I am an economist, and what I can see in the future is either a recession or bigger interest rates. GTA is no longer a hot market , even there are multiple offers for 1 bed condo and downtown houses. The investors are moving to Montreal, Ottawa, London where the prices are still affordable. There is a shortage of supply, but with new morgage rules, there is a shortage of money. There is no crash more a cool down, but the real crash might come if NAFTA negotiation is unsuccessful. If the war trade begin than global economy are going to suffer, and Canadian economy and Mexican economy will suffer the most. The new tariffs will mean higher cost for common goods and a less exports to US as a results many lay offs. Then the show will start, many people will be forced to sale their homes. The reason the National Bank didn’t increase the interest because they are afraid of a recession.
Our mortgage broker pushed variable rate really fucking hard when we were using him. Thankfully we now deal directly with the bank so I can just look at the numbers and make my own damn decision.
There’s two benefits to a variable rate mortgage in Canada: first, the interest rate is a couple points lower than for an equivalent period fixed rate mortgage. Second, variable rate mortgages tend to have more flexible repayment options, if you plan to pay down your mortgage more quickly than making the minimum payment for the next 30 years.
Right now with CIBC in Canada, variable is 3.45% for 5 years vs 4.99% for a 5 year fixed. If you really hate your money, they offer a 10 year fixed for 6.29%.
However, the cheapest option available is actually to take a 2 year fixed rate at 3.24%, Considering that the Bank of Canada tends not to change rates very often or by very much when it does, I don’t think the security of knowing your rate won’t change for five years is worth the extra point and a half of interest.
Contrast that to my American mother’s bank in Michigan, where the spread between ARM (4.25) and 30 year fixed (4.625) is barely worth mentioning.
Funny thing is, that in Vancouver, after the foreign buyers’ tax and the vacancy tax, sales plummeted, but prices stayed stable. I don’t think the term “dysfunctional” adequately describes the state of the Lower Mainland’s real estate market.
Toronto has developed land and satellite cities surrounding it up the wazoo. Their prices can be forced down relatively easily, relatively admittedly being a tough term to nail down.
Vancouver has nowhere to expand except due East and the November through March weather becomes decidedly like the average Canadian winter by the time you are 50 miles (80km) from Vancouver. Ergo, all the foreign buyers want to live or at least own property in mild Vancouver. They have massive financial resources and aren’t phased by the 15% foreign buyer’s tax. Our apartment downtown has appreciated 20% in the last 15 months; there is precious little supply and no sign of the condo and townhouse market softening. House sales have seen a small adjustment in prices in the last several months.
Most people here have fixed rate mortgages with specific terms, usually 1 year, 2 years, 3 years or 5 years. The amortization period is 20, 25 or 30 years. The mortgage comes due at the end of the term. Your bank will happily negotiate a new mortgage at prevailing rates to essentially pay out the old mortgage and institute a new one. We’re going to negotiate a new mortgage 6 months before the existing one comes due and hopefully get a manageable rate. The upside of the short terms is that you can dump as much as you can muster onto the amount owing at the time of signing the new debt and buy that sucker down.
Speculators who buy in adjustable rate mortgages deserve to suffer the slings and arrows of the market. The people we should care about are home buyers who live in their homes and don’t take unreasonable risks to own a home. Buy when the market is low so you can sell when the market is high. Have a strategy so you aren’t subject to market slumps.
Prices in Vancouver are simply terrifying (and that’s coming from someone who lives in SE England). It’s a lovely city, but it has been priced out of the reach of locals who actually do the jobs that make the city such a fantastic place.
The Guardian is reporting that 5% of Vancouver housing was unused for more than 180 days during 2017 - I would have thought it was higher judging by the number of dark apartment blocks looming over the city. But empty properties will now be taxed an additional 1% of their value.
The US is unusual in having very long term fixed-rate mortgages. Here in the UK, we’re much more like the Canadian market with most people on 2, 3 or 5 year fixed terms at the end of which you can either remortgage on a new fixed term or go to the standard variable rate.
That sounds like a remarkably good idea - when will we know what effect it has on prices, and is anywhere else trying something similar?
I know I’d like the prices to drop. I’m farther from being able to afford a place than I was twenty years ago, despite making 3 times as much.
I bought my house during a brief period in the market when the rates were up (about 9 years ago now), but still opted for the 30 year fixed. The great thing is that as long as you aren’t under water (the 20% downpayment makes this difficult) you can refinance to lock in a lower rate. We did this several years ago and I think we have a more or less rock bottom rate. I’ve never seen it go significantly below what we have.
The caveat is that banks don’t make it as easy as it should be to refi the mortgage. They’ll still rediculously require all of the closing bullshit they require when you first buy the house (title check, mortgage insurance, etc…), but all of that is paid off pretty quickly by your new lower interest rate.
Actually depends on the current rate. LIBOR and friends are pretty arbitrary (actually rigged) despite protestations to the contrary. If the present rate is higher than the long term mean then they’ll argue the other way. YMMV, IANAB etc.
In related news, Rob Ford is still dead.
And his considerably more awful brother is about to become premier of Ontario!
I find it hard to believe that a mere mortal can become “significantly more awful” than Rob Ford.
Who’s more awful, the addict or the dealer? I think we can all agree that this family is rotten through and through.
This topic was automatically closed after 5 days. New replies are no longer allowed.
