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Interest rates rising next year, prepare for a world of pain

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  • Mar 22nd, 2017 2:06 pm
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[OP]
Sr. Member
Dec 30, 1969
562 posts
302 upvotes
Toronto, ON

Interest rates rising next year, prepare for a world of pain

http://business.financialpost.com/2014/ ... oecd-says/


Most people who've taken out mortgages were only concerned with the monthly payments, and not what would happen when the interest rates rise. Oh boy, there's going to be a lot of homes on the market in the next few years.
308 replies
[OP]
Sr. Member
Dec 30, 1969
562 posts
302 upvotes
Toronto, ON
Not really a surprise though with how well the US economy is doing. Them raising rates will force Canada to raise rates as well. At least it's one less idiotic decision for Poloz to make
Deal Addict
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Dec 19, 2007
1504 posts
184 upvotes
Toronto
I agree.

Even a small increase will likely cause a significant amount of people to be stretched (even further).

Hopefully it's gradual. I renew the mortgage toward the end of next year...
Deal Addict
Jul 21, 2011
1724 posts
221 upvotes
RMB
I think seeing people losing their home due to rising rate and unaffordable monthly payment give you a sense of joy. Anyway good luck, let me know when homes are 50% off, and make sure you post in here again once you are finally a homeowner, let's see how many years is that going to be.
Deal Addict
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Jan 28, 2012
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I'm locked in below 3% for another few years, and am paying my mortgage off so fast that even if rates are 5%++ when I renew, I can still pay it off within 5-10 years at the same payment I'm doing now.


The financial illiterates buying with 5% down and making the minimum 30 year amortized payment's won't be so fortunate though.
Deal Addict
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Dec 19, 2007
1504 posts
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Toronto
zilber wrote:
Nov 25th, 2014 12:26 pm
I think seeing people losing their home due to rising rate and unaffordable monthly payment give you a sense of joy. Anyway good luck, let me know when homes are 50% off, and make sure you post in here again once you are finally a homeowner, let's see how many years is that going to be.
It doesn't give me joy. What is does do is show people not to be greedy and entitled and to pause and think about finances and their future. It will show people that it is not financially wise (in any climate) to get a $400-500k mortgage with a household income of $100k with 5% down and a 30 year amortization. We were offered an $800k mortgage a few years ago. We laughed at it. It's too bad more people don't do the same.
Rhaegar wrote:
Nov 25th, 2014 12:34 pm
I'm locked in below 3% for another few years, and am paying my mortgage off so fast that even if rates are 5%++ when I renew, I can still pay it off within 5-10 years at the same payment I'm doing now.


The financial illiterates buying with 5% down and making the minimum 30 year amortized payment's won't be so fortunate though.
Same as us. Basically at what we are currently paying (we prepay), rates will have to go above 5% for us to adjust our payments.
Deal Guru
Aug 22, 2011
12544 posts
2670 upvotes
Ottawa
spintheblackcircle wrote:
Nov 25th, 2014 12:43 pm
It doesn't give me joy. What is does do is show people not to be greedy and entitled and to pause and think about finances and their future. It will show people that it is not financially wise (in any climate) to get a $400-500k mortgage with a household income of $100k with 5% down and a 30 year amortization. We were offered an $800k mortgage a few years ago. We laughed at it. It's too bad more people don't do the same.

Same as us. Basically at what we are currently paying (we prepay), rates will have to go above 5% for us to adjust our payments.
Nothing wrong to go with the longest amortization to keep repayment low...the strategy is to consistently top up (ie: bi-weekly, plus lump sum)!
Penalty Box
Aug 11, 2005
3186 posts
432 upvotes
zilber wrote:
Nov 25th, 2014 12:26 pm
I think seeing people losing their home due to rising rate and unaffordable monthly payment give you a sense of joy. Anyway good luck, let me know when homes are 50% off, and make sure you post in here again once you are finally a homeowner, let's see how many years is that going to be.
It's okay they can rent afterwards! Being financially irresponsible does not deserve sympathy.
Deal Addict
User avatar
Dec 19, 2007
1504 posts
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Toronto
vkizzle wrote:
Nov 25th, 2014 12:46 pm
Nothing wrong to go with the longest amortization to keep repayment low...the strategy is to consistently top up (ie: bi-weekly, plus lump sum)!
Absolutely agreed! It's similar to using a "decent" cash/travel CC for everything and paying off the balance in full every month. Free money...

Implementing and sticking to it however is an entirely different matter...

You see threads here often of people with relatively low incomes and considering high mortgages. There doesn't seem to be much of a plan anymore. Buy now, think later is a poor strategy with a house. It seems that people are buying real estate on somewhat of a whim nowadays, not realizing that interest rates will inevitably change. When you're already living thin, that is definitely a problem...
Deal Addict
Jul 21, 2011
1724 posts
221 upvotes
RMB
spintheblackcircle wrote:
Nov 25th, 2014 12:43 pm
It doesn't give me joy. What is does do is show people not to be greedy and entitled and to pause and think about finances and their future. It will show people that it is not financially wise (in any climate) to get a $400-500k mortgage with a household income of $100k with 5% down and a 30 year amortization. We were offered an $800k mortgage a few years ago. We laughed at it. It's too bad more people don't do the same.
who cares, it doesn't border me at all what others are doing with their finances, it is entire their own business.
Deal Addict
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Sep 16, 2012
2948 posts
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Mississauga
This will impact the housing and auto loan market the most, both have been drivers in the economy in recent years.
Deal Addict
Jul 21, 2011
1724 posts
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RMB
olek86 wrote:
Nov 25th, 2014 12:55 pm
This will impact the housing and auto loan market the most, both have been drivers in the economy in recent years.
It is just another boom and bust cycle, it is nothing special and definitely not the end of the world.
Deal Addict
Jul 15, 2009
1047 posts
251 upvotes
Meh.

When I bought my house, prime was 6% and nobody could even imagine it ever going any lower.
Newbie
User avatar
Dec 30, 1969
76 posts
10 upvotes
rkanwar109 wrote:
Nov 25th, 2014 12:13 pm
http://business.financialpost.com/2014/ ... oecd-says/


Most people who've taken out mortgages were only concerned with the monthly payments, and not what would happen when the interest rates rise. Oh boy, there's going to be a lot of homes on the market in the next few years.

Another "theory” If the BOC doesent change their dovish overtones, don’t expect anything drastic.
Things aren't as rosy as they seem the economy is still quite fragile.
"Quoth the Raven Nevermore"
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