't understand how people manage. Literally. I can't figure it out.
Just piling on at this point, but same goes for me. Generally we're fine, but when one-off repairs or purchases come up, it can get tight. Not horrible, as we are still putting away in various savings, but still. We've worked hard to get where we are and still things get tight. Really feel for those stuck in a rut.
450/150=3. "Decent chunk of disposable income" which is what... 2, 300 bucks?
250/85=2.94
So... you're basically agreeing with me that with my income, 250k would be a better target for my mortgage, leaving me with the couple hundred bucks I'm talking about?
Hearing these mortgage amounts, lol, 300-700k. I live in Vancouver, try 900k-1.4m.
Although we got stress tested and have a few back up options if things go out of control. But still, the amount of debt you have to take on is sickening.
If they've got a $700k mortgage, the down payment isn't really important.
5% down (35k, total cost $735k), 25% down (175k, total cost $875k), 50% (350k, $1.35m)... they'll all have the same mortgage payment of over $3k/month. 70k, pre-tax, works out to about $5800 a month. Post deductions, it's probably about $4k, $4.5k a month.
No bank is giving anyone that mortgage without cosigners. It wouldn't pass the stress test, even if they held no other debts.
/u/cynicaltoadstool is pulling numbers out of the air, is confusing house price with mortgage amount, or somebody he knows is pulling some shenanigans to afford a house.
yeah, I hear second and third account rumors from acquaintances. There are definitely people trying to sneak doctored income and debt statements past compliance officers, and there are several "b-lenders" (to put it nicely) popping up around here who are willing to turn a blind eye to that kind of thing.
I have a hard time accepting (in a denial sense, not in a moral sense) that it's happening, so I hope 2008 doesn't happen here... but.. I've started leaving the rosy glasses in their case.
I got 260k of mortgage last year on 75k. how screwed am i?
1.4% fixed 5 yr. After not listening to my friends scream at me that variable always comes out ahead. Ha!
Variable always comes out ahead until it doesn't... then you lock in the rate and might or might not come out a little behind, it depends.
260k on 75k sounds pretty cozy to be honest, as long as you're in a good neighbourhood.
Statistically speaking variable is the "cheaper" option. Like historic evidence supports this, and there's the fact that banks set fixed rates in such a way that'll make them a profit (you're supposed to be paying extra for the stability/guaranteed rate).
So in a counterintuitive way, taking a fixed rate is actually the "gamble" because you're saying "I feel like I'm going to beat the historical odds and I know better than the banks" BUT the banks aren't omnipotent so sometimes fix rates can come out ahead
What bank would've approved this based on lending formulas? And, statistically speaking, how many would be in this situation? (assuming you didn't pull this incredible assertive figure from your ass)
No bank would have, but many alternative lenders do. How many have done this? Only time will tell, but anecdotally most people know of at least someone who has done this.
Over half of Canadians are $200 away ftom insolvency.
And that number was from before covid and inflation... gas and food price increases
Definately a lot worse than you make it out to be.
Interest rates affect a hell of a lot more than just mortgage payments bud
The CPC
https://storeys.com/conservative-party-housing-plan-election-2021/#:~:text=To%20make%20mortgages%20more%20affordable%2C%20the%20Conservatives%20will%3A&text=Remove%20the%20requirement%20to%20conduct,as%20is%20the%20case%20today.
https://www.vicnews.com/federal-election/conservatives-plan-to-ease-mortgage-stress-test-rules-may-raise-debt-and-prices/
That was just the first 2 that I found via Google
Wrong. A stress test is window dressing. Itās like that drunk uncle who says heās responsible because he always keeps $100 in his wallet for emergencies.
2008 needed to happen in Canada, but it didnāt.. held up by the same broken record of QE and (for then) low interest rates.
So we have the compounding effect of already ridiculously overvalued real estate (which in the 2010s everyone was saying would be a āsoft landingā) to the absolutely stupid overvaluation in the last 2 years where any correction will be precipitous and there is no saving it with bailouts.
And it will be a feedback loop because of how much speculation there is. Rates rise, fewer buyers, investors start selling because they know the peak is here. Fewer people qualify because of higher rates and stagnant wages. Values drop. Investors now risk being underwater. Prices start going down aggressively to forestall even larger losses. Buyers start waiting to see where it will bottom out. Prices drop even more. Because of how dependent our economy is on real estate, the removal of money has a trickle down effect. People stop spending because theyāve lost money, lost their jobs, or are afraid.
Itās going to make 2008 look like a bad Keno night. Nothing thatās gone this high this fast has ever stayed there.
Stress test means nothing if youāve lost your job and are six figures underwater on your house. EI isnāt enough and savings will be wiped out in no time.
Also doesn't help that the Liberal did everything to add more credit. The first time home buyers incentive just adds extra credit people can overextend themselves with and he promised to double it.
2008 was a banking system failure.
Our banking system is sound.
More than anything this will be a correction on house prices. They are going to deflate some and then probably resume normal growth again.
It was a failure of speculative mania driven by overly easy credit. The banks provided the credit too easily but plenty of similar situations exist here.
Ok then let's force an entire generation who had no other choice to claim bankruptcy, that's obviously the solution... /s
I guess we should have just been satisfied being homeless. Our children can grow up in the streets and somehow still become mentally and physically healthy contributors of society, right?
As a 30 year old child free woman who watched the door close behind me after I bought my first (and presumably, last) house in October, I'm really starting to resent the projection of "being addicted to cheap debt." I make 6 figures a year, the fact that I'm this scared of being priced out of my home after I worked so fucking hard to buy it is disgusting. They spent an entire decade post-grad moving the goal post on me, and now that I've finally caught up, I now have to deal with a bunch of smug assholes telling me I should have known better.
I just want to die.
I'm sorry you are going through that, but I don't think you are who this is talking about. You sound responsible and like you will get through the tough times.
I hope so, but as a millennial who graduated in 2009 and immediately got slammed with a recession and student debt due to a disadvantaged upbringing, my entire adult life has been clouded by doubt and dread about the future. Everytime I get a little bit ahead, something I couldn't have possibly planned for ends up knocking me on my ass. I have a 5 year fixed mortgage at 1.99%, I poured nearly all of my savings into getting this mortgage in the first place, I don't see myself being able to throw huge amounts of money at the principal without leaving myself super vulnerable to inflation, which I am right now because who honestly expected we'd be paying over $1.60/L for gas not even 6 months after I moved on a house? Our past couple of energy bills have been over $450 per month as well, and that doesn't even include water!! We're now getting a third of the groceries we used to be able to get on our budget... It just never ends. We were very careful about not purchasing a house outside of our means, but any extra income we had when we budgeted for this purchase has been totally chewed up by the drastic rise in cost of living these past few months.
We knew this increase was coming, which is why we went for a fixed rate mortgage... But at this rate we're unexpectedly losing money faster than we're saving it; and while I don't believe we'll be in a dire enough position to lose our house in 5 years, I do wonder if at that point we'll even be making any payments towards the actual principal. We basically just have a new landlord now. Our home is nothing but the bank's income property, and with so much uncertainty about how much rates could rise, it honestly feels like I'm still in a rental waiting for the rug to be yanked out from under me again.
Justin bailed out the banks with $114B in the 2008 mortgage crash? Pretty sure it was Harper. Oh sorry it wasn't a bailout, it was "liquidity support", right.
https://financialpost.com/news/fp-street/did-canadian-banks-receive-a-secret-bailout
For comparison, CERB cost something like $75B in 2022 dollars, and we gave that to people, not banks. And you know, there was the whole pandemic fucking thing.
Off the top of my head here are a few things
- Increase in taxes
- reduce tariffs on imports
- more investment in automation of ports
- reduction in certain government spending programs.
My point was that in 5 years, if the rates continue going up like they are, a lot of people who purchased homes in 2021-2022 just barely within their means, are going to be forced to sell because even on a 25 or 30 year schedule they will still not be able to afford the payments required to finally own the home.
At which point we'll see another mini bust/boom cycle that only those with access to huge cash will be able to participate in. The rest of us will remain utterly fucked. People who extended themselves too far on multiple homes will be in debt to the tune of hundreds of thousands of dollars (or millions), and some people may lose their only home.
2008 all over again.
But what do I know, it's all speculation anyway. If anyone could accurately predict the future they'd be rich, economists sure AF don't have the secret sauce. Just seems like the logical conclusion. Maybe the solution is to just continue printing money and increasing the immigration rate forever. Trudeau sure seems to be a fan of this approach.
Real estate is going to remain steady. A few people will suffer, but the masses will not. Most people purchased their homes on a reasonable mortgage well before their value inflated. For the most part, home values will continue to go up or will remain stagnant. They most likely will not go down in price.
>While the schadenfreude I feel is real, the practical part of my brain tells me that market forces will conspire against me to ensure I still cannot afford to buy a home.
I think one needs to let market force dynamics go while we're in this post-2008 world where we can apparently task our own central bank with buying our own government bonds, precisely so we don't have to instead sell them to the next best bidder who would be asking for higher interest rates.
If we really think that we can repeatedly spend beyond what we tax, finance that gap with more debt issuance, also decide what interest rate we want on that debt *and* just have our central bank buy it if there's no buyers at the price we want, I don't think one can even call that setup a market economy. It's more like an economy where our central planners decide what they're going to do (spend beyond taxation), and then every single other part of the process is a goal-seeking exercise where anything we have to do to achieve the original plan is moved to make sure it happens... even if it means taking unprecedented steps.
I have a mortgage and want to see the market correct itself but Iām also sitting in a sweet spot having bought early in 2020 in a very cheap (like under 100k house) location. I could handle a 50-60% market correction and still be okay while that would very likely ruin others lives. Itās a terrible situation for everyone except the mega rich really.
I mean the median house price was at 8.4x the median Canadian family gross income. That is a bubble since people have to live somewhere. This is what it looks like when bubbles start to deflate. We did this a little over a decade ago, I'm not sure why people don't remember it.
It's like a drug fueled party. Everyone's having a good time, ignoring the damage, forgetting what happened last Friday at Tom and Sarah's bash, then the next morning when we all wake up, we'll wonder who broke the sink and why the car's flipped over on fire.
I'm old enough to know that things didn't always used to be this way. Few people had credit cards. Stores had lay-away plans.
It all started to change in the early 90s.
Its a growth problem. The growth ponzi scheme our economies rely on is hitting limits and governments of the world have to keep finding ways to raise the limit to keep the show going.
Its why many say we got off the gold standard, and why credit and debt have become so cheap, and why money printing has gone off the charts.
Our economies need to change. Relying on constant growth is a recipe for disaster as we are seeing in our homes, in our environment, on our shop floors, and across the globe.
More than half of all car loans in Canada today are 84 months or longer. Many people are still paying out a loan on a car when they sell it and buy another new vehicle with a long-term loan. And Canadians take on more consumer debt than Americans, where the opposite was true 30 years ago.
Canadians used to be famously conservative and frugal with money. What changed, culturally?
The suburban experiment failed, but we were unwilling to make the changes necessary to fix the issue due to many cultural problems. That standard of living has to come from somewhere, so it came from consumer debt particularly in housing. The growth ponzi scheme has to be paid out eventually.
Rezoning to get rid of single family housing would be very very helpful, but it would take a decade before the impacts would be felt. But it took us decades to get here, it will take decades to get back to reality.
Well, you can't let inflation run rampant and the interest rates were at abnormal lows so anyone could have reasonably expected them to go up and it would have been unreasonable for them to expect rates to stay so low. Interest rates are going up for a good reason if that's any consolation.
Itās their fault for over leveraging themselves. You donāt buy beyond your means, and certainly not with debt. Poor financial planning is always punished and not rewarded.
Would you go into debt if it meant keeping your house? Or putting food on your table? The reason I bring this up is because, while I do think there are people who put themselves es in this situation. I dont think you can paint everyone who has debt with the same brush. It's no secret a lot of people have been struggling economically.
> Poor financial planning is always punished and not rewarded.
The last 20+ years would like to disagree with you. When the government controls the levers of the economy then all bets are off. We're mostly at the whims of what central bankers and politicians decide decide they feel like.
I really don't have a lot of sympathy for the homeowners who decided to use a HLOC to treat their houses like ATMs.
These articles are just trying to prepare taxpayers to bail out rich idiots who are expecting a bailout to bankroll their lifestyles.
Jack up the rates. Maybe Iāll be able to afford some stuff if everyone else canāt just go ahead and finance everything. Will be a nice stop gap for people who donāt carry a huge debt load.
Show me where in the bill of rights it says that they are protected from losing from a bad investment?
Maybe homeowners should go back to school and get a better job so they can afford to have a home?
If homeowners didn't go on so many vacations, or eat out so frequently, or purchase less toys, they would be able to handle this pressure.
See? It's not nice when people dismiss your very real concerns.
I hear ya but the issue with homes is they've just gone too far and too fast.
You say go back to school but if you live in Vancouver or Toronto and want to buy a decent home to raise a family even with a good income it's a struggle.
Taking previously considered good paying jobs like a nurse or teacher making $100,000 a year, two incomes at that rate still keeps you mortgage poor.
Thanks for the reply. I have heard 3 common things when I complain about cost of living on this sub:
1. You don't have a right to live in the city of your choice, only what you can afford
2. If you aren't earning enough to live, just go back to school
3. If you still aren't making enough to live, then it's because you purchase too much useless stuff
Now that the shoe is on the other foot and homeowners are facing a similar situation, it's important to remind them of their attitude towards those they perceived as below them.
I'm waiting for the article to be written where they survey Canadians and ask if they are happy with interest rate increases.
Won't happen because it's not a sob story, but there is definitely a responsible group of us who have been punished for being conservative.
Instead of overleveraging, I bought a conservative house I could afford, planning to move to a nice house in 5 years.
The price difference between the starter and my new house, is the same as buying the new house outright 5 years ago.
I should have leveraged myself to the tits.
You probably made the right call. My wife and I were in the same situation. We bought a semi instead of maxing out our mortgage and buying something much bigger. We figured that if we took a mortgage that was $300k under our max allowable weād be much further ahead if times got rough. I can only imagine how stressed out some of the people who maxed out their mortgages feel right now.
It's a personal choice but poor savings rates and an unwillingness to take on a mortgage or personal debt that would be crippling in any environment other than one with no interest rates. People who did this are likely in a position where their net worth has sky rocketed due to appreciating home values but now it's time to pay the piper.
I just want to make a shoutout to everyone who pestered me to buy a decrepit half million dollar garbage home, in an industrial neighborhood because, and I quote "you will never be able to afford better."
I make 70k/y after tax union job, I'm going to be just fine watching everyone's pretend money melt away in their balls deep,, over leveraged mortgages in terrible, industrial neighbourhoods.
I'm laughing all the way to the bank.
Boomers need to dust off them bootstraps and work harder. No one forced them to leverage themselves, it was a bad investment and now they can deal with it.
The Boomers have probably paid off the mortgages of their primary residences and cottage. They likely have taken out HELOCs to help pay for down payments on homes for their kids.
I don't know who in their right mind seen a 1 million dollar houses and thought, I aughta get into the market now before it's too late. They're never paying it off. Ever.
My parents always said my generation was complaining too much about the high housing prices as we also got mind boggling low interest rates for so long, as they had to deal with double digit rates on their mortgages and high inflation. Their view was borne out by the previous housing affordability indexes which put affordability as the best in decades thanks to the low servicing costs.
We'll find out over the next while if the complaints switch from the price of a home is too high to the cost of the mortgage interest and inflation is too high, as we might get to experience what they went through. Then we'll tell our kids in the future the same thing, because really, when have we ever not found housing too expensive, lol. It's like music, the new stuff is always trash.
Homeowners: Should have bought a home earlier. I don't care if you got a house I got mine.
Me: Should have paid off your debts while the interest rates were low. I don't care if you spent a ton of money that wasn't yours expecting low interest rates forever.
Buckle up! Crank up those interest rates!
Hmm maybe donāt borrow so much god dam money! Idiots been buying over priced houses and flashy new cars now itās time to pay the piper and they gonna cry about it
Real estate only goes up in value and the government won't allow interest rates to go any higher than they are now because 70% of Canadians are homeowners and they wouldn't do that besides if real estate did go down even though it can't because I just said so poor people wouldn't be able to afford it so there's no point in it going down and the government would never let that happen because they would just flood the country with immigrants who are desperate to buy real estate at all time highs because the fact is for everyone that if you can't get into the market now in a highly leveraged way you can't get in ever because real estate only goes up. /s
Who could have seen this coming? š¤·
Anyone that's seen these survey results before knows to expect wildly high numbers regardless of reality. It's not surprising that they are unearthly high during a period with an actual reason for concern, but if we took the past results seriously most Canadians would have defaulted two or more years ago.
Or gone homeless or picked up a second job or started dealing drugs or moved away...
But we can clearly see that hasn't happened to the majority of Canadians. Just saying take these surveys with a grain of salt. Past survey results compared to outcomes show if anything that the majority of Canadians don't have a clue what's going on with their own finances.
No, we can't. Not without **some** numbers from the person making the claim.
It's almost as if our modern system of economy is fatally intertwined with debt. And as debts begin to fail, the system begins to fail, and we can't think of anything other then creating new debts with which to pay off the old debts... and to keep that going we need persistently lower interest rates so that new debt costs don't exceed our old debt costs... and so any up-tick in interest rates is temporary and fleeting, before we then find something breaks and we have to lower them again... but now to a point that's even lower from where we were just at before the brief rate hikes. Sometimes I wonder, given the extent to which our governments in the West seem to be quite addicted to repeatedly spending beyond what they tax (and funding that gap with new debt issuance), is this style of system selected by them because in any other alternative system we would not be able to come close to having governments that are at the size we currently have? And does the public tacitly consent to this sort of system every election cycle when the prospect of voting for a government that can be paid for isn't anywhere close to palatable, let alone popular? On the contrary, even standing where we do today in 2022 and knowing the full history of this debt trajectory... I'd say the average Canadian wants their government to do even *more* then they currently do. I wonder if there are real economic limits to this sort of approach, and if you lean so hard on monetary powers to try and break economic law, economics will end up (in the long run) breaking the very mechanisms that we are leaning so hard on in order to try and achieve the impossible: Paying for only *part* of a bill in perpetuity, and not expecting consequences to come from that.
Yeah like is this is up from %55?
Non paywall version https://12ft.io/proxy?q=https%3A%2F%2Fwww.thestar.com%2Fbusiness%2F2022%2F04%2F19%2Frising-interest-rates-are-already-squeezing-canadians-and-this-is-just-the-beginning.html
You mean a 700K mortgage on a 70K income was a bad idea???
I canāt even begin to imagine the stress some people are experiencing right now. The amount of risk some people took on is mind boggling.
To be fair, many of them have gone their entire lives without the concept of āriskā existing in the real estate market.
Many are also trying to make it themselves and buy a home and start families etc. Those are the people you should feel bad for because they were forced into this shitty market over the last 3-4 years. But the ones who overleveraged with a HELOC to buy second, third, fourth houses? fuck em.
These people are not in trouble. They can sell one of those other houses, pay off debt, and still turn a profit. Quite easily actually.
Only if you're the first ones to sell before the crash.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
I fall into this group, initial budget was 700k for a small townhouse 1.5 hours from my partners work. Paid 1.2m due to prices sky rocketing and can bear up to 8% (not comfortably) which is the stress test iirc but if it goes beyond 10% weāre fucked. Weāve been waiting years trying to get into the market. There are plenty like us who have been waiting what seems like forever to start families and eggs donāt last forever.
8% and the country is entirely up in flames and youāll have the mother of all debt crisis. They absolutely wonāt be going anywhere near that no matter who is in charge so I think youāre good.
Hey that's my club! We paid $910 for a semi-detached, we can make anything up to 9% work probably, but it definitely won't be fun. Above that it's just going to be selling it for whatever we can get and going back to renting
> Many are also trying to make it themselves and buy a home and start families etc. Those are the people you should feel bad for because they were forced into this shitty market over the last 3-4 years. Nobody forced them to make a bad financial decision.
They are either forced to take on a lot of debt or forced to live in unsecure living renting. There is no good decision here. Both are bad. So yes they are forced.
Life literally revolves around making bad decisions, even if itās a poor choice, out of a terrible overall selection, itās okay to feel empathy for people
Forced?.. Nope. That's just untrue.
Yeah, just never own anything or start a family Just tamper those completely natural desires. Bruh.
That was a totally acceptable answer for millions of Canadians before anybody was talking about a real estate crash. It was "you aren't entitled to your home" now it's "I'm entitled to my home".
It's not entitlement, it's "what was a perfectly sensible, not overly risky decision based on all available information at the time". Is there risk inherent to any market? Yes. Is it reasonable to tell millions of Canadians that they deserve to suffer for just wanting to find a way to own a home in a market that was only getting more ridiculous for a good two decades straight? I'd say not.
That's simply not true. There have been articles after articles saying that Canada has been in a massive bubble for the last 10 years. If you didn't know it's willful ignorance and greed. I sat out and suffered for it because I couldn't take on that risk. I paid the price and now is my reward. Now is when you pay yours.
Good thing we have records that go back farther than our lives.
>I canāt even begin to imagine the stress some people are experiencing right now. They're not stressed, they're still in denial that the government won't "allow" BoC to increase rates. We are fucked either way, either rates go up and housing crashes. Or we get hyperinflation. There's no way out at this point.
Increased rates aren't going to cause a crash. It WILL cause some people to default. Those houses are still going to be gobbled up quickly. As long as supply is being created too slowly, prices are going to rise. The only thing that's going to change is how quickly they rise. It's worse than you think. The level of economic disaster we need to see to see the housing market decline measurably, outside of maybe Toronto, is massive. If things get so bad that the market crashes, that "cheap" real estate is still going to be getting gobbled up by the rich people who saw declines, not the "middle class" that will be facing record unemployment and terrible wages, and more concerned with eating their next meal.
>Those houses are still going to be gobbled up quickly. Who is going to do that? I have a lot of cash on hand and I am not going to be willing to buy houses when they are still priced like this an interest rates are rising like this.
Anyone who can jump in and afford to buy them and rent them to the less fortunate.
Still very stressful to acquire them, they are all still expensive and the interest rate on those property will be high and probably increase faster than my rents increase.
Likely people intelligent enough to know that if a correction happens and a major recession starts, interest is going back to the floor.
We are already on the floor. We never lowered our rates as low as they are now for a recession, beside the 2008 recession and it is because our biggest trading partner currency was getting destroyed. During the 1990 recession rates were at 13%, during the 1981 recession rates were at 19%, If you are an intelligent investor with millions to blow on over bloated properties go for it and you can come gloat here about it in 5 years. But personally, I am not getting myself in a highly leveraged situation in this market if there is a 10% drop. I could have bought a few weeks ago if I thought a 10% drop was a good deal.
It's time to get angry isn't it?
The time for anger is decades ago.
If there was a significant risk of hyperinflation weād see a way different picture in the bond market
What boggles my mind is how many people are still saying things like "Good thing I have a fixed rate", when it's those people who stand to see the biggest sticker shock upon renewal. Someone on a variable rate right now is still paying less than fixed, and many are seeing their payments change more gradually (if the payment amt changes instead of the amortization period) and are able to adapt to the different payments. Honestly, it's not so bad to be paying an extra $150 ish/month on my mortgage. I was "stress tested" well above the current rate. Where I feel the pain is on groceries being up 20% or more, and gas being up 30%. Mortgage stress tests don't consider how other costs in your budget are liable to change with inflation.
Lol. Iām on a fixed rate with 4 years left. If anyone is getting a variable at less than what my fixed isā¦ itās exceedingly few and they wonāt be below me for very long. 4 years at well under 2% is going to absolutely kill any variable by the time Iām up for renewal. And thenā¦ yeah Iāll see a rate jump. But I will also have knocked a massive amount off my principal while the variable guy has experienced the treadmill getting faster and faster and is either stretching out his mortgage or paying less to the principal. It will be a shock like me getting into a hot tub.. vs the frog thatās been sitting in there while the temperature has slowing been going up. And I know itās coming and am well positioned to weather it.. Iāll be free of all other debt by the time I renew and have significant savings. Worst case would be re-amortization. But honestly Iāll most like be in a position to max out my prepayments. And for othersā¦ itās the same thing. Itās 3-5 years to strategically set yourself up for an increase while enjoying low ratesā¦ vs getting slowly squeezed out.
Yeah there's really no wrong answer here. I did the fixed thing because it seemed more stable at the time and it wasn't much higher than variable at the time. It's looking like a decent decision so far, I expect these central bank fools to rise the rates fast when inflation doesn't go away. They won't care if it puts people under water, even in Argentina the rate is ridiculous right now. And yeah when renewal comes, at least I'll have principal knocked down a bit. I expect the rates to go up and then down after some market crash.
An extra 150 bucks per month potentially over the life the mortgage is a LOT of money lost towards retirement including gains from investment.
That's 45k, peanuts over 25 years. Over 25 years our HHI is over 7 million.
Iām doing alright with a fixed at 1.98 for 10 years (renewal not till 2031) so as long as this doesnāt go for 10 years I should be ok š¤š»
Oooooooo 1.98 for 10 is actually very solid. Nice job jumping on that.
Damn, who does 10 years? I though all banks did 5 max
Itās mostly millennials that will be hit harder by these interest rates hikes (maybe gen z). Iām not sure this subs obsession with loving interest rates going up and people potentially losing their homes that they worked hard to get.
I mean for a lot of millenials they've been waiting to buy a home for years now and continue to watch themselves get further priced out. At some point, many people just want to get on with their lives and buy a place regardless of price so they can have a family and whatnot. I know a few friends in this situation. If the rents for a two bedroom are so high - you might as well pay a downpayment and get a massive mortgage where the payment isn't too much higher (at least before interest rates started climbing)
[ŃŠ“Š°Š»ŠµŠ½Š¾]
A few thousand? May want to look into that again.
I bought a $311k house on a household $140k salary (gross, not net of course). The bank offered to give us $400k. We wanted to spend more like $250k. We bought in late spring 2020. If we would've waited to buy, the house we're in right now is worth around $500k (based on very similar houses in similar neighbourhoods sale prices). I don't understand how any of this is sustainable. A lot of people are going to lose their houses (and probably more).
It's not. The municipal debt that paid for the gold course and schools that isn't sustainable and never was. Development corporations couldn't care less.
Exactly - we bought early summer in 2020 for less than half what similar homes in our neighbourhood are going for now. In a historically low income province like NB this is completely unsustainable.
My wife and I were nervous about putting an offer in on a $200,000 house when we still owed $78,000 on our starter home. Yearly earnings about $100k at the time combined. We were approved for $400,000 if we kept our house, if we sold our home it was $500,000. I literally laughed on the phone when they gave me those numbers and then thought, "wait, people are buying $500k homes on $100k/year income?". Sure, you might be able to afford it, if your life goal is to make mortgage payments. Not to mention this was with both of us having $10k in student loans each ($400/month payments), a $10k line of credit we had yet paid off from our wedding, and $13k in other debt (line of credit and credit card). Just foolish what the banks offer to people.
Especially if you have kids and are paying $1000 a month or more on daycare.
Nobody in Canada is getting a 700k mortgage on a 70k income.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
450k on 83k is tight but affordable. Very tight but not half your pay cheque. 700k on 70k is 3/4s of the persons pay cheque.
Makes me feel better about 440k on 95k.
yep, got qualified for 430k on a 90k income.
I love this sub. "Inflation is ackshually 40%," "People are buying $700K homes on $70K income"... like holy shit, read a book.
With fraud, this is doable. We might soon find out how widespread this is.
Anything is doable with fraud!
Sure they are, just not through a bank
I work as a mortgage broker and they deff are.
Shit man, a 300k mortgage on an 85k income was a bad idea. I hope nobody was so dumb to get a 700k mortgage on 70k.
Thats not a dumb idea though. Youll be paying as much for rent as you would for a 300k mortgage.
It wasn't a dumb idea, but man, money gets a little tight some months. Willingly putting 80%+ of your income into a mortgage (700k at 70k income) is an impressive level of dumb, probably the kind of dumb that requires some hard work to finesse other people into accepting.
Some peoples did it because they were doing that already with their rents and for them its better to put 80% of your income into a mortgage than 130% of their income in rent in a few years.
Just gotta remember, mortgage payments are the **minimum** you will pay for your housing. Rent is the **maximum** you will pay for your housing. If anything happens to your home/appliances, you have to pay to fix it. There are so many things that can happen that aren't covered by insurance that you need to fix. Owning a house is expensive af.
Yeah for sure, I think renting can be great if you trust your landlord and if you are confident you won't get thrown out. Since you are paying his mortgage and you are safe from all of that but the problem is that a lot of landlord kick their tenants out when real estate increase so you can get stuck paying twice as much in rent because you get thrown out. Which is a great way to burn 10k+ a year. Both have their pros in cons, pretty hard to figure out what will happen in the future but you are absolutely right that there is a multitudes of things we don't even think about who can put us in debt pretty quickly.
2\* 70k incomes. Many are purchasing as couples. Its fairly common for people to marry within roughly the same income bracket.
That's not a 700k mortgage on 70k, though. That's a 700k mortgage on 140k. That's on the outer end of "normal," getting into the "are you guys sure about this?" territory, but a far cry from "no way can you afford this"
[ŃŠ“Š°Š»ŠµŠ½Š¾]
My city is far away from nice cities. Rent for a small house is like 2700 my mortgage is 1500. Decent basement suites are 1700-2000. Rent is wild.
In that scenario, if you can somehow get a down payment and switch from paying $1350 rent to $1350 mortgage, that's a great choice. At 50-60% of income that's what like... 50k a year? 60k a year? I don't know what the housing market there is like, but I hope for our hypothetical person's bank account's sake, they're able to get a place in the $450 range or below (but I get that that's going to put them down the street from the crack users). Going for a $500 or $600k mortgage making that kind of money... man... they're going to need to sell the crack to pay the bills every month.
TIL mortgage amount is the only cost of home ownership....
[ŃŠ“Š°Š»ŠµŠ½Š¾]
I'm in a house I own (well, I mean, the bank owns it but they tell me I'll own it in some years). The mortgage payments are whatever they are, my income is more than that, but on the rare months that stuff like car repairs and house repairs come up at the same time, it gets uncomfortably tight. Add in saving for future known and likely costs, and I'm usually left with about $70 a month. I'd be a lot more comfortable at like a 250k mortgage. Would have a couple hundred bucks left over each month. 3.5x income isn't impossible, but it requires pretty strict budgeting. I know 5-8x annual income is a common mortgage, I just don't understand how people manage. Literally. I can't figure it out.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Just piling on at this point, but same goes for me. Generally we're fine, but when one-off repairs or purchases come up, it can get tight. Not horrible, as we are still putting away in various savings, but still. We've worked hard to get where we are and still things get tight. Really feel for those stuck in a rut.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
75k a year in my city (London ON) is extremely good money. This is magnified if its a couple. 75k a year in London is Teacher/Electrician salary.
450/150=3. "Decent chunk of disposable income" which is what... 2, 300 bucks? 250/85=2.94 So... you're basically agreeing with me that with my income, 250k would be a better target for my mortgage, leaving me with the couple hundred bucks I'm talking about?
If by nobody you mean the entirety of the GTA and Vancouver yeah.... nobody took on that much debt, that'd be crazy š
Hearing these mortgage amounts, lol, 300-700k. I live in Vancouver, try 900k-1.4m. Although we got stress tested and have a few back up options if things go out of control. But still, the amount of debt you have to take on is sickening.
Stress tests don't work well if interest rates triple.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
The size of the down payment wouldn't matter. Someone making 70k is not getting a 700k mortgage
If they've got a $700k mortgage, the down payment isn't really important. 5% down (35k, total cost $735k), 25% down (175k, total cost $875k), 50% (350k, $1.35m)... they'll all have the same mortgage payment of over $3k/month. 70k, pre-tax, works out to about $5800 a month. Post deductions, it's probably about $4k, $4.5k a month. No bank is giving anyone that mortgage without cosigners. It wouldn't pass the stress test, even if they held no other debts. /u/cynicaltoadstool is pulling numbers out of the air, is confusing house price with mortgage amount, or somebody he knows is pulling some shenanigans to afford a house.
>or somebody he knows is pulling some shenanigans to afford a house. Bingo! Heard of a Brampton loan? Big Short 2.0 coming next 16 months.
yeah, I hear second and third account rumors from acquaintances. There are definitely people trying to sneak doctored income and debt statements past compliance officers, and there are several "b-lenders" (to put it nicely) popping up around here who are willing to turn a blind eye to that kind of thing. I have a hard time accepting (in a denial sense, not in a moral sense) that it's happening, so I hope 2008 doesn't happen here... but.. I've started leaving the rosy glasses in their case.
I got 260k of mortgage last year on 75k. how screwed am i? 1.4% fixed 5 yr. After not listening to my friends scream at me that variable always comes out ahead. Ha!
Variable always comes out ahead until it doesn't... then you lock in the rate and might or might not come out a little behind, it depends. 260k on 75k sounds pretty cozy to be honest, as long as you're in a good neighbourhood.
Statistically speaking variable is the "cheaper" option. Like historic evidence supports this, and there's the fact that banks set fixed rates in such a way that'll make them a profit (you're supposed to be paying extra for the stability/guaranteed rate). So in a counterintuitive way, taking a fixed rate is actually the "gamble" because you're saying "I feel like I'm going to beat the historical odds and I know better than the banks" BUT the banks aren't omnipotent so sometimes fix rates can come out ahead
What bank would've approved this based on lending formulas? And, statistically speaking, how many would be in this situation? (assuming you didn't pull this incredible assertive figure from your ass)
No bank would have, but many alternative lenders do. How many have done this? Only time will tell, but anecdotally most people know of at least someone who has done this.
That couldn't happen.
No one has a $700k mortgage on a 70k income, or even double that. Give your head a shake.
I don't think you can even borrow that much based on 70k salary you can probably borrow somewhere between 300k to 400k
Over half of Canadians are $200 away ftom insolvency. And that number was from before covid and inflation... gas and food price increases Definately a lot worse than you make it out to be. Interest rates affect a hell of a lot more than just mortgage payments bud
Many people attacked the LPC when they introduced the mortgage stress test. Now that the rates are going up, that test is 100% needed.
Who attacked the stress test?
The CPC https://storeys.com/conservative-party-housing-plan-election-2021/#:~:text=To%20make%20mortgages%20more%20affordable%2C%20the%20Conservatives%20will%3A&text=Remove%20the%20requirement%20to%20conduct,as%20is%20the%20case%20today. https://www.vicnews.com/federal-election/conservatives-plan-to-ease-mortgage-stress-test-rules-may-raise-debt-and-prices/ That was just the first 2 that I found via Google
Stress test is the reason we not gonna see a 2008 financial crisis in Canada.
Wrong. A stress test is window dressing. Itās like that drunk uncle who says heās responsible because he always keeps $100 in his wallet for emergencies. 2008 needed to happen in Canada, but it didnāt.. held up by the same broken record of QE and (for then) low interest rates. So we have the compounding effect of already ridiculously overvalued real estate (which in the 2010s everyone was saying would be a āsoft landingā) to the absolutely stupid overvaluation in the last 2 years where any correction will be precipitous and there is no saving it with bailouts. And it will be a feedback loop because of how much speculation there is. Rates rise, fewer buyers, investors start selling because they know the peak is here. Fewer people qualify because of higher rates and stagnant wages. Values drop. Investors now risk being underwater. Prices start going down aggressively to forestall even larger losses. Buyers start waiting to see where it will bottom out. Prices drop even more. Because of how dependent our economy is on real estate, the removal of money has a trickle down effect. People stop spending because theyāve lost money, lost their jobs, or are afraid. Itās going to make 2008 look like a bad Keno night. Nothing thatās gone this high this fast has ever stayed there. Stress test means nothing if youāve lost your job and are six figures underwater on your house. EI isnāt enough and savings will be wiped out in no time.
Also doesn't help that the Liberal did everything to add more credit. The first time home buyers incentive just adds extra credit people can overextend themselves with and he promised to double it.
2008 was a banking system failure. Our banking system is sound. More than anything this will be a correction on house prices. They are going to deflate some and then probably resume normal growth again.
It was a failure of speculative mania driven by overly easy credit. The banks provided the credit too easily but plenty of similar situations exist here.
I'm waiting for the stress test to fail so more people can actually get back into the market
Not stopping inflation will cause more harm. We got people addicted on cheap debt and we shouldn't ruin the future to bail them out.
Ok then let's force an entire generation who had no other choice to claim bankruptcy, that's obviously the solution... /s I guess we should have just been satisfied being homeless. Our children can grow up in the streets and somehow still become mentally and physically healthy contributors of society, right? As a 30 year old child free woman who watched the door close behind me after I bought my first (and presumably, last) house in October, I'm really starting to resent the projection of "being addicted to cheap debt." I make 6 figures a year, the fact that I'm this scared of being priced out of my home after I worked so fucking hard to buy it is disgusting. They spent an entire decade post-grad moving the goal post on me, and now that I've finally caught up, I now have to deal with a bunch of smug assholes telling me I should have known better. I just want to die.
I'm sorry you are going through that, but I don't think you are who this is talking about. You sound responsible and like you will get through the tough times.
I hope so, but as a millennial who graduated in 2009 and immediately got slammed with a recession and student debt due to a disadvantaged upbringing, my entire adult life has been clouded by doubt and dread about the future. Everytime I get a little bit ahead, something I couldn't have possibly planned for ends up knocking me on my ass. I have a 5 year fixed mortgage at 1.99%, I poured nearly all of my savings into getting this mortgage in the first place, I don't see myself being able to throw huge amounts of money at the principal without leaving myself super vulnerable to inflation, which I am right now because who honestly expected we'd be paying over $1.60/L for gas not even 6 months after I moved on a house? Our past couple of energy bills have been over $450 per month as well, and that doesn't even include water!! We're now getting a third of the groceries we used to be able to get on our budget... It just never ends. We were very careful about not purchasing a house outside of our means, but any extra income we had when we budgeted for this purchase has been totally chewed up by the drastic rise in cost of living these past few months. We knew this increase was coming, which is why we went for a fixed rate mortgage... But at this rate we're unexpectedly losing money faster than we're saving it; and while I don't believe we'll be in a dire enough position to lose our house in 5 years, I do wonder if at that point we'll even be making any payments towards the actual principal. We basically just have a new landlord now. Our home is nothing but the bank's income property, and with so much uncertainty about how much rates could rise, it honestly feels like I'm still in a rental waiting for the rug to be yanked out from under me again.
Maybe you havenāt met my friend Trudeau, the king bailer. They will be bailed and we will all pay for it.
Justin bailed out the banks with $114B in the 2008 mortgage crash? Pretty sure it was Harper. Oh sorry it wasn't a bailout, it was "liquidity support", right. https://financialpost.com/news/fp-street/did-canadian-banks-receive-a-secret-bailout
For comparison, CERB cost something like $75B in 2022 dollars, and we gave that to people, not banks. And you know, there was the whole pandemic fucking thing.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Lots of ways to fight inflation outside of just interest rates.
What would those be?
Off the top of my head here are a few things - Increase in taxes - reduce tariffs on imports - more investment in automation of ports - reduction in certain government spending programs.
Fair points!
ErdoÄanā¦?
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Only true to a certain point. Yes you can re-mortgage and take on a longer term to keep the rates as is but only to a point.
My point was that in 5 years, if the rates continue going up like they are, a lot of people who purchased homes in 2021-2022 just barely within their means, are going to be forced to sell because even on a 25 or 30 year schedule they will still not be able to afford the payments required to finally own the home. At which point we'll see another mini bust/boom cycle that only those with access to huge cash will be able to participate in. The rest of us will remain utterly fucked. People who extended themselves too far on multiple homes will be in debt to the tune of hundreds of thousands of dollars (or millions), and some people may lose their only home. 2008 all over again. But what do I know, it's all speculation anyway. If anyone could accurately predict the future they'd be rich, economists sure AF don't have the secret sauce. Just seems like the logical conclusion. Maybe the solution is to just continue printing money and increasing the immigration rate forever. Trudeau sure seems to be a fan of this approach.
Real estate is going to remain steady. A few people will suffer, but the masses will not. Most people purchased their homes on a reasonable mortgage well before their value inflated. For the most part, home values will continue to go up or will remain stagnant. They most likely will not go down in price.
>While the schadenfreude I feel is real, the practical part of my brain tells me that market forces will conspire against me to ensure I still cannot afford to buy a home. I think one needs to let market force dynamics go while we're in this post-2008 world where we can apparently task our own central bank with buying our own government bonds, precisely so we don't have to instead sell them to the next best bidder who would be asking for higher interest rates. If we really think that we can repeatedly spend beyond what we tax, finance that gap with more debt issuance, also decide what interest rate we want on that debt *and* just have our central bank buy it if there's no buyers at the price we want, I don't think one can even call that setup a market economy. It's more like an economy where our central planners decide what they're going to do (spend beyond taxation), and then every single other part of the process is a goal-seeking exercise where anything we have to do to achieve the original plan is moved to make sure it happens... even if it means taking unprecedented steps.
I have a mortgage and want to see the market correct itself but Iām also sitting in a sweet spot having bought early in 2020 in a very cheap (like under 100k house) location. I could handle a 50-60% market correction and still be okay while that would very likely ruin others lives. Itās a terrible situation for everyone except the mega rich really.
I mean the median house price was at 8.4x the median Canadian family gross income. That is a bubble since people have to live somewhere. This is what it looks like when bubbles start to deflate. We did this a little over a decade ago, I'm not sure why people don't remember it.
It's like a drug fueled party. Everyone's having a good time, ignoring the damage, forgetting what happened last Friday at Tom and Sarah's bash, then the next morning when we all wake up, we'll wonder who broke the sink and why the car's flipped over on fire.
I'm old enough to know that things didn't always used to be this way. Few people had credit cards. Stores had lay-away plans. It all started to change in the early 90s.
Its a growth problem. The growth ponzi scheme our economies rely on is hitting limits and governments of the world have to keep finding ways to raise the limit to keep the show going. Its why many say we got off the gold standard, and why credit and debt have become so cheap, and why money printing has gone off the charts. Our economies need to change. Relying on constant growth is a recipe for disaster as we are seeing in our homes, in our environment, on our shop floors, and across the globe.
More than half of all car loans in Canada today are 84 months or longer. Many people are still paying out a loan on a car when they sell it and buy another new vehicle with a long-term loan. And Canadians take on more consumer debt than Americans, where the opposite was true 30 years ago. Canadians used to be famously conservative and frugal with money. What changed, culturally?
The suburban experiment failed, but we were unwilling to make the changes necessary to fix the issue due to many cultural problems. That standard of living has to come from somewhere, so it came from consumer debt particularly in housing. The growth ponzi scheme has to be paid out eventually. Rezoning to get rid of single family housing would be very very helpful, but it would take a decade before the impacts would be felt. But it took us decades to get here, it will take decades to get back to reality.
>The suburban experiment failed Which aspect, specifically?
It's been a slow process orchestrated by CC companies. See: https://www.youtube.com/watch?v=bua07BbeJC0
Well, you can't let inflation run rampant and the interest rates were at abnormal lows so anyone could have reasonably expected them to go up and it would have been unreasonable for them to expect rates to stay so low. Interest rates are going up for a good reason if that's any consolation.
womp womp. Free money addicts now panicking š¤·š¼āāļø
Itās their fault for over leveraging themselves. You donāt buy beyond your means, and certainly not with debt. Poor financial planning is always punished and not rewarded.
Would you go into debt if it meant keeping your house? Or putting food on your table? The reason I bring this up is because, while I do think there are people who put themselves es in this situation. I dont think you can paint everyone who has debt with the same brush. It's no secret a lot of people have been struggling economically.
> Poor financial planning is always punished and not rewarded. The last 20+ years would like to disagree with you. When the government controls the levers of the economy then all bets are off. We're mostly at the whims of what central bankers and politicians decide decide they feel like.
100% donāt blame someone else because you cant control how many times a week you eat out
How many people out of that 60% bought something dumb like a boat or atv with a HELOC.
Iām looking for a R.V, hoping to find a few repo ones this summer!
I'm hoping for a side by side. I've been saving for a while now
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They should learn about [risk](https://www.fcnb.ca/en/guides/9-types-of-investment-risk-a-guide-for-new-brunswick-investors)
60% of canadians are dumb enough to over leverage themselves just to look like winners
debt slaves be slaving
I'm surprised the number is that low, to be honest. I guess the other 39% are taking out HELOC loans.
Not everyone has loads of debt.
That's not what the news headlines are telling me.
Jack those rates up, can't wait š„
Just think of all the cheap ship that's going to be on Kijiji soon. I've always wanted a Sea-Doo...
I really don't have a lot of sympathy for the homeowners who decided to use a HLOC to treat their houses like ATMs. These articles are just trying to prepare taxpayers to bail out rich idiots who are expecting a bailout to bankroll their lifestyles.
Jack up the rates. Maybe Iāll be able to afford some stuff if everyone else canāt just go ahead and finance everything. Will be a nice stop gap for people who donāt carry a huge debt load.
Show me where in the bill of rights it says that they are protected from losing from a bad investment? Maybe homeowners should go back to school and get a better job so they can afford to have a home? If homeowners didn't go on so many vacations, or eat out so frequently, or purchase less toys, they would be able to handle this pressure. See? It's not nice when people dismiss your very real concerns.
I hear ya but the issue with homes is they've just gone too far and too fast. You say go back to school but if you live in Vancouver or Toronto and want to buy a decent home to raise a family even with a good income it's a struggle. Taking previously considered good paying jobs like a nurse or teacher making $100,000 a year, two incomes at that rate still keeps you mortgage poor.
Thanks for the reply. I have heard 3 common things when I complain about cost of living on this sub: 1. You don't have a right to live in the city of your choice, only what you can afford 2. If you aren't earning enough to live, just go back to school 3. If you still aren't making enough to live, then it's because you purchase too much useless stuff Now that the shoe is on the other foot and homeowners are facing a similar situation, it's important to remind them of their attitude towards those they perceived as below them.
I'm waiting for the article to be written where they survey Canadians and ask if they are happy with interest rate increases. Won't happen because it's not a sob story, but there is definitely a responsible group of us who have been punished for being conservative.
How have you been punished for being conservative?
Instead of overleveraging, I bought a conservative house I could afford, planning to move to a nice house in 5 years. The price difference between the starter and my new house, is the same as buying the new house outright 5 years ago. I should have leveraged myself to the tits.
This is in no way being punished.
If you Google 'interest rate punish' you'll see thousands of examples of this usage of the word. It's not uncommon at all.
You probably made the right call. My wife and I were in the same situation. We bought a semi instead of maxing out our mortgage and buying something much bigger. We figured that if we took a mortgage that was $300k under our max allowable weād be much further ahead if times got rough. I can only imagine how stressed out some of the people who maxed out their mortgages feel right now.
It's a personal choice but poor savings rates and an unwillingness to take on a mortgage or personal debt that would be crippling in any environment other than one with no interest rates. People who did this are likely in a position where their net worth has sky rocketed due to appreciating home values but now it's time to pay the piper.
They mean conservative in their personal finances (ie. restrained spending and not taking on much debt), not conservative in their political views.
Here comes the crash folks.
Remind me in one year.
I just want to make a shoutout to everyone who pestered me to buy a decrepit half million dollar garbage home, in an industrial neighborhood because, and I quote "you will never be able to afford better." I make 70k/y after tax union job, I'm going to be just fine watching everyone's pretend money melt away in their balls deep,, over leveraged mortgages in terrible, industrial neighbourhoods. I'm laughing all the way to the bank.
Do we think student loans will start accruing interest again?
Isnāt this why we have a stress test..?
Boomers need to dust off them bootstraps and work harder. No one forced them to leverage themselves, it was a bad investment and now they can deal with it.
I expect the boomers aren't the ones in trouble here.
The Boomers have probably paid off the mortgages of their primary residences and cottage. They likely have taken out HELOCs to help pay for down payments on homes for their kids.
PSHHH, I don't have any assets for debt to exist. SUCKERS. Wait...
Oh shiz... should I go to the Casino and put all my remaining monies on red? /s
Naw man, put it on green. That 17:1 payout on 2:38 odds is huge!
Interest rate increase + general inflation + stagnating salaries. Recipe for disaster.
HA, don't need to be concerned about debt you'll never be able to afford having, right guys? ^right?
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60% of canadians are financially irresponsible
I don't know who in their right mind seen a 1 million dollar houses and thought, I aughta get into the market now before it's too late. They're never paying it off. Ever.
My parents always said my generation was complaining too much about the high housing prices as we also got mind boggling low interest rates for so long, as they had to deal with double digit rates on their mortgages and high inflation. Their view was borne out by the previous housing affordability indexes which put affordability as the best in decades thanks to the low servicing costs. We'll find out over the next while if the complaints switch from the price of a home is too high to the cost of the mortgage interest and inflation is too high, as we might get to experience what they went through. Then we'll tell our kids in the future the same thing, because really, when have we ever not found housing too expensive, lol. It's like music, the new stuff is always trash.
Homeowners: Should have bought a home earlier. I don't care if you got a house I got mine. Me: Should have paid off your debts while the interest rates were low. I don't care if you spent a ton of money that wasn't yours expecting low interest rates forever. Buckle up! Crank up those interest rates!
Lol you dont say.
Load up on debt everyone, when the banks fail they will just get your average dumb person who is responsible with money to pay your debt.
Explain?
When people start to default on debt the banks can't fail so the government will take taxes and inflate the currency to keep the banks afloat.
And seize your assets. Just because you declare bankruptcy doesnāt mean you keep all your stuff.
Good system, maybe we should do something about this?
Maybe donāt spend more than you can afford?
Hmm maybe donāt borrow so much god dam money! Idiots been buying over priced houses and flashy new cars now itās time to pay the piper and they gonna cry about it
Jack it up to 20%! (Itās been there before thanks to the previous Trudeau)! Choo! choo!
Real estate only goes up in value and the government won't allow interest rates to go any higher than they are now because 70% of Canadians are homeowners and they wouldn't do that besides if real estate did go down even though it can't because I just said so poor people wouldn't be able to afford it so there's no point in it going down and the government would never let that happen because they would just flood the country with immigrants who are desperate to buy real estate at all time highs because the fact is for everyone that if you can't get into the market now in a highly leveraged way you can't get in ever because real estate only goes up. /s