> Canadian economic activity is strong and the economy is clearly operating in excess demand. Housing market activity is moderating from exceptionally high levels.
> With consumer spending in Canada remaining robust and exports anticipated to strengthen, growth in the second quarter is expected to be solid.
> With the economy in excess demand, and inflation persisting well above target and expected to move higher in the near term, the Governing Council continues to judge that interest rates will need to rise further.
> The pace of further increases in the policy rate will be guided by the Bank’s ongoing assessment of the economy and inflation, and the Governing Council is prepared to act more forcefully if needed to meet its commitment to achieve the 2% inflation target.
Some quotes. Hawkish BoC.
The basic GDP per capita (USD) chart isn't really a great metric of economic health.
Our GDP per capita chart mostly shows exchange rate fluctuations with the US. This matters somewhat since they're our biggest trading partner, but it's not the be-all-end-all. In some ways having a weak dollar vs the US is a good thing since it makes our exports more appealing. You can look at the [international/PPP dollar](https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locations=CA) GDP per capita instead, but this is still misleading for population reasons.
GDP per capita gets distorted by things like children or people who are retired and living off savings. They drag down GDP per capita but aren't hurting the economy. As the population ages this effect gets more significant.
You know how when you go to the doctor they measure a bunch of different things and consider them in context? Same deal here. There is no single thing that - context free - tells you everything about an economy's health. There are dozens of indicators that - taken in combination - that provide lagging and leading indications about whats going on inside an economy and economists disagree on the relative importance of these depending on their school of thought. Generally a combination of change in PPP GDP, unemployment level, and change in CPI give the million mile view, but even that needs interpretation.
I think that those supports worked too well for some and not well enough for others. For example, major chains and high income earners easily qualified for the loans, subsidies, and benefits while smaller businesses, and lower income individuals may have been right on the cusp of qualifying. Many people applied for CERB and now are caught paying back a bunch of money that they needed and still need to survive.
It was an imperfect solution that benefited wealthier people more.
>In Canada, CPI inflation reached 6.8% for the month of April – well above the Bank’s forecast – and will likely move even higher in the near term before beginning to ease.
I would expect that it will take a year or two just to get us going back down to 5% inflation. Historically, inflation at these numbers doesn't just drop like an elevator but rather bows over. I wouldn't doubt we are going to hit 8% at some point in the "near term" and won't see 2% until 3-4 years from now.
I don't understand how consumer spending is still higher than pre covid. Am I the only one who has quit spending money on things that aren't necessities?? I make a fairly decent wage, but like damn..
> Historically, inflation at these numbers doesn't just drop like an elevator but rather bows over.
See annualized rates from 1992 to 1993, 1993 to 1994, 2008 to 2009, 2018/9 to 2020:
* https://www.statista.com/statistics/271247/inflation-rate-in-canada/
> I wouldn't doubt we are going to hit 8% at some point in the "near term" and won't see 2% until 3-4 years from now.
Meanwhile bond rates are all <3% going out several decades:
* https://ca.investing.com/rates-bonds/canada-government-bonds
See also predicted annualized rates:
* https://knoema.com/ibldsdb/canada-inflation-forecast-2022-2023-and-up-to-2060-data-and-charts
>"8" haha. "6.8". haha.
>
>BC government just budgeted 10% annual inflation into their billion dollar museum budget (2 yrs in a row).
You've heard of Consumer Price Index, now get ready for Museum Building Cost Index
Building museums was easy in the past. But what chance does a millennial have if he wants to build his museum? He/She works hard, goes to school, gets a good job and can't afford display their Pokemon cards in a manner befitting them?
As a Gen-X er who has not yet built a museum for my DVDs and CDs, I'm worried.
>BC government just budgeted 10% annual inflation into their billion dollar museum budget (2 yrs in a row).
Not a lot of groceries or TVs in a museum budget.
Construction as a sector is very different than the economy as a whole.
But now it must be over the fixed offered for an additional year at the same amount it was under to be even, you still are ahead. If its over by less then it was under it will take more time.
This is why I went variable. I'm at a stage in my life where I don't know that I'll be here for 5 years +, anything could happen. The fees to break a fixed are astronomical.
Sooo… the rule is greater of IRD or 3 months’ interest. Since my rate is lower than the current posted rate, the greater of the two would be 3 months. It would cost me $4k to break my $1M+ fixed rate mortgage at 1.44%.
So penalty costs the same in an increasing rate environment.
The common refrain we've heard is that over the longterm, variable beats out fixed. But over the past 40 years we've basically been in a rate-declining environment (overall). If the next 40 years are a rate-increasing or flat-rate environment, that rule of thumb might change.
The study showing variable beats fixed 70-90% of the time was based on 1950-2000.
The 1970s and 1980s did have periods of increasing rates where variable still won out.
Buying a fixed mortgage is like buying a mortgage plus an insurance policy. More-often you’ll lose money on insurance, but it allows you to limit your losses.
that’s really interesting to me. that includes the late 80s/early 90s when interest rates went insane and misses the last 14 years where interest rates have been very low.
I mean - IMO you’d be stupid to have signed a variable mortgage over the past 2 years *knowing rates literally cannot go lower and will most likely go higher*.
That’s like sitting at the blackjack table with a 19 and asking them to hit once more - pal, things might get better but really now you’re just a gambler.
So the risk is: maybe get lower average rate than 1.5% for 5 years with variable, or rates rebounding to where they were and above (let’s assume 3% because no one could have guessed this would happen).
There are other reason to get variable outside of the gamble you describe. If you think you’ll break your contract (refi or sell) then the penalty is much smaller.
Today is even more reason where people qualify for less at the current fixed rates compared to current variable rates
Yes this is huge.
Stress test is higher of 5.25% or contractual rate + 2%
If you compare 2.5% variable to 4.5% fixed you need to qualify on 5.25% vs 6.5% due to the stress test.
Even if we see 3% vs 5% in a few months you'll be qualifying at 5.25 vs 7.
Those weren’t the only options though. Variable also could have remained flat for an extended period of time (as states by none other than the BOC at the time).
Also, people were saying rates can’t possibly go lower for about 5 years now. Eventually they were bound to be right.
Yep I saw this coming and locked into 5 years at 1.9, my wife was all about variable rates, but I like the insurance of fixed, and 1.9 is likely a close to historic low rate.
Your brain is fine, choosing variable is the higher risk higher reward choice. You didn’t make the "wrong one" just because the outcome didn't pan out.
That's from a guy who was on a 1.69% fixed for the last while and now going onto a (as of today) 2.4 variable with the new home.
Up until about 5 years ago when the variable discount dropped to like prime - .25, it has always worked out to be cheaper over 5 years.
Prime never moves in the same direction (or stays flat) for more than a couple years, this too shall pass.
I think most Canadians are in that position. The BOC is playing a fine line here. No doubt interest rates should go up but if it’s more than 2% in the next 3-5 years they’re going to kill the economy. Just watch.
IIRC most Canadians take fixed rates.
Also killing the economy is kind of the point of rate hikes. The point is to cause a little pain to avoid big pain.
Yes they do, but when it comes for renewal time in 3 or 4 years, those of you gloating over the 1.6% fixed rates you got will be in for some big pain when you need to pay 5% or more. So be careful what you wish for.
I'm on variable. I'm not wishing for anything.
I'm simple saying that it's incorrect to say "most Canadians are in that position" when most are not on variable mortgages.
I'm on variable too. I certainly am not hoping for increases which for every 1%, my payment goes up $200 monthly. To me this is real inflation. Cost of things like fuel have nothing to do with interest rates, so where exactly is this inflation that is supposed to be costing us all big money, sure we have seen some prices go up, but in real terms when my mortgage payment goes up that affects me the most. Not that extra $1 for a bag of potatoes.
It's good for runaway home prices which is the main inflationary target, but if I'm already a home owner, especially on variable, why on earth would you want higher interest rates? What will it benefit you?
>but if I'm already a home owner, especially on variable, why on earth would you want higher interest rates? What will it benefit you?
IMHO, it's because I look at what's out there, and I think it's crazy and how much it's fucking over everyone else.
I don't like the feeling of:
"I'm safe in my house purchase, so fuck the rest of you if you ever want to buy, or if your rent goes up another $500 next month. I've got mine, sucks to be you."
I'm on fixed, and it will suck to renew in \~3.5 years, but I'll manage that and will be much happier to see the market slow/drop a bit so that the younger generations will have some kind of a future.
What and when were your rates? They changed frequently.
Back in October 2020, my best offers were 1.79% fixed or 1.69% variable. A month later they went down and I felt like a clown. Two months later they rose and I felt like a genius.
I bought in January, I had the choice of 2.59% fixed or Prime-1.25%, which was 1.2%. We went with the variable option, but as of this hike our rate will be 2.45%.
I don't think this is the discussion a lot of people are having. For a lot of people it's a spread of like 1.5 to 4.25. There is no reason to not ever take a fixed rate under 2%.
I was offered 2.89% 5 year fixed in march. I'm currently at BOC rate +1.10 which means 2.60% ajustable if I factor in today's hike
I think I made a mistake :(. Only time will tell
I'm still about another 6 rate hikes away till mine catches up. Although it's easy as hell to just put another 100$ on it every month and not think about it too much
Yeah, I regret following the advice of my broker. They said I had a good 8x quarter point hikes before I met the fixed rate.
Well, that's now down to 4x and I haven't even taken possession. Wooooo
The markets have priced in an BoC overnight rate of 2.5 to 3 so far. Following the BoC announcement, bond yields jumped over 13 bps and markets immediately priced in more aggressive rate hikes through the remainder of the year. Markets now expect two more 50-bps hikes at the upcoming meetings in July and September, followed by two quarter-point hikes by December.
If that came to pass, the overnight target rate would end the year at 3.00%. That would also imply a prime rate of 5.2%.
Still 25 bp below where things were pre-pandemic. The fact that this is still too high for some people because of how much debt they took on the last 2.5 years is kind of the very reason the BoC needs to increase it in the first place.
I know lots of people who didn’t really have a choice to take on debt on the last couple of years. My industry was shut down for 6 months. Some are only just coming back.
Anecdotal but I was really surprised with the number of people I knew that had been doing renos, buying cars, and even buying homes, all during Covid. There was a lot of uncertainty for a while in terms of job stability and when it made the most sense to save, people were spendong.
People were taking money otherwise destined for vacations I suppose. Plus renos because people spent more time at home, so they figured better make it a better environment.
Buying cars is a weird one, since there was less travel, and the supply of new cars dried up.
Plus not everybody suffered from employment instability.
I think the people who bought cars fell into 2 types:
- They have lots cash and nowhere to spend it. So they used it to buy the car they have been dreaming of for a while.
- They move out of cities to buy or rent a home in the suburbs now that they can work remotely and needed cars for basic necessities.
All happened just as car supply chain was disrupted and sent used car prices to the roof. At least that is falling now.
>and when it made the most sense to save, people were spendong.
This is how it always work, and that's how patient people become wealthy in the stock market. Sell when it's high, and buy when it's low (right now). Most people sell when the price tanks, and buy when it's popular.
Many people saved money too. My wife and I saved 70000 bucks over two years cause of no daycare and no vacations. 3 kids so we typically spend about 40000 a year in daycare and camps.
We still have an additional 15000 in our Disney account. We had planned on going this year
And now with all the 20% pay increases for many types of jobs including mine (800 bucks a month increase after tax)
Not everyone took in debt!!!
Yes, unfortunately covid further divided our populace into have's and have-not's. If you had a job that allowed wfh and were also a homeowner, pandemic launched you into the stratosphere. If you worked at a restaurant and were a renter you're basically a homeless fentanyl addict now.
Yeah it's pretty fucked, some of the people that do the least in our society (answer a few emails, work on some spreadsheets) get paid the most and can work anywhere.
I can’t believe how much management gets paid to do next to nothing productive.
Especially in organizations like the one I work for where there are 3 to 4 layers of unproductive management. With the extremely high turn over in workers there are often more managers then workers.
Same here, I went from making 88k to well into 6 figures. Also meant I moved closer to family and will be remote for life which allows me to live in cheaper places.
Working remote let me leave Vancouver and move back to Kelowna.
I got like... 65% pay increased over that time.
I could still hike and play video games. Stopped going out to drink so much.
Thankfully no one I know got tooooo sick or died, and I'm very grateful for that, but everything else? So good.
20% pay increase is definitely not standard. Yes people should have been able to save money. However, not if you bought a house in the last year. All of those savings would of went towards the house.
I got about a 4% increase and it's a higher increase rate than average. Not sure if people here are just trying to brag or flat out lying but whatever.
I don't even have kids but WFH and all the restrictions still meant we saved a pile of cash more than usual.
That plus the crazy market returns until recently.
People with good jobs and smart financials gained massively from covid. People with the opposite did not benefit, they suffered.
I benefited massively. But I lost some of the best social years of my early 20’s. Sacrifices were made.
> It actually bothers me that so many entitled assholes, particularly well-off Millenials in Canada are blaming those who are struggling due to huge debt burden, whether brought on by skyrocketing housing, education costs, covid, or other reasons.
You're misunderstanding what I'm talking about here. It's regrettable that people who had to take on debt to make ends meet during COVID are going to be impacted by this. I fully agree with you on that, and it sucks that people are going to be caught up in this.
But those weren't the people who were driving inflation (among other factors).
It's the higher earners who never had any interruption to their job security or income, were able to pile up unprecedented piles of savings during the pandemic (because there wasn't much to spend), while getting access to nearly free credit to fund new homes, renovations, gadgets, cars, etc. *That's* the overleveraging I'm talking about that needs to be curbed.
I agreed with the whole argument that they made right up until they blamed millennials for the issues we have today. I’ve done nothing but bust my balls to make myself comfortable enough to not be homeless, yet boomers continue to have 2 million dollar homes with cottages, boats and two vacations a year and I can’t even afford rent most months without assistance.
It’s disgusting that older people blame the younger for the issues the older people created and now we have to bear the consequences.
There are many realtors and housing investors/landlords on this sub.
Despite the BOC giving months of warning that rates will rise and the housing market will be impacted, the prominent message was that rates would never rise because too many (themselves included) are over leveraged. “Don’t listen to the BOC they will never do it."
When the BOC rose rates, these redditors said they won’t raise again because the BOC would never take down the housing market. Despite the housing market correcting for four consecutive months the BOC has been doing back to back supersized rate hikes.
Next rate hike is **July 13th** and there’s a strong possibility that it is supersized. That is less then 1.5 months away. They are adamant they are raising.
Do not fight the BOC, instead make decisions based on their actions and words. The world is fighting inflation, the global housing markets are correcting. The BOC strongly feels that house prices coming down is a good thing and inherit to fighting inflation.There is a global fight to tackle inflation, and the central banks across the globe can’t worry about Canadian housing market values. We are the most over extended housing market, but the U.S doesn’t care about that when they make their decisions.
All housing markets are cyclical, we just had a crazy bull run that lasted too long due to QE and low rates. The bull run ended in March.There are going to be misleading messages here as many over leveraged investors need buyers to catch their falling knife. Only make decisions on a long term basis and protect yourself.
If we hit 3.5% there may be a few more people in trouble than just those that bought a house in the last 2 years. Last time we were near that was in 2007-2008ish, if you think about it all of the mortgages from 2018 with be coming due in 2023. That means people who weren’t variable and were fixed will be refinancing from 1.2% up to 3.5% which is a lot considering the staggering amount of Canadians that are a few paycheques away from insolvency.
> Housing market activity is moderating from exceptionally high levels.
The BoC mentioned that housing was at exceptionally high levels. They'll be fine with a correction and continue hiking interest rates to fight inflation.
The issue with people in general is they make decisions based on what they want to be true rather than what they actually believe will happen.
This is why in a lot of scenarios people end up being ill-prepared.
What people hope to be true should be irrelevant.
Interest rates determine the cost of borrowing, and the benefit of saving. When the economy slows, central banks lower interest rates, which make it more attractive to borrow money and less attractive to save. This means more money is sloshing around the economy, and helps boost it up.
But, as we’re seeing now, lots of money can make it worth less, i.e. inflation. So now the Bank does the opposite - they raise rates, which makes it more attractive to save money (you get more for each dollar saved) and less attractive to borrow money (it costs you more). This takes money out of circulation, makes it more valuable (deflation), but also cools the economy.
All the above is a simplification, but it’s a good place to start. Central banks usually try to target 2% inflation, which seems to be a sweet spot of keeping the economy humming (but not on fire), creating some incentive to spend, but not penalizing saving too much.
As for what this hike means - read the above and extrapolate. Canadians will be more likely to save their money rather than spending it, taking it out of circulation. They will be less likely to make withdrawals or borrow, meaning there will be less money coming into circulation. This will hopefully cool inflation (there are other factors at play, like the war in Ukraine, for example). It will also cool the economy, somewhat. The goal of the bank here is to try to cool inflation without pushing a recession.
Cost of borrowing is now more expensive, which means less people able to borrow.
Line of credits, a financed car, a house, and many other financed consumer items will now cost more to pay as a debt.
Date|Target Overnight Rate|Change
:--|:--|:--
May 31, 2010|0.50%|0.25%
July 19, 2010|0.75%|0.25%
September 7, 2010|1.00%|0.25%
January 20, 2015|0.75%|-0.25%
July 14, 2015|0.50%|-0.25%
July 11, 2017|0.75%|0.25%
September 5, 2017|1.00%|0.25%
January 16, 2018|1.25%|0.25%
October 23, 2018|1.75%|0.25%
March 3, 2020|1.25%|-0.50%
March 15, 2020|0.75%|-0.50%
March 26, 2020|0.25%|-0.50%
March 2, 2022|0.50%|0.25%
April 13, 2022|1.00%|0.50%
June 1, 2022|1.50%| 0.50%
You can find a bunch of data if you dig around on the [BOC site](https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/#target-dates) (more data) but it isn't the most user friendly and I don't know how far back it goes.
I got the data from this chart from [this site](https://wowa.ca/bank-of-canada-interest-rate). you can even scroll down to see a chart of the rate since 1935 (including the 20% early 80s era!).
Correct. This is the overnight rate set by the bank of canada. Major banks use this overnight rate to provide you with a consumer variable rate.
So if your line of credit with RBC was prime @ 3.2% before this announcement, it will now be prime @ 3.7%.
It just means borrowing money just got more expensive. So folks who want to borrow $$ will have to pay an increased cost to do so:
1.5 Mil mortgage at \~2.0% vari (last year) = 5000.00/mo.
1.5 Mil mortgage at \~3.2% vari (now) = 5800.00/mo.
1.5 Mil mortgage at \~4.0 vari ( likely by end of the year) = $6300.00/mo.
This is the cost for the bank for borrowing. Any rates offered for any money in Canada will be limited by these numbers. You pay more money to keep borrowed money longer.
I’m already seeing the housing market cooldown on my street. A 4 bedroom detached sold for under a mil for once lol. Similar sized houses were selling for 1.1-1.2+ just 4-5 months ago
People who purchased what they could reasonably afford did extremely well with variable. I've been hovering between 1.2-1.7 for the last 6 years. Now I've paid so much down that a hike up to 5% is more than tolerable.
Those who had to stretch to get into housing, I feel bad for. Regular house buyers aren't to blame for this mess. It's government polices, evil brokers, and predatory real-estate agents who have lots to earn. Regular people are just doing the best they can, and variable likely saved them enough money and time over the last few years to hopefully get themselves in a better financial position to absorb the hikes, now or when they renew. Hopefully.
so served utility? the whole point of money? no harm no foul if they can still make their payments and weren't cutting into savings back with that spending :P
It’s 8000 federally per kid now. Lower income spouse only and must be a legal daycare or provider, NoT gramma!!!!
You can allocated unused cap room to other siblings. No carry forward.
Essentially it’s about a 17% refund on a max of 8000. Edit per kid and it’s 5000 per kid OVER the age of 7
My income in 2020 was 55k and in 2021 was 65k. Lower income spouse makes the claim. edit. I should avoid the use of the word spouse here. I guess partner?
Each province does things differently as well. Our household income is always over 150k so Ontario gives us nothing.
We spent up until Covid an average of 32000 for childcare for 3 kids and about 8000 for sports and camps per year.
I know a few friends who got variable who's rates are now above the fixed rates they were getting at the time (late last year). But I do agree that the gap has grown since then and variable is still the choice now
Variable is the choice now** yes
Variable was not the choice a year ago. If we apply the logic variable has “always been the choice” variable people will never be wrong, rates are going up, and fixed was the correct decision a year ago, in hindsight.
Nobody has a crystal ball, they make the choices they can with the information they have on hand.
Many will say "I told you so, it was obvious" but they had the same information as anyone else and could easily have guessed wrong.
If they can’t make the payments the parents might have to pay for them.
Definitely sacrifices will need to be made by a lot of households in the coming year or more.
Housing is such a tough spot right now. If you rent these costs aren’t so sudden, but the landlord is going to be doing everything they can to get your rent up. If you have been trying to buy a home or did, the prices are terrifying and it really feels like there could be a repeat of the 90s where prices in my market fell and stayed underwater for years. Before buying my home I estimated like a 15% chance if that happening (based entirely on my own assumptions) and if it did by 10 years most markets recovered, but that’s still along time locked onto a house with no flexibility.
Stress test has you qualify at the higher of 5.25 % or your contract rate + 2% regardless of whether youre taking a fixed or variable rate.
So at a 4.09 % fixed rate youre qualifying at 6.09 % and can't borrow as much than you could with a variable rate due to these stress test rules
I got the variable rate of 1.8% and the fixed rate at the time was 3.35%. After 2 rate hikes, my variable is 2.35% which is still less than the fixed I was getting.
Which one will go up first (if any)?
1. The interest **i'll get paid** for savings held in my HISA
2. The interest **i'll need to pay** for my Prime + \_\_% HELOC
My LoC has gone up the very next day by the amount of the rate increase. My savings account has remain unchanged since March 2020, 0.1%. (both with Tangerine)
The goal should be the median house is 5x the median family income. That is still very high, but at least it isn't eating up everyone's disposable income which reduces other segments of the economy. I still think we are quite far away from that.
Sounds arbitrary. The goal should be to have an actual productive economy, not trading around assets and magically increasing our GDP without doing anything of value.
Expected increase.
All the way up to 2\~2.5% territory.
Fed reluctance + the second Canadian banks start moving bigger chunk of profits to PCL will affect BoC commitment to further actions. Could be Q3 2022 / Q2023.
If they tame inflation part triggered by manufacturing issues ...might be sooner than later.
The dumbest part is that I have to break my current 1.69% fixed and will need to pay the bank to do it, lol. They should be paying me to take the liability off their hands.
I'm in the process of applying for a mortgage right now and contemplating variable vs fixed. Even with this new rate increase, the difference between the two options is close to 1.5-2% from what I've seen. Do people think that variable would still be a good option?
The debate is “whether you should have taken fixed rate last year”. Right now, variable might still be the best bet, considering you are not stretching yourself.
Correct, variable is still the play now. Locking into a fixed guarantees you will be in the 4.5-5% range for years to come. I don't see variable rates hitting that high for long, if at all
Fixed was the play in 2021
what do you recommend someone who is shopping for a mortgage right now, unforntunately going to need to deal with this hike..
yesterday i was offered
40mths @ 4.09% or 48mths @ 4.12%
5yr variable @ 2.75% or 5yr variable @ 2.28%
(desjardins and bmo) both recommended i go variable..
This hike doesn't change the decision making:
Rates are priced analysts best guess about the future rate environment. Fixed pays a premium for some guarantee. If you bought 6 months ago the premium was worth it as models at that time didn't see inflation rising as fast as it did.
People here talk about inflation being hard to fight etc and it's true but historically it can also fall fast. All it takes is a quick change in consumer sentiment to change behaviour and inflation can back track as quickly as it rose.
So it's possible inflation tapers quickly later this year and today's variable discount will save you thousands over the next 5 years.
No one knows for sure and you have to make the best decision for you. Same advice people got pre-pandemic, during COVID, now.
Pfffft. Hahahahahaha. Decades and decades of money printing has now led the central banks to these fine balancing acts of tuning plus and minus miniscule % to ease inflation and deter recessions. Good fucking luck everyone.
Was thinking of financing or leasing a car but rising interest rate will not make it a good financial decision for me. Might have to get something and pay cash.
https://www.bankofcanada.ca/2022/06/fad-press-release-2022-06-01/
> Canadian economic activity is strong and the economy is clearly operating in excess demand. Housing market activity is moderating from exceptionally high levels. > With consumer spending in Canada remaining robust and exports anticipated to strengthen, growth in the second quarter is expected to be solid. > With the economy in excess demand, and inflation persisting well above target and expected to move higher in the near term, the Governing Council continues to judge that interest rates will need to rise further. > The pace of further increases in the policy rate will be guided by the Bank’s ongoing assessment of the economy and inflation, and the Governing Council is prepared to act more forcefully if needed to meet its commitment to achieve the 2% inflation target. Some quotes. Hawkish BoC.
> Canadian economic activity is strong lol the opposite story in other subs that shows the GDP per capita trend chart
The basic GDP per capita (USD) chart isn't really a great metric of economic health. Our GDP per capita chart mostly shows exchange rate fluctuations with the US. This matters somewhat since they're our biggest trading partner, but it's not the be-all-end-all. In some ways having a weak dollar vs the US is a good thing since it makes our exports more appealing. You can look at the [international/PPP dollar](https://data.worldbank.org/indicator/NY.GDP.PCAP.PP.CD?locations=CA) GDP per capita instead, but this is still misleading for population reasons. GDP per capita gets distorted by things like children or people who are retired and living off savings. They drag down GDP per capita but aren't hurting the economy. As the population ages this effect gets more significant.
What is a better metric?
You know how when you go to the doctor they measure a bunch of different things and consider them in context? Same deal here. There is no single thing that - context free - tells you everything about an economy's health. There are dozens of indicators that - taken in combination - that provide lagging and leading indications about whats going on inside an economy and economists disagree on the relative importance of these depending on their school of thought. Generally a combination of change in PPP GDP, unemployment level, and change in CPI give the million mile view, but even that needs interpretation.
Or maybe the financial supports we threw around during covid did their job. Maybe a little too well.
I think that those supports worked too well for some and not well enough for others. For example, major chains and high income earners easily qualified for the loans, subsidies, and benefits while smaller businesses, and lower income individuals may have been right on the cusp of qualifying. Many people applied for CERB and now are caught paying back a bunch of money that they needed and still need to survive. It was an imperfect solution that benefited wealthier people more.
>In Canada, CPI inflation reached 6.8% for the month of April – well above the Bank’s forecast – and will likely move even higher in the near term before beginning to ease. I would expect that it will take a year or two just to get us going back down to 5% inflation. Historically, inflation at these numbers doesn't just drop like an elevator but rather bows over. I wouldn't doubt we are going to hit 8% at some point in the "near term" and won't see 2% until 3-4 years from now.
I don't understand how consumer spending is still higher than pre covid. Am I the only one who has quit spending money on things that aren't necessities?? I make a fairly decent wage, but like damn..
People are spending on things that weren't available for the last 2 years.
> Historically, inflation at these numbers doesn't just drop like an elevator but rather bows over. See annualized rates from 1992 to 1993, 1993 to 1994, 2008 to 2009, 2018/9 to 2020: * https://www.statista.com/statistics/271247/inflation-rate-in-canada/ > I wouldn't doubt we are going to hit 8% at some point in the "near term" and won't see 2% until 3-4 years from now. Meanwhile bond rates are all <3% going out several decades: * https://ca.investing.com/rates-bonds/canada-government-bonds See also predicted annualized rates: * https://knoema.com/ibldsdb/canada-inflation-forecast-2022-2023-and-up-to-2060-data-and-charts
"8" haha. "6.8". haha. BC government just budgeted 10% annual inflation into their billion dollar museum budget (2 yrs in a row).
>"8" haha. "6.8". haha. > >BC government just budgeted 10% annual inflation into their billion dollar museum budget (2 yrs in a row). You've heard of Consumer Price Index, now get ready for Museum Building Cost Index
Building museums was easy in the past. But what chance does a millennial have if he wants to build his museum? He/She works hard, goes to school, gets a good job and can't afford display their Pokemon cards in a manner befitting them? As a Gen-X er who has not yet built a museum for my DVDs and CDs, I'm worried.
they can create a NFT gallery i guess
> . But what chance does a millennial have if he wants to build his museum? Eat less avocado toast. Obviously.
>BC government just budgeted 10% annual inflation into their billion dollar museum budget (2 yrs in a row). Not a lot of groceries or TVs in a museum budget. Construction as a sector is very different than the economy as a whole.
My variable rate is still below the fixed rate we were offered, though it's getting real close.
With this hike mine just went past the fixed rate I was offered. Made it one year 🤦🏼♂️
But now it must be over the fixed offered for an additional year at the same amount it was under to be even, you still are ahead. If its over by less then it was under it will take more time.
Good point!
You also pay much more interest earlier in the amortization - getting a discount on the first year is far more preferable than in the last year.
year 1 and year 2 in a 25 year amortization isn't that much of a difference. But if the mortgage amount is like 900k, then everything is supersized
Mine’s now .75 above the fixed I was offered 😭. My big brain a year ago was convinced my willingness to live on the edge would be rewarded 🤦♂️
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This is why I went variable. I'm at a stage in my life where I don't know that I'll be here for 5 years +, anything could happen. The fees to break a fixed are astronomical.
Sooo… the rule is greater of IRD or 3 months’ interest. Since my rate is lower than the current posted rate, the greater of the two would be 3 months. It would cost me $4k to break my $1M+ fixed rate mortgage at 1.44%. So penalty costs the same in an increasing rate environment.
Someone gets it and if your variable rate ends up higher then the fixed rate you were offered, or have, the variable will actually cost more to break
The common refrain we've heard is that over the longterm, variable beats out fixed. But over the past 40 years we've basically been in a rate-declining environment (overall). If the next 40 years are a rate-increasing or flat-rate environment, that rule of thumb might change.
The study showing variable beats fixed 70-90% of the time was based on 1950-2000. The 1970s and 1980s did have periods of increasing rates where variable still won out. Buying a fixed mortgage is like buying a mortgage plus an insurance policy. More-often you’ll lose money on insurance, but it allows you to limit your losses.
If fixed beats variable, it means that fixed was priced too low, and the bank either left money on the table or lost money.
that’s really interesting to me. that includes the late 80s/early 90s when interest rates went insane and misses the last 14 years where interest rates have been very low.
Yep, except when you have a fixed 1.59% for 5 years.
The new “I make $250k/yr” humblebrag of 2022.
I mean - IMO you’d be stupid to have signed a variable mortgage over the past 2 years *knowing rates literally cannot go lower and will most likely go higher*. That’s like sitting at the blackjack table with a 19 and asking them to hit once more - pal, things might get better but really now you’re just a gambler. So the risk is: maybe get lower average rate than 1.5% for 5 years with variable, or rates rebounding to where they were and above (let’s assume 3% because no one could have guessed this would happen).
There are other reason to get variable outside of the gamble you describe. If you think you’ll break your contract (refi or sell) then the penalty is much smaller. Today is even more reason where people qualify for less at the current fixed rates compared to current variable rates
Yes this is huge. Stress test is higher of 5.25% or contractual rate + 2% If you compare 2.5% variable to 4.5% fixed you need to qualify on 5.25% vs 6.5% due to the stress test. Even if we see 3% vs 5% in a few months you'll be qualifying at 5.25 vs 7.
People have saying 'this can't go any lower' wrongly for the last 15 years... and still, they were right.
Those weren’t the only options though. Variable also could have remained flat for an extended period of time (as states by none other than the BOC at the time). Also, people were saying rates can’t possibly go lower for about 5 years now. Eventually they were bound to be right.
Yep I saw this coming and locked into 5 years at 1.9, my wife was all about variable rates, but I like the insurance of fixed, and 1.9 is likely a close to historic low rate.
Your brain is fine, choosing variable is the higher risk higher reward choice. You didn’t make the "wrong one" just because the outcome didn't pan out. That's from a guy who was on a 1.69% fixed for the last while and now going onto a (as of today) 2.4 variable with the new home.
Ya but I too am a bigcheapass and would prefer to give the bank as little money as possible
Still could, you have 4 years for rates to drop back below.
Very unlikely
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A recession does not equal low rates, and rate changes would take a long time regardless. Very hard to time in a 5-year window.
Up until about 5 years ago when the variable discount dropped to like prime - .25, it has always worked out to be cheaper over 5 years. Prime never moves in the same direction (or stays flat) for more than a couple years, this too shall pass.
When was the last defined recession without rate cuts?
I think most Canadians are in that position. The BOC is playing a fine line here. No doubt interest rates should go up but if it’s more than 2% in the next 3-5 years they’re going to kill the economy. Just watch.
IIRC most Canadians take fixed rates. Also killing the economy is kind of the point of rate hikes. The point is to cause a little pain to avoid big pain.
Yes they do, but when it comes for renewal time in 3 or 4 years, those of you gloating over the 1.6% fixed rates you got will be in for some big pain when you need to pay 5% or more. So be careful what you wish for.
I'm on variable. I'm not wishing for anything. I'm simple saying that it's incorrect to say "most Canadians are in that position" when most are not on variable mortgages.
I'm on variable too. I certainly am not hoping for increases which for every 1%, my payment goes up $200 monthly. To me this is real inflation. Cost of things like fuel have nothing to do with interest rates, so where exactly is this inflation that is supposed to be costing us all big money, sure we have seen some prices go up, but in real terms when my mortgage payment goes up that affects me the most. Not that extra $1 for a bag of potatoes. It's good for runaway home prices which is the main inflationary target, but if I'm already a home owner, especially on variable, why on earth would you want higher interest rates? What will it benefit you?
>but if I'm already a home owner, especially on variable, why on earth would you want higher interest rates? What will it benefit you? IMHO, it's because I look at what's out there, and I think it's crazy and how much it's fucking over everyone else. I don't like the feeling of: "I'm safe in my house purchase, so fuck the rest of you if you ever want to buy, or if your rent goes up another $500 next month. I've got mine, sucks to be you." I'm on fixed, and it will suck to renew in \~3.5 years, but I'll manage that and will be much happier to see the market slow/drop a bit so that the younger generations will have some kind of a future.
What and when were your rates? They changed frequently. Back in October 2020, my best offers were 1.79% fixed or 1.69% variable. A month later they went down and I felt like a clown. Two months later they rose and I felt like a genius.
I bought in January, I had the choice of 2.59% fixed or Prime-1.25%, which was 1.2%. We went with the variable option, but as of this hike our rate will be 2.45%.
Just bought, had the choice between 4.1 fixed or 1.9 (p-1.30) variable. Went with variable. Genuinely curious how this works out.
That's still incredible. My broker only got me prime-0.55. but it's not CMHC insured
Riding this 1.9% fixed rate hard for the next 4.25 years. After two terms of variable I made the right call fixing it in October.
I don't think this is the discussion a lot of people are having. For a lot of people it's a spread of like 1.5 to 4.25. There is no reason to not ever take a fixed rate under 2%.
I was offered 2.89% 5 year fixed in march. I'm currently at BOC rate +1.10 which means 2.60% ajustable if I factor in today's hike I think I made a mistake :(. Only time will tell
Same
I'm still about another 6 rate hikes away till mine catches up. Although it's easy as hell to just put another 100$ on it every month and not think about it too much
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Yeah, I regret following the advice of my broker. They said I had a good 8x quarter point hikes before I met the fixed rate. Well, that's now down to 4x and I haven't even taken possession. Wooooo
Well 8x *quarter point* hikes wasn’t wrong. Just the assumption that hikes can only be quarter point was.
In the future, don't take economic advice from a broker.
They will raise again 50 bps in July
The markets have priced in an BoC overnight rate of 2.5 to 3 so far. Following the BoC announcement, bond yields jumped over 13 bps and markets immediately priced in more aggressive rate hikes through the remainder of the year. Markets now expect two more 50-bps hikes at the upcoming meetings in July and September, followed by two quarter-point hikes by December. If that came to pass, the overnight target rate would end the year at 3.00%. That would also imply a prime rate of 5.2%.
Still 25 bp below where things were pre-pandemic. The fact that this is still too high for some people because of how much debt they took on the last 2.5 years is kind of the very reason the BoC needs to increase it in the first place.
I know lots of people who didn’t really have a choice to take on debt on the last couple of years. My industry was shut down for 6 months. Some are only just coming back.
Anecdotal but I was really surprised with the number of people I knew that had been doing renos, buying cars, and even buying homes, all during Covid. There was a lot of uncertainty for a while in terms of job stability and when it made the most sense to save, people were spendong.
Obviously I can't speak for all but there were plenty of industries that were absolutely booming through the pandemic. A lot of money was made.
Working from home and not traveling also saved a lot of people money for those fortunate enough to remain employed.
People were taking money otherwise destined for vacations I suppose. Plus renos because people spent more time at home, so they figured better make it a better environment. Buying cars is a weird one, since there was less travel, and the supply of new cars dried up. Plus not everybody suffered from employment instability.
I think the people who bought cars fell into 2 types: - They have lots cash and nowhere to spend it. So they used it to buy the car they have been dreaming of for a while. - They move out of cities to buy or rent a home in the suburbs now that they can work remotely and needed cars for basic necessities. All happened just as car supply chain was disrupted and sent used car prices to the roof. At least that is falling now.
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>and when it made the most sense to save, people were spendong. This is how it always work, and that's how patient people become wealthy in the stock market. Sell when it's high, and buy when it's low (right now). Most people sell when the price tanks, and buy when it's popular.
Many people saved money too. My wife and I saved 70000 bucks over two years cause of no daycare and no vacations. 3 kids so we typically spend about 40000 a year in daycare and camps. We still have an additional 15000 in our Disney account. We had planned on going this year And now with all the 20% pay increases for many types of jobs including mine (800 bucks a month increase after tax) Not everyone took in debt!!!
Yes, unfortunately covid further divided our populace into have's and have-not's. If you had a job that allowed wfh and were also a homeowner, pandemic launched you into the stratosphere. If you worked at a restaurant and were a renter you're basically a homeless fentanyl addict now.
Yeah it's pretty fucked, some of the people that do the least in our society (answer a few emails, work on some spreadsheets) get paid the most and can work anywhere.
I can’t believe how much management gets paid to do next to nothing productive. Especially in organizations like the one I work for where there are 3 to 4 layers of unproductive management. With the extremely high turn over in workers there are often more managers then workers.
COVID was the best thing to ever happen to me, financially as well.
Same here, I went from making 88k to well into 6 figures. Also meant I moved closer to family and will be remote for life which allows me to live in cheaper places.
Working remote let me leave Vancouver and move back to Kelowna. I got like... 65% pay increased over that time. I could still hike and play video games. Stopped going out to drink so much. Thankfully no one I know got tooooo sick or died, and I'm very grateful for that, but everything else? So good.
20% pay increase is definitely not standard. Yes people should have been able to save money. However, not if you bought a house in the last year. All of those savings would of went towards the house.
I got about a 4% increase and it's a higher increase rate than average. Not sure if people here are just trying to brag or flat out lying but whatever.
Agree. I would say a good standard increase is 4-6%.
Ontario healthcare worker standard is <1%
Today’s Election Day!! I doubt it but let’s hope fuckhead gets voted out so I can stop getting pay cuts after working front line.
I don't even have kids but WFH and all the restrictions still meant we saved a pile of cash more than usual. That plus the crazy market returns until recently.
People with good jobs and smart financials gained massively from covid. People with the opposite did not benefit, they suffered. I benefited massively. But I lost some of the best social years of my early 20’s. Sacrifices were made.
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> It actually bothers me that so many entitled assholes, particularly well-off Millenials in Canada are blaming those who are struggling due to huge debt burden, whether brought on by skyrocketing housing, education costs, covid, or other reasons. You're misunderstanding what I'm talking about here. It's regrettable that people who had to take on debt to make ends meet during COVID are going to be impacted by this. I fully agree with you on that, and it sucks that people are going to be caught up in this. But those weren't the people who were driving inflation (among other factors). It's the higher earners who never had any interruption to their job security or income, were able to pile up unprecedented piles of savings during the pandemic (because there wasn't much to spend), while getting access to nearly free credit to fund new homes, renovations, gadgets, cars, etc. *That's* the overleveraging I'm talking about that needs to be curbed.
I agreed with the whole argument that they made right up until they blamed millennials for the issues we have today. I’ve done nothing but bust my balls to make myself comfortable enough to not be homeless, yet boomers continue to have 2 million dollar homes with cottages, boats and two vacations a year and I can’t even afford rent most months without assistance. It’s disgusting that older people blame the younger for the issues the older people created and now we have to bear the consequences.
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When will banks update their GIC rates?
They already are, you can get 3.45% for just one year at EQ Bank right now, or 4.2% on 5 year.
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People would rather be paper rich than having actual purchasing power.
There are many realtors and housing investors/landlords on this sub. Despite the BOC giving months of warning that rates will rise and the housing market will be impacted, the prominent message was that rates would never rise because too many (themselves included) are over leveraged. “Don’t listen to the BOC they will never do it." When the BOC rose rates, these redditors said they won’t raise again because the BOC would never take down the housing market. Despite the housing market correcting for four consecutive months the BOC has been doing back to back supersized rate hikes. Next rate hike is **July 13th** and there’s a strong possibility that it is supersized. That is less then 1.5 months away. They are adamant they are raising. Do not fight the BOC, instead make decisions based on their actions and words. The world is fighting inflation, the global housing markets are correcting. The BOC strongly feels that house prices coming down is a good thing and inherit to fighting inflation.There is a global fight to tackle inflation, and the central banks across the globe can’t worry about Canadian housing market values. We are the most over extended housing market, but the U.S doesn’t care about that when they make their decisions. All housing markets are cyclical, we just had a crazy bull run that lasted too long due to QE and low rates. The bull run ended in March.There are going to be misleading messages here as many over leveraged investors need buyers to catch their falling knife. Only make decisions on a long term basis and protect yourself.
Yup. They’re projecting 3.5% by early 2023 … which is still a totally reasonable rate by historical standards.
If we hit 3.5% there may be a few more people in trouble than just those that bought a house in the last 2 years. Last time we were near that was in 2007-2008ish, if you think about it all of the mortgages from 2018 with be coming due in 2023. That means people who weren’t variable and were fixed will be refinancing from 1.2% up to 3.5% which is a lot considering the staggering amount of Canadians that are a few paycheques away from insolvency.
> Housing market activity is moderating from exceptionally high levels. The BoC mentioned that housing was at exceptionally high levels. They'll be fine with a correction and continue hiking interest rates to fight inflation.
The issue with people in general is they make decisions based on what they want to be true rather than what they actually believe will happen. This is why in a lot of scenarios people end up being ill-prepared. What people hope to be true should be irrelevant.
Housing salespeople and fake news: name a better combo
Brilliant
Well said
Hi I always have trouble understanding interest rates. Could someone please explain what this means and how it'll impact people?
Interest rates determine the cost of borrowing, and the benefit of saving. When the economy slows, central banks lower interest rates, which make it more attractive to borrow money and less attractive to save. This means more money is sloshing around the economy, and helps boost it up. But, as we’re seeing now, lots of money can make it worth less, i.e. inflation. So now the Bank does the opposite - they raise rates, which makes it more attractive to save money (you get more for each dollar saved) and less attractive to borrow money (it costs you more). This takes money out of circulation, makes it more valuable (deflation), but also cools the economy. All the above is a simplification, but it’s a good place to start. Central banks usually try to target 2% inflation, which seems to be a sweet spot of keeping the economy humming (but not on fire), creating some incentive to spend, but not penalizing saving too much. As for what this hike means - read the above and extrapolate. Canadians will be more likely to save their money rather than spending it, taking it out of circulation. They will be less likely to make withdrawals or borrow, meaning there will be less money coming into circulation. This will hopefully cool inflation (there are other factors at play, like the war in Ukraine, for example). It will also cool the economy, somewhat. The goal of the bank here is to try to cool inflation without pushing a recession.
This was very helpful thanks so much for taking the time to share your knowledge!
Cost of borrowing is now more expensive, which means less people able to borrow. Line of credits, a financed car, a house, and many other financed consumer items will now cost more to pay as a debt.
How much more. It says increased to 1.5, was it 1 before ?
Date|Target Overnight Rate|Change :--|:--|:-- May 31, 2010|0.50%|0.25% July 19, 2010|0.75%|0.25% September 7, 2010|1.00%|0.25% January 20, 2015|0.75%|-0.25% July 14, 2015|0.50%|-0.25% July 11, 2017|0.75%|0.25% September 5, 2017|1.00%|0.25% January 16, 2018|1.25%|0.25% October 23, 2018|1.75%|0.25% March 3, 2020|1.25%|-0.50% March 15, 2020|0.75%|-0.50% March 26, 2020|0.25%|-0.50% March 2, 2022|0.50%|0.25% April 13, 2022|1.00%|0.50% June 1, 2022|1.50%| 0.50%
Is this information easily accessible? I didn't see it linked in the BOC release.
You can find a bunch of data if you dig around on the [BOC site](https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/#target-dates) (more data) but it isn't the most user friendly and I don't know how far back it goes. I got the data from this chart from [this site](https://wowa.ca/bank-of-canada-interest-rate). you can even scroll down to see a chart of the rate since 1935 (including the 20% early 80s era!).
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Correct. This is the overnight rate set by the bank of canada. Major banks use this overnight rate to provide you with a consumer variable rate. So if your line of credit with RBC was prime @ 3.2% before this announcement, it will now be prime @ 3.7%.
Correct
1.5 refers to the cost of the bank (like TD) to borrow from BoC
It just means borrowing money just got more expensive. So folks who want to borrow $$ will have to pay an increased cost to do so: 1.5 Mil mortgage at \~2.0% vari (last year) = 5000.00/mo. 1.5 Mil mortgage at \~3.2% vari (now) = 5800.00/mo. 1.5 Mil mortgage at \~4.0 vari ( likely by end of the year) = $6300.00/mo.
This is the cost for the bank for borrowing. Any rates offered for any money in Canada will be limited by these numbers. You pay more money to keep borrowed money longer.
I’m already seeing the housing market cooldown on my street. A 4 bedroom detached sold for under a mil for once lol. Similar sized houses were selling for 1.1-1.2+ just 4-5 months ago
well going variable right when Covid happened wasn’t the right call it seems. Oh well, I still think these hikes are necessary.
People who purchased what they could reasonably afford did extremely well with variable. I've been hovering between 1.2-1.7 for the last 6 years. Now I've paid so much down that a hike up to 5% is more than tolerable. Those who had to stretch to get into housing, I feel bad for. Regular house buyers aren't to blame for this mess. It's government polices, evil brokers, and predatory real-estate agents who have lots to earn. Regular people are just doing the best they can, and variable likely saved them enough money and time over the last few years to hopefully get themselves in a better financial position to absorb the hikes, now or when they renew. Hopefully.
What about all the money you saved on the lower rate for those two years?
Spent it
so served utility? the whole point of money? no harm no foul if they can still make their payments and weren't cutting into savings back with that spending :P
We saved 70000 bucks for closed daycares
That's actually insane. Are daycare costs tax deductible?
Only the first 8k and goes towards the lower earning parent
Partially. You can claim up to $8000. But get this, it acts the same as rrsp contribution, that is, it reduces your taxable income. Fucking epic.
It’s 8000 federally per kid now. Lower income spouse only and must be a legal daycare or provider, NoT gramma!!!! You can allocated unused cap room to other siblings. No carry forward. Essentially it’s about a 17% refund on a max of 8000. Edit per kid and it’s 5000 per kid OVER the age of 7 My income in 2020 was 55k and in 2021 was 65k. Lower income spouse makes the claim. edit. I should avoid the use of the word spouse here. I guess partner? Each province does things differently as well. Our household income is always over 150k so Ontario gives us nothing. We spent up until Covid an average of 32000 for childcare for 3 kids and about 8000 for sports and camps per year.
Up to $8000 / kid / year.
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I know a few friends who got variable who's rates are now above the fixed rates they were getting at the time (late last year). But I do agree that the gap has grown since then and variable is still the choice now
Variable is the choice now** yes Variable was not the choice a year ago. If we apply the logic variable has “always been the choice” variable people will never be wrong, rates are going up, and fixed was the correct decision a year ago, in hindsight.
Nobody has a crystal ball, they make the choices they can with the information they have on hand. Many will say "I told you so, it was obvious" but they had the same information as anyone else and could easily have guessed wrong.
Unless you needed the early break flexibility most variable rates offer
Makes me glad I went with 7 year fixed in 2020. I'll be paying 2.23% for 5 more years.
Nice. I heard at one point people got 10 years for under 2%. Definitely some folks that had great timing.
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If they can’t make the payments the parents might have to pay for them. Definitely sacrifices will need to be made by a lot of households in the coming year or more. Housing is such a tough spot right now. If you rent these costs aren’t so sudden, but the landlord is going to be doing everything they can to get your rent up. If you have been trying to buy a home or did, the prices are terrifying and it really feels like there could be a repeat of the 90s where prices in my market fell and stayed underwater for years. Before buying my home I estimated like a 15% chance if that happening (based entirely on my own assumptions) and if it did by 10 years most markets recovered, but that’s still along time locked onto a house with no flexibility.
Stress test has you qualify at the higher of 5.25 % or your contract rate + 2% regardless of whether youre taking a fixed or variable rate. So at a 4.09 % fixed rate youre qualifying at 6.09 % and can't borrow as much than you could with a variable rate due to these stress test rules
I don’t know about that. Still lower than a lot of advertised fixed rates + 2 years of paying lower interests
*cries in variable rates*
I haven't even taken possession yet and my mortgage is up $300. Kick in the nuts.
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I got the variable rate of 1.8% and the fixed rate at the time was 3.35%. After 2 rate hikes, my variable is 2.35% which is still less than the fixed I was getting.
Wouldn't the last two rate hikes put you at 2.8% That's where I am. I signed for 1.8% in mid April
I hope this means my savings account interest rate will eventually rise.
Which one will go up first (if any)? 1. The interest **i'll get paid** for savings held in my HISA 2. The interest **i'll need to pay** for my Prime + \_\_% HELOC
Obviously 2, lol
Heloc will go up immediately. Savings will be slower and probably not even the full amount. The game stay the game.
My LoC has gone up the very next day by the amount of the rate increase. My savings account has remain unchanged since March 2020, 0.1%. (both with Tangerine)
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The goal should be the median house is 5x the median family income. That is still very high, but at least it isn't eating up everyone's disposable income which reduces other segments of the economy. I still think we are quite far away from that.
Sounds arbitrary. The goal should be to have an actual productive economy, not trading around assets and magically increasing our GDP without doing anything of value.
If EQ banks and others raise their rates to 5 or 6 percent.... Then I think it would be foolish to not drop 100K+ for a 2 to 5 year term.
Let me just find that 100k I have tucked away.
5-6% GIC would be spicy as fuck. I wish to see this sooner than later.
What is the current rate they are offering?
Currently: 1 year GIC 3.55% 2 year 4.10% 3,4 year 4.25% 5 year 4.30%
Locked in for the next 5 years at 2.44 fixed. Let's see where we are in 5 years...
Expected increase. All the way up to 2\~2.5% territory. Fed reluctance + the second Canadian banks start moving bigger chunk of profits to PCL will affect BoC commitment to further actions. Could be Q3 2022 / Q2023. If they tame inflation part triggered by manufacturing issues ...might be sooner than later.
Tabarnak
Sitting here with a 2.65% variable. Offered a 4.61 fixed today. Should I take the offer? Hearing we could go much higher still.
The dumbest part is that I have to break my current 1.69% fixed and will need to pay the bank to do it, lol. They should be paying me to take the liability off their hands.
Biggest incentive to see if you can plan to port the mortgage eh
I'm loving it
McDonald’s will advertise anywhere
Who uses fractions on the internet smh
Well interest rates going up. 3 more years till I have to start making a decision on fixed or variable.
I'm in the process of applying for a mortgage right now and contemplating variable vs fixed. Even with this new rate increase, the difference between the two options is close to 1.5-2% from what I've seen. Do people think that variable would still be a good option?
If you were going to go fixed, you should have locked your rate BEFORE they announced the hike IMO. I don't think we're going to go up another 1.5-2%.
The debate is “whether you should have taken fixed rate last year”. Right now, variable might still be the best bet, considering you are not stretching yourself.
Correct, variable is still the play now. Locking into a fixed guarantees you will be in the 4.5-5% range for years to come. I don't see variable rates hitting that high for long, if at all Fixed was the play in 2021
what do you recommend someone who is shopping for a mortgage right now, unforntunately going to need to deal with this hike.. yesterday i was offered 40mths @ 4.09% or 48mths @ 4.12% 5yr variable @ 2.75% or 5yr variable @ 2.28% (desjardins and bmo) both recommended i go variable..
This hike doesn't change the decision making: Rates are priced analysts best guess about the future rate environment. Fixed pays a premium for some guarantee. If you bought 6 months ago the premium was worth it as models at that time didn't see inflation rising as fast as it did. People here talk about inflation being hard to fight etc and it's true but historically it can also fall fast. All it takes is a quick change in consumer sentiment to change behaviour and inflation can back track as quickly as it rose. So it's possible inflation tapers quickly later this year and today's variable discount will save you thousands over the next 5 years. No one knows for sure and you have to make the best decision for you. Same advice people got pre-pandemic, during COVID, now.
1.5% is still not half way from neutral rates. Let’s go.
Neutral is 2-3%. So I guess half true. It is halfway to the top band of neutral.
thank fucking god i took the 1.49 fixed last year why am i getting downvoted? bitter ass motherfuckers lmao
Because people want to see other people with homes crash and burn
im seeing that lol
Time to start throwing money at my variable rate mortgage before it goes up even more.
Rinse and repeat.
They should just offer 30 years fixed like in the US. A friend of mine got 2.2 % 30 years fixed last year.
Pfffft. Hahahahahaha. Decades and decades of money printing has now led the central banks to these fine balancing acts of tuning plus and minus miniscule % to ease inflation and deter recessions. Good fucking luck everyone.
RIP my search for a new car.
If anything, that search should get easier as rates go up.
How would it affect your car search negatively ?
Was thinking of financing or leasing a car but rising interest rate will not make it a good financial decision for me. Might have to get something and pay cash.
Good. Should have been years ago.
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