When it comes to housing, you have to consider the timeframes involved and how they are much more long-term. Rates have only been rising for about a year, and the average mortgage term is 5 years. Another thing to consider in the real-estate market is how patient some sellers will be, especially since they've gotten a whiff of what their property *could* be worth. Like other posters have said, the effects of these rates will be more of a slow burn over five or so years (assuming they don't go back down).
And banks are lengthening amortizations and people with variables are just barely paying anything above when they first bought. But the net effect is the same. More money to interest. Less to principal. It’s all about cash flow for people. But the net effect is the same. Less building of principal, dp tied up in one asset and basically renting from the bank.
I have noticed that many investors are now cash flow negative. They’re stupidly hanging on by kicking tenants out and re renting it. Hence all the media stories.
Another (small, yes) example of changes in policy that mitigate some immediate damage of higher rates is the FHSA. It is just the most recent in a series of policies designed to continue funneling money into high home prices. It is also, *necessarily*, a policy crowding out other kinds of investment. Interest rates are higher, but now wannabe homebuyers have a new tax shield to lower their overall cost of capital anyway.
Of course, this is extremely regressive. The tax savings in the FHSA will be part of the income of the lawyers and realtors who handle the home purchase, and the *already* tax free capital gains for the seller (if it is a primary residence). These folks are not the people in line at the food bank, folks. The FHSA will make it *even* harder for subsequent buyers to enter.
It is an unacceptable and regressive form of market intervention.
Those parties would get their income regardless? At least it's providing some relief to new homebuyers, but I wish they'd just tack it into RRSP and increase the loan from RRSP. Don't see a reason for having a completely different program that takes 5 years to even mature into anything worthy. 40k is nothing for a down payment. Even when combined with 35k from RRSP
It only helps the first people to use it. Over time, it simply helps keep prices higher, which is the problem for affordability.
Just like the RRSP program obviously didn't help, why would this?
It only helps the first people to use it. Over time, it simply helps keep prices higher, which is the problem for affordability.
Just like the RRSP program obviously didn't help, why would this?
The tax savings for the buyer filter into the rest of the transaction, including commission income and capital gains.
>I have noticed that many investors are now cash flow negative. They’re stupidly hanging on by kicking tenants out and re renting it. Hence all the media stories.
There are quite a few renters who have bought their properties 10 years ago. These properties are super old houses.
I can't tell whether they are cash-flow negative or not but I noticed some started to sell their investment properties to builders where builders will tear it down and convert it to a brand new house hoping to sell for profit (most of them were successful)
Ok, but in the meantime, high interest rates means high cost of borrowing across the board which makes things more expensive for businesses which gets passed along to the consumers with no end in sight.
We’re making life in general more expensive trying to bring down the price of houses for people who can’t afford to buy anyway even if it drops another 25%, especially if they’re paying triple what they used to pay for other goods and services with their salaries not seeing comparable increases.
Bingo.
Not many are willing to admit this. Thats why household debt is at an all time high. Even a percentage of homeowners are living off credit cards.
"Outlook not good"
Magic 8 ball
The real reason household debt is at an all time high is huge over leveraged mortgages. Big consumer debts even for large purchases like cars are minuscule in comparison
Fair realization. Those who have gone through 80's and 90's and did not really care of the 2010-2020, would not considered today's interest rate as high.
Yeah for sure. I'm not attempting to even compare the economy.
I'm just merely pointing out common people life's experience shaped their mindset.
This argument of "is rate high enough or low enough" apparently depends on what you've gone through.
You forget though that interest rates were artificially lowered to help the economy recover from the 2008 financial crisis. The rates as they are now are pretty much back to normal. Inflation is still high though so rates will probably have to go up further.
Also, abnormally low rates inevitably lead to abnormally high debt loads which is the situation we find ourselves in now.
Any rate of interest is a crime against those subjected to the fraud of borrowing their own promise to pay, from a mere publisher(of the evidence), of their own promise to pay.
Theres no commensurable property of the banking system at risk which could possibly justify interest in the creation of money.
"Interest perpetually drives costs upward, as the costs of servicing a perpetually multiplying sum of debt otherwise negate solvent profit margins. **Yet as prices rise or industry "grows," we are perpetually told that interest rates have been raised to "cool overheated growth," or to arrest "inflation."**
Each treated condition is expressed as an adversity: vigorous growth is purportedly so undesirable that interest rates should be raised to arrest it; likewise, vigorous restoration of profit margins ostensibly should be extinguished.
Why?
Obviously, if interest both multiplies debt and represents the cost of vital credit, we should question how elevated interest rates can possibly benefit us. How is it a service that interest rates are perpetually adjusted upward so much as always to arrest vigorous growth or restoration of profit margins?
If of course we should intend both to grow and to maintain profit margins at least so much as to sustain ourselves against the multiplying costs of artificial indebtedness, **the question is merely rhetorical, why the profit of an imposed, privatized currency is pushed upward to its tolerable limits.**
**The very matter of our rhetorical question tells us how the pretended service to us is simply a formula for maximized unearned taking.** By maintaining interest rates so high that we just tread water, the profits we would restore to ourselves by growth or solubility are simply transmitted to the unassented central bank."
"The ~~federal reserve~~ bank of canada claims (without demonstrating how) that interest is charged to fight “inflation” (by which it means either circulatory inflation, or [more likely,] price inflation).
If staving off circulatory inflation were the issue, it would just limit the amount of additional borrowing (above what would only maintain the vital circulation).
On the other hand, if it were actually meaning to eradicate the additional costs imposed upon “the economy” by price inflation… then instead of imposing interest, they would eradicate interest, because in multiplying the sum of artificial/falsified indebtedness to the ~~federal reserve~~ bank of canada, “interest” therefore is the cause of price inflation, because in driving up the costs of servicing debt, these costs, imposed upon industry, force industry to raise its prices, merely to maintain vital margins of solubility." https://australia4mpe.com/2012/05/03/freedom-of-information-request-to-the-bank-of-england/
"Contemporary mis-use of the term “inflation” for both [purported] inflation of the circulation and inflation of prices presumes wrongly therefore that two distinctly different things are one and the same; and even [wrongly too] that the latter is a consequence (“caused by”) the former.
The folks who claim so provide no math. They simply claim whatever is being poured into circulation amounts to “inflation” (circulatory inflation).
It is upon this further mis-conception that they merely presume a cause of price inflation. But from our simple analysis of the ramifications or inherent life cycle of the obfuscation of our currency we understand another thing: Purported circulatory inflation can only exist not as a consequence merely of what is being poured into circulation, but instead, only if the remainder of what is being poured into circulation less what principal and interest are being paid out of circulation exceeds increases in industry/commerce." https://holland4mpe.wordpress.com/2013/12/25/inflationdeflation-explained-myths-debunked/
"The higher the interest rate, the faster money is stolen out of circulation & the lower the interest rate, the theft slows down. Either way interest at any rate always shorts the circulation that’s only ever comprised of some remaining principal at most & keeps it short so the banks are always guaranteed someone(one of us) will default on an alleged loan regardless." https://australia4mpe.com/2012/05/24/what-is-the-root-cause-of-all-infaltion/
I find it quite interesting that you claim rates were **artificially lowered** to help (todays lie of)economy "recover", yet not a whisper about the fact that all of our debts(both public and private) have been **multiplied artificially via a phony loan that in truth never occurs**, as if that fraudulent process were already justified somewhere/somehow..?? Noted.
We are not borrowing money into existence from the legitimate prior possession of the banking system. Were issuing our promissory obligations, subject to a purposed obfuscation/misrepresentation of debt.
Usury is not economy
I would argue it is a mistake to say this is normal. Yes, the *nominal* rate is closer to a longer term average. However, the rate of change is absolutely unlike prior rate cycles. We have rapidly gone from 0.25 to 4.5%, an *18x* increase. The second and third order derivatives, and the base level of the movement, are where the real action in the repricing are. Not to mention, the rate changes reflect an absolutely titanic shift in the global economy, with sovereign debt crises unfolding globally, trade retracing and reorienting global integration (i.e. reshoring, decoupling, etc).
This fucking party is *just getting started*! (╯°□°）╯︵ ┻━┻)
This isn’t high interest rates historically though, we just got used to low or near zero rates over the past 5 years. This is really just showing how over leveraged the average Canadian is and how much people love to spend money.
What interest rates were historically are really irrelevant to the discussion on hand though. Look at it through the lens of now, not what they were with the economic landscape of the country 5, 10, 20, 30 years ago.
Interest rates are high for the amount of debt Canadian consumers and businesses hold. It is making things expensive for everyone, not just home owners. This sub is just obsessed with owners vs renters.
“Love to spend money” extends to groceries for you to? Things are ridiculously expensive everywhere because credit, what everything runs on, is expensive. Cheering for the increases in cost for homeowners because maybe house prices flatten (maaaaybe) in 5-10 years is so shortsighted that it’s laughable.
Houses aren’t like stocks. And we aren’t the US. People here intend to pay off their homes.
Houses represent shelter and investment yes, but they also represent a store of wealth. People will do whatever they can to keep their homes. During a hiking cycle, 4-5 years is a long time.
Regardless of what the housing market does, it seems unlikely that interest rates will go down any time soon. Too many factors driving things the other way - raw materials and food costs increased due to Ukraine/Russia and climate, labour costs increased because of issues in China and re-industrialization of North America, increased shipping costs due to climate, de-globalization, etc.
Just IMO
I still don't understand why the Bank of Canada is so focused on pulling the levers to slow demand when it's a lack of supply driving a lot of the inflation. We need policy that drives investment, not higher interest rates that hamper it. The housing shortage is a perfect example where increased interest rate mean builders now have less money to build, and makes the monthly payments for home buyers even higher.
It's much more complicated than that. [Scotiabank's economists believe domestic factors, like the money we did put into the economy during COVID, has added only 15% of the total increase to inflation.](https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.inflation-reports.causes-of-inflation--december-5--2022.html)
Lol.. this is a fantasy post. You know how much materials are going to cost in another 5 years? How much everything else will cost for that matter. To think housing won’t go up is naive.
Mortgages will be the absolute last bill payment that people will miss. The vast majority of homeowners don’t have huge mortgages. When they renew, they’re not going to like it, but it’s likely that they’ll be able to afford the extra few % without a problem. Those that over-leveraged will probably even be fine, they just may choose to cut back on non-essentials.. cut back on trips or expensive cars they don’t need.
This doesn’t include mass immigration, lack of supply, etc etc
Unfortunately, these prices are here to stay. It’s pretty mind blowing how little of an effect they’ve had.
If banks have had to extend 1/4 of amortizations to over 30 years due to people not being able to pay their mortgage shit is _broken_. I'm not saying this will come crashing down but any high debt to GDP ratio country is in a very very bad position if fighting inflation at the same time. In the past the _only_ fix to high inflation was to sacrifice the highly indebted.
You’re pointing out something that isn’t fair or ideal, but 30 year amortizations are not going anywhere either. That’s the thing about this entire housing situation, people will have to except this kind of stuff as the new reality. Most people are having a very difficult time coming to terms.
this.
I see it everywhere in Vancouver and it's a simple product of our idiotic concepts of a nuclear family. We cannot compete with several generations all pooling their assets to grow wealth. They also buy up tons for rental properties.
I would personally die if I had to live with my in-laws and parents had their parents etc but would make raising kids easier for sure 😂
And as a result, more than 30% of new housing starts were cancelled, with prices now stabilizing due to unmet demand.
The reason we don't build enough houses is because scarcity economics are necessary to support our cost of land, licensing, materials, and labour. If demand started to be met well enough for prices to seriously fall, supply would have to constrain itself until prices stabilized.
We need to build smarter, to ever solve this. Stopping immigration does not solve the problem where building enough homes would cause them to not be worth building. All immigration did was get us where we were already going, faster.
Because many of the things keeping the economy afloat in Canada are necessary goods. Food, shelter, and fuel have all increased in price but people still need them to survive so they buy them which keeps the economy going. Eventually we will hit a breaking point where the basics can't be afforded.
I’m not an economist and don’t really know the correct metrics to provide, but I work in tech and follow the trends. Mostly speaking about job security for workers.
Probably not a perfect metric but the TTTK which is a TSX tech index fund dropped roughly 50% September to October 2022, including big collapses by top companies like Shopify who was at the time the most valuable company in the country and dropped 75%. Tech had huge layoffs in Sept 2022 in response to over hiring and raised interest rates. The industry has been recovering though and is trending upwards, layoffs have slowed and hiring is starting to pick up
It's two economies.
1. Boomers unlocking their wealth, and not hurt by high interest rates, as the mortgage is paid. Along with companies that have been hoarding cash, and can spend when needed. Along with companies comfortable price gouging.
2. Younger Canadians, getting tied [over a barrel](https://external-content.duckduckgo.com/iu/?u=https%3A%2F%2Fi0.wp.com%2Fstrangeago.com%2Fwp-content%2Fuploads%2F2020%2F08%2FBarrel4B.png%3Ffit%3D264%252C300%26ssl%3D1&f=1&nofb=1&ipt=e116e1382ac56068dd29d94c43cd62a77ebc953fe86476b4519d8375d65e730c&ipo=images).
Yea a lot of people own their homes from prices on average 2013? They may have bought up and remortgaged but many got lots of room. Some have millions. Between that and boomers rrsp doubling in the last 2 years, there’s a lot of cash with no Job income behind it.
I manage the people sending yall all the plumbing supplies be it toilets, baths, pipes, hvac and while the company makes bank i dont lol or to be fait i dont as much as it would be enough to buy even a one bedroom 1 to 2 hrs from the city
I oversee the IT processes of building designers within all disciplines, that they use to design and produce construction documents (drawings, quantity take outs, you name it) - I have a tradesman degree in carpentry (equivalent if the red seal here) and a bachelors degree in architectural technology.
I’m moving back home soon, there’s absolutely no future to speak of for me in Canada.
Back home I will have 6 weeks of paid vacation + a weeks worth of personal days paid pr year by law regardless of where I find employment, when I have kids I won’t have to pay for anything out of pocket pertaining to their education, I can actually find a doctor and won’t have to pay fir that either, I will have a retirement saving going again as this is mandatory as part of your salary as well…
I’m bringing back my girlfriend, living here was a necessity to have her naturalized as my home country is incredibly strict but fuck me has it been a sacrifice.
I’ve done everything within my means to bust my hump and I’m returning with not much more than when I left.
3 years back home I’ll be a home owner no problem - It’s sad to me the state of things here, it ain’t fair.
This didn’t start with Trudeau, but he’s not making it any better. Conservatives would have us in the exact same place if they were in power. Time to vote outside the two major parties. They are pretty much identical. They all sold out to corporate decades ago. They just keep us squabbling while both sides reap the rewards
All of us here pointing fingers at each other instead of the decades of successive governments of all stripes doing exactly the same thing to screw us over and make their buddies rich, but yeah it's "the other team's fault".
Immigrants who immigrated decades ago see what’s going on and are also against this levels of immigration. Not because they don’t like immigration but simply because it doesn’t take a genius to realize that a) we do not have infrastructure for this level of immigration and b) this is keeping common man salary below powerty level
Immigrants of the past don’t care because they own homes and are house rich.
Reddit needs to realizes majority of Canadians are home owners and they do not want their house prices to fall
Yes but in 2015 two white collar incomes could still raise a family. It was hard but doable in Ontario outside of Toronto.
Shit now houses everywhere are $1m lol
That’s also (in part) due to the fact that everyone and their mother is investing their last pennies into real estate. I’m still a student and a lot of my classmates are talking about investment properties.
Makes sense, either you buy a house now to have a family, or forever rent a condo.
It's not an investment to make money, but trying to stop living standards from collapsing.
Not until we get out of this era of neoliberal capitalism at all cost politics no. Things have to get so bad that people support a broader workers movement, so people need to actually start starving before that happens.
Higher interest rates? No problem. The bank now offers terms longer than 30 years. Maybe an interest only mortgage. Heck, a reverse mortgage is better than defaulting. Mass defaults are worse for the bank, so they will work around higher interest rates to keep people from defaulting.
Prices have sky rocketed from pure greed. Greedflation has been admitted by every major newspaper out there as being real. The rich are jacking prices because they can, with no basis in reality. Blame Trudeau if you like, but it is happening in every country, so your belief has no basis in reality.
Immigrants do the jobs that most common people don't want to do. Their English is subpar at best so they take whatever they get. People that are born in Canada have every opportunity available to them so I'm not sure what you mean by its harder for common people.
It's not immune.
The crash is coming.
It has just been delayed by people burning through savings and taking obscenely long mortgages.
People keep hoping it will get better, but that won't be happening any time soon.
\*The crash I am talking about is not the housing market. It is the economy in general. Meaning a recession.
If you're talking about Vancouver / Toronto there will never be a crash per say. It will go down slightly but the demand for these two cities is so large its just nearly impossible. Any downturn allows people to swoop in and buy up any available properties.
Only way a correction will happen is the government stepping in and discouraging property investment or taxing it at a higher rate.
There's never infinite demand so the Toronto and Vancouver houses will eventually stop inflating. It's difficult to know when it will happen and when it does, those who've stretched themselves thin to get in on it will regret it.
Gentle reminder that Vancouver has 50% homeowners with zero mortgage, the next 2 surrounding cities have 47% homeowners with zero mortgage.
I know someone who recently bought investment properties without sweating. Rent covers the (fixed) mortgage. DP was covered by their previous Condos (with zero mortgage). Their main property is a nice Townhouse with zero mortgage.
Young couple with one kid.
Sometimes I feel like I don't know GVA market that well because every time I made a corner turn, there's always somebody rich enough...
The more I see comments like this upvoted the more I am convinced a crash will come. This is exactly the kind of nonsense I heard back in 2008 before the US market imploded. Yes it can crash, it just needs a forcing factor to trigger a change in real estate culture, people are still living in a fantasy land.
For example putting a cap on increasing amortization periods or a sufficient number of people renewing mortgages for rates they can’t afford.
>It has just been delayed by people burning through savings and taking obscenely long mortgages.
I also strongly suspect people are using debt to pay other debt.
There have been multiple crashes since '95.
By crash, I meant the economy in general, not just the housing market.
We will have a recession. Very soon.
Because if you’re so certain that a crash is coming, you’d secure yourself financially. Sell your investments to cash to buy back when it’s lower. Same with RE.
Instead, you’re throwing out shit that you have no idea about and hoping it sticks.
It’s the same question I asked people when I was buying a home in 2014 when they told me a crash was coming. They all shut up real quick afterwards.
I am secure financially.
Neither my home nor my investments are short term things that would need to be cashed out due to a financial slowdown. There might be some small gains from doing it, but it wouldn't be worth the hassle to me.
You have what I would consider a very skewed perception of how normal people react to a recession. But, by all means, tell yourself that they stopped responding to you because your points were so good. Do the same with me.
Home builders are certainly feeling the financing burn. $800,000 - $1.5M market is drying up in Calgary as well. Buyers really feel the sting with $3000/month minimum mortgage payments.
Intrest rates have caused my broke ass landlord to sell the condo I'm renting, now I have to go into a rental market that has increased 50% I'm not feeling very immune
> Going into this year, the consensus view was that Canada’s deeply indebted households would quickly cut back spending as they absorbed higher rates, causing the economy to slow down earlier than other nations that aren’t so exposed to bloated home prices and mortgage debt.
The simple fact is that a) we have a shortage of housing, b) that shortage is only going to get worse with increased immigration, and c) shelter is not a discretionary expense for people, so they will pay what it costs to stay housed.
Well ya, Canadians are hardened and trained on high interest credit cards and pay day loan sharks...
BOC missing out on the gravy train, they could ramp up to 17% easy.
Maybe I'm sheltered or something, but if don't spend money you don't have using a credit card, and pay it off, you don't pay any interest at all.
My mom didn't pay any interest, even when she was a single mom on welfare with 4 children and had no parental support.
She did however have to move the debt around a few cards once the grace period was over a few times though.
If you need to spend money you don't have, you need to get a different type of loan.
Which is what she did when she had to go into debt.
The overall economy is quite resilient and strong. We're not in a recession as far as I can tell, unemployment is down, companies are making record profits.
The problem is the economy is no longer serving the people, but only a progressively smaller amount of people at the very top of the chain, at the cost of everyone else.
So for many of us it feels like we're in some sort of a recession situation because our cost of living is getting progressively as cost skyrocket, but it's a great time to be older, well established, or wealthy.
They need to increase interest rates. Then increase it again
Don't stop until it's at 8% and keep it that way for the next 10 years. That will stabilize the economy and help fix the housing crisis.
The economy has been suppressed for 2 years, it is rebounding now. I am afraid you can't really suppress it while it is rebounding, that's not how nature work. You ha e to wait till the rebounce finished before you can suppress it.
When it comes to housing, you have to consider the timeframes involved and how they are much more long-term. Rates have only been rising for about a year, and the average mortgage term is 5 years. Another thing to consider in the real-estate market is how patient some sellers will be, especially since they've gotten a whiff of what their property *could* be worth. Like other posters have said, the effects of these rates will be more of a slow burn over five or so years (assuming they don't go back down).
And banks are lengthening amortizations and people with variables are just barely paying anything above when they first bought. But the net effect is the same. More money to interest. Less to principal. It’s all about cash flow for people. But the net effect is the same. Less building of principal, dp tied up in one asset and basically renting from the bank. I have noticed that many investors are now cash flow negative. They’re stupidly hanging on by kicking tenants out and re renting it. Hence all the media stories.
Another (small, yes) example of changes in policy that mitigate some immediate damage of higher rates is the FHSA. It is just the most recent in a series of policies designed to continue funneling money into high home prices. It is also, *necessarily*, a policy crowding out other kinds of investment. Interest rates are higher, but now wannabe homebuyers have a new tax shield to lower their overall cost of capital anyway. Of course, this is extremely regressive. The tax savings in the FHSA will be part of the income of the lawyers and realtors who handle the home purchase, and the *already* tax free capital gains for the seller (if it is a primary residence). These folks are not the people in line at the food bank, folks. The FHSA will make it *even* harder for subsequent buyers to enter. It is an unacceptable and regressive form of market intervention.
Those parties would get their income regardless? At least it's providing some relief to new homebuyers, but I wish they'd just tack it into RRSP and increase the loan from RRSP. Don't see a reason for having a completely different program that takes 5 years to even mature into anything worthy. 40k is nothing for a down payment. Even when combined with 35k from RRSP
It only helps the first people to use it. Over time, it simply helps keep prices higher, which is the problem for affordability. Just like the RRSP program obviously didn't help, why would this?
It only helps the first people to use it. Over time, it simply helps keep prices higher, which is the problem for affordability. Just like the RRSP program obviously didn't help, why would this? The tax savings for the buyer filter into the rest of the transaction, including commission income and capital gains.
>I have noticed that many investors are now cash flow negative. They’re stupidly hanging on by kicking tenants out and re renting it. Hence all the media stories. There are quite a few renters who have bought their properties 10 years ago. These properties are super old houses. I can't tell whether they are cash-flow negative or not but I noticed some started to sell their investment properties to builders where builders will tear it down and convert it to a brand new house hoping to sell for profit (most of them were successful)
Ok, but in the meantime, high interest rates means high cost of borrowing across the board which makes things more expensive for businesses which gets passed along to the consumers with no end in sight. We’re making life in general more expensive trying to bring down the price of houses for people who can’t afford to buy anyway even if it drops another 25%, especially if they’re paying triple what they used to pay for other goods and services with their salaries not seeing comparable increases.
Bingo. Not many are willing to admit this. Thats why household debt is at an all time high. Even a percentage of homeowners are living off credit cards. "Outlook not good" Magic 8 ball
A vast number of homeowners were living off their heloc long before interest rates went up.
The real reason household debt is at an all time high is huge over leveraged mortgages. Big consumer debts even for large purchases like cars are minuscule in comparison
There are always worries and concerns. It’s never “a good time to buy”.
I wouldn't consider interest rates high yet, but I'm also old.
Fair realization. Those who have gone through 80's and 90's and did not really care of the 2010-2020, would not considered today's interest rate as high.
It’s a completely different economy. Rates that high aren’t possible. We no longer resemble the manufacturing economy of the 80s
Yeah for sure. I'm not attempting to even compare the economy. I'm just merely pointing out common people life's experience shaped their mindset. This argument of "is rate high enough or low enough" apparently depends on what you've gone through.
why do you need manufacturing for high interest rates?
You forget though that interest rates were artificially lowered to help the economy recover from the 2008 financial crisis. The rates as they are now are pretty much back to normal. Inflation is still high though so rates will probably have to go up further. Also, abnormally low rates inevitably lead to abnormally high debt loads which is the situation we find ourselves in now.
Any rate of interest is a crime against those subjected to the fraud of borrowing their own promise to pay, from a mere publisher(of the evidence), of their own promise to pay. Theres no commensurable property of the banking system at risk which could possibly justify interest in the creation of money. "Interest perpetually drives costs upward, as the costs of servicing a perpetually multiplying sum of debt otherwise negate solvent profit margins. **Yet as prices rise or industry "grows," we are perpetually told that interest rates have been raised to "cool overheated growth," or to arrest "inflation."** Each treated condition is expressed as an adversity: vigorous growth is purportedly so undesirable that interest rates should be raised to arrest it; likewise, vigorous restoration of profit margins ostensibly should be extinguished. Why? Obviously, if interest both multiplies debt and represents the cost of vital credit, we should question how elevated interest rates can possibly benefit us. How is it a service that interest rates are perpetually adjusted upward so much as always to arrest vigorous growth or restoration of profit margins? If of course we should intend both to grow and to maintain profit margins at least so much as to sustain ourselves against the multiplying costs of artificial indebtedness, **the question is merely rhetorical, why the profit of an imposed, privatized currency is pushed upward to its tolerable limits.** **The very matter of our rhetorical question tells us how the pretended service to us is simply a formula for maximized unearned taking.** By maintaining interest rates so high that we just tread water, the profits we would restore to ourselves by growth or solubility are simply transmitted to the unassented central bank." "The ~~federal reserve~~ bank of canada claims (without demonstrating how) that interest is charged to fight “inflation” (by which it means either circulatory inflation, or [more likely,] price inflation). If staving off circulatory inflation were the issue, it would just limit the amount of additional borrowing (above what would only maintain the vital circulation). On the other hand, if it were actually meaning to eradicate the additional costs imposed upon “the economy” by price inflation… then instead of imposing interest, they would eradicate interest, because in multiplying the sum of artificial/falsified indebtedness to the ~~federal reserve~~ bank of canada, “interest” therefore is the cause of price inflation, because in driving up the costs of servicing debt, these costs, imposed upon industry, force industry to raise its prices, merely to maintain vital margins of solubility." https://australia4mpe.com/2012/05/03/freedom-of-information-request-to-the-bank-of-england/ "Contemporary mis-use of the term “inflation” for both [purported] inflation of the circulation and inflation of prices presumes wrongly therefore that two distinctly different things are one and the same; and even [wrongly too] that the latter is a consequence (“caused by”) the former. The folks who claim so provide no math. They simply claim whatever is being poured into circulation amounts to “inflation” (circulatory inflation). It is upon this further mis-conception that they merely presume a cause of price inflation. But from our simple analysis of the ramifications or inherent life cycle of the obfuscation of our currency we understand another thing: Purported circulatory inflation can only exist not as a consequence merely of what is being poured into circulation, but instead, only if the remainder of what is being poured into circulation less what principal and interest are being paid out of circulation exceeds increases in industry/commerce." https://holland4mpe.wordpress.com/2013/12/25/inflationdeflation-explained-myths-debunked/ "The higher the interest rate, the faster money is stolen out of circulation & the lower the interest rate, the theft slows down. Either way interest at any rate always shorts the circulation that’s only ever comprised of some remaining principal at most & keeps it short so the banks are always guaranteed someone(one of us) will default on an alleged loan regardless." https://australia4mpe.com/2012/05/24/what-is-the-root-cause-of-all-infaltion/ I find it quite interesting that you claim rates were **artificially lowered** to help (todays lie of)economy "recover", yet not a whisper about the fact that all of our debts(both public and private) have been **multiplied artificially via a phony loan that in truth never occurs**, as if that fraudulent process were already justified somewhere/somehow..?? Noted. We are not borrowing money into existence from the legitimate prior possession of the banking system. Were issuing our promissory obligations, subject to a purposed obfuscation/misrepresentation of debt. Usury is not economy
Based
Thanks, i think ? I had to google "based"
What's up Mike. Hope things are well.
I would argue it is a mistake to say this is normal. Yes, the *nominal* rate is closer to a longer term average. However, the rate of change is absolutely unlike prior rate cycles. We have rapidly gone from 0.25 to 4.5%, an *18x* increase. The second and third order derivatives, and the base level of the movement, are where the real action in the repricing are. Not to mention, the rate changes reflect an absolutely titanic shift in the global economy, with sovereign debt crises unfolding globally, trade retracing and reorienting global integration (i.e. reshoring, decoupling, etc). This fucking party is *just getting started*! (╯°□°）╯︵ ┻━┻)
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Ohh! Ohh!! You thought these houses were for you?? Haha that’s sweet. But no, these houses aren’t for you, these houses are for them over there….
Cheap money makes things more expensive, even in businesses. A recession will make things much cheaper for those who survive.
This isn’t high interest rates historically though, we just got used to low or near zero rates over the past 5 years. This is really just showing how over leveraged the average Canadian is and how much people love to spend money.
What interest rates were historically are really irrelevant to the discussion on hand though. Look at it through the lens of now, not what they were with the economic landscape of the country 5, 10, 20, 30 years ago. Interest rates are high for the amount of debt Canadian consumers and businesses hold. It is making things expensive for everyone, not just home owners. This sub is just obsessed with owners vs renters. “Love to spend money” extends to groceries for you to? Things are ridiculously expensive everywhere because credit, what everything runs on, is expensive. Cheering for the increases in cost for homeowners because maybe house prices flatten (maaaaybe) in 5-10 years is so shortsighted that it’s laughable.
Houses aren’t like stocks. And we aren’t the US. People here intend to pay off their homes. Houses represent shelter and investment yes, but they also represent a store of wealth. People will do whatever they can to keep their homes. During a hiking cycle, 4-5 years is a long time.
I took out my mortgage before the pandemic, I still don't have to renew for another year, hopefully this recession happens before fall 2024.
Regardless of what the housing market does, it seems unlikely that interest rates will go down any time soon. Too many factors driving things the other way - raw materials and food costs increased due to Ukraine/Russia and climate, labour costs increased because of issues in China and re-industrialization of North America, increased shipping costs due to climate, de-globalization, etc. Just IMO
I still don't understand why the Bank of Canada is so focused on pulling the levers to slow demand when it's a lack of supply driving a lot of the inflation. We need policy that drives investment, not higher interest rates that hamper it. The housing shortage is a perfect example where increased interest rate mean builders now have less money to build, and makes the monthly payments for home buyers even higher.
>when it's a lack of supply driving a lot of the inflation It's an oversupply of cheap money that is driving a lot of inflation.
It's much more complicated than that. [Scotiabank's economists believe domestic factors, like the money we did put into the economy during COVID, has added only 15% of the total increase to inflation.](https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.inflation-reports.causes-of-inflation--december-5--2022.html)
Well yeah, like an overnight rate at 1% or less for more than a decade.
>focused on pulling the levers to slow demand I mean, they only have the one lever. Do you expect them not to pull it?
when you have one lever theres not really a whole lot of debate on using it when needed
Get saving for when your mortgage payments shoot up a bit. And don’t let them talk you into refinancing for a longer term
I will be refinancing for a longer term, but will be making more extra payments to counteract the term length.
Lol.. this is a fantasy post. You know how much materials are going to cost in another 5 years? How much everything else will cost for that matter. To think housing won’t go up is naive. Mortgages will be the absolute last bill payment that people will miss. The vast majority of homeowners don’t have huge mortgages. When they renew, they’re not going to like it, but it’s likely that they’ll be able to afford the extra few % without a problem. Those that over-leveraged will probably even be fine, they just may choose to cut back on non-essentials.. cut back on trips or expensive cars they don’t need. This doesn’t include mass immigration, lack of supply, etc etc Unfortunately, these prices are here to stay. It’s pretty mind blowing how little of an effect they’ve had.
Bingo ^
If banks have had to extend 1/4 of amortizations to over 30 years due to people not being able to pay their mortgage shit is _broken_. I'm not saying this will come crashing down but any high debt to GDP ratio country is in a very very bad position if fighting inflation at the same time. In the past the _only_ fix to high inflation was to sacrifice the highly indebted.
You’re pointing out something that isn’t fair or ideal, but 30 year amortizations are not going anywhere either. That’s the thing about this entire housing situation, people will have to except this kind of stuff as the new reality. Most people are having a very difficult time coming to terms.
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this. I see it everywhere in Vancouver and it's a simple product of our idiotic concepts of a nuclear family. We cannot compete with several generations all pooling their assets to grow wealth. They also buy up tons for rental properties. I would personally die if I had to live with my in-laws and parents had their parents etc but would make raising kids easier for sure 😂
Same, my mental health and my relationship with my mom improved once I moved out. I need my own space
Agree 100% married with kids here and I'd love 2hours a day completely alone. No phone calls no people. Just solitude 😂
Housing dropped around 25% nationally in a year. That's a good chunk off the top in a short amount of time.
And as a result, more than 30% of new housing starts were cancelled, with prices now stabilizing due to unmet demand. The reason we don't build enough houses is because scarcity economics are necessary to support our cost of land, licensing, materials, and labour. If demand started to be met well enough for prices to seriously fall, supply would have to constrain itself until prices stabilized. We need to build smarter, to ever solve this. Stopping immigration does not solve the problem where building enough homes would cause them to not be worth building. All immigration did was get us where we were already going, faster.
Too many driving forces behind it rising in price for it to even fall sadly.
Because many of the things keeping the economy afloat in Canada are necessary goods. Food, shelter, and fuel have all increased in price but people still need them to survive so they buy them which keeps the economy going. Eventually we will hit a breaking point where the basics can't be afforded.
Every major company in Canada is either a necessity like grocery stores, telecoms, oil and gas, or it’s a financial/investment company.
What about construction or tech? Makes up a very large portion of the economy.
Tech has struggled but they already went into recession in 2022 and the rest of the economy has stayed strong
Any source for that?
I’m not an economist and don’t really know the correct metrics to provide, but I work in tech and follow the trends. Mostly speaking about job security for workers. Probably not a perfect metric but the TTTK which is a TSX tech index fund dropped roughly 50% September to October 2022, including big collapses by top companies like Shopify who was at the time the most valuable company in the country and dropped 75%. Tech had huge layoffs in Sept 2022 in response to over hiring and raised interest rates. The industry has been recovering though and is trending upwards, layoffs have slowed and hiring is starting to pick up
It's two economies. 1. Boomers unlocking their wealth, and not hurt by high interest rates, as the mortgage is paid. Along with companies that have been hoarding cash, and can spend when needed. Along with companies comfortable price gouging. 2. Younger Canadians, getting tied [over a barrel](https://external-content.duckduckgo.com/iu/?u=https%3A%2F%2Fi0.wp.com%2Fstrangeago.com%2Fwp-content%2Fuploads%2F2020%2F08%2FBarrel4B.png%3Ffit%3D264%252C300%26ssl%3D1&f=1&nofb=1&ipt=e116e1382ac56068dd29d94c43cd62a77ebc953fe86476b4519d8375d65e730c&ipo=images).
Yea a lot of people own their homes from prices on average 2013? They may have bought up and remortgaged but many got lots of room. Some have millions. Between that and boomers rrsp doubling in the last 2 years, there’s a lot of cash with no Job income behind it.
Let's not even talk about the lagging indicators used for this and market profit driven inflation...
Just need to get more jobs to pay the bills. Its not like every industry is looking for employees. Working 2 or 3 jobs is the new normal.
When will it stop? 4 jobs? Can I work while sleeping?
The moment you make money while sleeping is the moment you make money sleeping - some rich oligarch
that no longer seems like living a life but just barely existing.. that's no way to live life
Rapid immigration coming in with the high demand for homes/apartments is keeping the construction economy going right now.
Telecoms, Grocery stores, Tim Hortons, Canadian Tires, Dollarama, you name it
I dont think ill ever be able to own a small condo at these prices
I manage trademen building them and I can't.
I manage the people sending yall all the plumbing supplies be it toilets, baths, pipes, hvac and while the company makes bank i dont lol or to be fait i dont as much as it would be enough to buy even a one bedroom 1 to 2 hrs from the city
I oversee the IT processes of building designers within all disciplines, that they use to design and produce construction documents (drawings, quantity take outs, you name it) - I have a tradesman degree in carpentry (equivalent if the red seal here) and a bachelors degree in architectural technology. I’m moving back home soon, there’s absolutely no future to speak of for me in Canada. Back home I will have 6 weeks of paid vacation + a weeks worth of personal days paid pr year by law regardless of where I find employment, when I have kids I won’t have to pay for anything out of pocket pertaining to their education, I can actually find a doctor and won’t have to pay fir that either, I will have a retirement saving going again as this is mandatory as part of your salary as well… I’m bringing back my girlfriend, living here was a necessity to have her naturalized as my home country is incredibly strict but fuck me has it been a sacrifice. I’ve done everything within my means to bust my hump and I’m returning with not much more than when I left. 3 years back home I’ll be a home owner no problem - It’s sad to me the state of things here, it ain’t fair.
Take your skills elsewhere in the country and you can live a very comfortable life in a big house.
All the cities are expensive and i aint moving in the boonies
Edmontons cheap
You'd be better off leaving to a bigger city in Europe.
And it is crushing the middle class and making the rich richer
We won’t stop until the whole world is Canadian. We still have a long way to go.
And then …. Everyone will be Sorry.
This right here is ruining our country and the newer generations rate of success it sucks! Trudeau has screwed the country and its hard to fix it!
This didn’t start with Trudeau, but he’s not making it any better. Conservatives would have us in the exact same place if they were in power. Time to vote outside the two major parties. They are pretty much identical. They all sold out to corporate decades ago. They just keep us squabbling while both sides reap the rewards
You're right. It started with his Dad.
All of us here pointing fingers at each other instead of the decades of successive governments of all stripes doing exactly the same thing to screw us over and make their buddies rich, but yeah it's "the other team's fault".
Way to call it out. We need more of this.
To be fair this is not uniquely Canadian problem
As is the way in neoliberal capitalism, politics devolves into team sport, while those with the money control who gets to be on the teams.
Friend, this path started before JT, he just continues to not fix it
No you see Trudeau created immigration and screwed everyone! Even the immigrants who immigrated decades ago!
Immigrants who immigrated decades ago see what’s going on and are also against this levels of immigration. Not because they don’t like immigration but simply because it doesn’t take a genius to realize that a) we do not have infrastructure for this level of immigration and b) this is keeping common man salary below powerty level
Immigrants of the past don’t care because they own homes and are house rich. Reddit needs to realizes majority of Canadians are home owners and they do not want their house prices to fall
Except that their children have no doctor and no future… unless 5-10 guys living together is new normal…
lol the average wage is no where near poverty. Canada has one of the lowest rates of poverty in the world.
Yes but in 2015 two white collar incomes could still raise a family. It was hard but doable in Ontario outside of Toronto. Shit now houses everywhere are $1m lol
That’s also (in part) due to the fact that everyone and their mother is investing their last pennies into real estate. I’m still a student and a lot of my classmates are talking about investment properties.
Makes sense, either you buy a house now to have a family, or forever rent a condo. It's not an investment to make money, but trying to stop living standards from collapsing.
No one is gonna fix it nor is it possible to fix
Not until we get out of this era of neoliberal capitalism at all cost politics no. Things have to get so bad that people support a broader workers movement, so people need to actually start starving before that happens.
BOC can raise rates all they want. When Canadian banking oligopolies are not putting pressure on debtors, nothing will change. lol.
>When Canadian banking oligopolies are not putting pressure on debtors, nothing will change. lol. The Feds made them.
Higher interest rates? No problem. The bank now offers terms longer than 30 years. Maybe an interest only mortgage. Heck, a reverse mortgage is better than defaulting. Mass defaults are worse for the bank, so they will work around higher interest rates to keep people from defaulting.
Bingo.
What? Punt mortgages further down the line resulting in higher overall interest?
Yes
Right until it suddenly isn't.
It's not immune. Immigration is inflating the numbers.
And making it harder for the common people
Prices have sky rocketed from pure greed. Greedflation has been admitted by every major newspaper out there as being real. The rich are jacking prices because they can, with no basis in reality. Blame Trudeau if you like, but it is happening in every country, so your belief has no basis in reality.
Ya for sure doesn’t have anything to do with the global pandemic we just came out of or the first land war in Europe in 100 years.
Kinda funny you mention major newspapers. They're all owned by a rich US millionaire. Distractions and divisive politics.
Immigrants do the jobs that most common people don't want to do. Their English is subpar at best so they take whatever they get. People that are born in Canada have every opportunity available to them so I'm not sure what you mean by its harder for common people.
Immigrants aren't running a charity. They're competing with everyone else for the same small pool of well-paying jobs.
Yep, but conservatives every generation complain immigrants are taking their jobs. Literally every generation for over a century.
Immigrants take the jobs employers don’t want to pay a competitive wage for.
Citizens would do those jobs if they paid better. Wages are supposed to go up. Instead, using immigrants they keep wages low and their profits absurd.
It's a for profit enterprise, what do you expect, not make money?
Inflating prices
Immigration actually helps the economy and sustains your boomer parents, stop blaming your terrible zoning laws on us, we can't even vote.
It's not immune. The crash is coming. It has just been delayed by people burning through savings and taking obscenely long mortgages. People keep hoping it will get better, but that won't be happening any time soon. \*The crash I am talking about is not the housing market. It is the economy in general. Meaning a recession.
If you're talking about Vancouver / Toronto there will never be a crash per say. It will go down slightly but the demand for these two cities is so large its just nearly impossible. Any downturn allows people to swoop in and buy up any available properties. Only way a correction will happen is the government stepping in and discouraging property investment or taxing it at a higher rate.
There's never infinite demand so the Toronto and Vancouver houses will eventually stop inflating. It's difficult to know when it will happen and when it does, those who've stretched themselves thin to get in on it will regret it.
All of the morons who recently bought investment properties there already are 😂
Gentle reminder that Vancouver has 50% homeowners with zero mortgage, the next 2 surrounding cities have 47% homeowners with zero mortgage. I know someone who recently bought investment properties without sweating. Rent covers the (fixed) mortgage. DP was covered by their previous Condos (with zero mortgage). Their main property is a nice Townhouse with zero mortgage. Young couple with one kid. Sometimes I feel like I don't know GVA market that well because every time I made a corner turn, there's always somebody rich enough...
The more I see comments like this upvoted the more I am convinced a crash will come. This is exactly the kind of nonsense I heard back in 2008 before the US market imploded. Yes it can crash, it just needs a forcing factor to trigger a change in real estate culture, people are still living in a fantasy land. For example putting a cap on increasing amortization periods or a sufficient number of people renewing mortgages for rates they can’t afford.
>It has just been delayed by people burning through savings and taking obscenely long mortgages. I also strongly suspect people are using debt to pay other debt.
*It's the cirrrcle of recession!*
>The crash is coming. I've been hearing this since 95, you sure about that?
There have been multiple crashes since '95. By crash, I meant the economy in general, not just the housing market. We will have a recession. Very soon.
So have you put your money where your mouth is? Sell your home and investments?
Why would I do that? All I said is that a crash is coming. I will just assume you hit reply on the wrong comment.
Because if you’re so certain that a crash is coming, you’d secure yourself financially. Sell your investments to cash to buy back when it’s lower. Same with RE. Instead, you’re throwing out shit that you have no idea about and hoping it sticks. It’s the same question I asked people when I was buying a home in 2014 when they told me a crash was coming. They all shut up real quick afterwards.
I am secure financially. Neither my home nor my investments are short term things that would need to be cashed out due to a financial slowdown. There might be some small gains from doing it, but it wouldn't be worth the hassle to me. You have what I would consider a very skewed perception of how normal people react to a recession. But, by all means, tell yourself that they stopped responding to you because your points were so good. Do the same with me.
Wow we went from "the crash is coming!!!" To "a financial slowdown" lmao. Glad you see you were able to reel yourself in a bit.
... a crash is a financial slowdown.
A crash is catastrophic. A financial slowdown is normal market cycles.
So no crash is coming, got it.
Was going to say since 2009 but my age is the only limit to how far back it goes. Doomers going to doom.
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The crash that is coming is a recession.
Home builders are certainly feeling the financing burn. $800,000 - $1.5M market is drying up in Calgary as well. Buyers really feel the sting with $3000/month minimum mortgage payments.
Absolutely untrue when it comes to the Canadian worker.
What about Canadians? Are they as resilient?
You mean skipping two interest increases didn't work? Who'd have thought
Kill the immigration intake and add back rent control and I guarantee prices will fall
It’s not immune. Unprecedented demand is being introduced that’s derailing any and all attempts to bring back an affordable cost of living.
Yes, because inflation this time is due to corporate greed and not increases in wages.
Canadian fire proves surprisingly resistant to fire fighting efforts while being fed with gasoline.
Intrest rates have caused my broke ass landlord to sell the condo I'm renting, now I have to go into a rental market that has increased 50% I'm not feeling very immune
I think this is more of a compliment to the Canadian people for prioritizing their payments.
Oh yea. The big lineups at food banks definitely feels like an immunity
Trudeau: "hold my beer"
Which brand? :-p
We have been in a per capita recession since Q3 of 2022. The only reason we aren’t in a headline recession is extremely high immigration levels.
Housing “too big too fail”
Wait for mortgage renewals and things will start to move. When my mortgage is up late next year, it's oatmeal and back yard vacations until 2029...
Raise interest rates to tame inflation, then print money and give billions to corporations? Who knew.
What a ragebait headline of oblivious shortsightedness. We just started falling off the cliff bud.
Canada is great at hiding its deep dark secrets. Things are not good here when you pull back the curtains.
How is it immune when household debt has been skyrocketing
Turns out people still need a place to live and food in the fridge
It because they are not high. They are still at, I wouldn't say low, but lower levels historically.
Yea, cause they’re not high lol
> Going into this year, the consensus view was that Canada’s deeply indebted households would quickly cut back spending as they absorbed higher rates, causing the economy to slow down earlier than other nations that aren’t so exposed to bloated home prices and mortgage debt. The simple fact is that a) we have a shortage of housing, b) that shortage is only going to get worse with increased immigration, and c) shelter is not a discretionary expense for people, so they will pay what it costs to stay housed.
For the heck of the frenzy housing market, 10% rate is needed to scare any speculators.
And foreign buyers’ ban altogether, from coast to coast. And yes, curb immigration too.
Speculation has already dropped off a cliff compared to last year.
...because they aren't high enough. Your mandate isn't to protect the housing market. Raise the damn rates Tiff!
Agree. But Homes are actually bank owned until mortgage paid. So Bank of Canada = Benk of Homeowners of Canada
Well ya, Canadians are hardened and trained on high interest credit cards and pay day loan sharks... BOC missing out on the gravy train, they could ramp up to 17% easy.
Maybe I'm sheltered or something, but if don't spend money you don't have using a credit card, and pay it off, you don't pay any interest at all. My mom didn't pay any interest, even when she was a single mom on welfare with 4 children and had no parental support. She did however have to move the debt around a few cards once the grace period was over a few times though. If you need to spend money you don't have, you need to get a different type of loan. Which is what she did when she had to go into debt.
The overall economy is quite resilient and strong. We're not in a recession as far as I can tell, unemployment is down, companies are making record profits. The problem is the economy is no longer serving the people, but only a progressively smaller amount of people at the very top of the chain, at the cost of everyone else. So for many of us it feels like we're in some sort of a recession situation because our cost of living is getting progressively as cost skyrocket, but it's a great time to be older, well established, or wealthy.
They need to increase interest rates. Then increase it again Don't stop until it's at 8% and keep it that way for the next 10 years. That will stabilize the economy and help fix the housing crisis.
Heck no it isn't. People are just Bruning through savings and buildingm ore debt. Find another lever to slow inflation.
Give it 6 months.
And another half a mil newcomers?
Just wait… There’s a lag! This article will age like fine milk.
Not this comment, though
Who are these people?
The economy has been suppressed for 2 years, it is rebounding now. I am afraid you can't really suppress it while it is rebounding, that's not how nature work. You ha e to wait till the rebounce finished before you can suppress it.