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Deal Addict
Jul 14, 2002
1726 posts
610 upvotes
LongLiveRFD wrote:
May 10th, 2018 1:30 pm
It's a bad trade that all govts have to enter. You sacrifice average people/FTHB affordability for little extra time to breath until speculators push prices to new high again.

Effectively, the wealthy gets wealthier, and the poor gets poorer.

For foreign speculators, even the 15%FBT won't matter, as long as the next guy (you) bid a higher price, they are good.

Even if buying second property is banned outright, there will still be ways to speculate.

All you get is a bit more time, as Torontonians will learn, the hard way.
If you're dealing with people that have much more money than you, let them go ahead and bid it up.
The person with less capital puts themselves into a lose lose situation entering the bid if they stretch themselves thin or can't afford it.
The buyer is the one who takes the risk, not the person that didn't buy.
Deal Addict
User avatar
Jan 6, 2011
4763 posts
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GTA
dantey wrote:
May 10th, 2018 10:28 pm
If you're dealing with people that have much more money than you, let them go ahead and bid it up.
The person with less capital puts themselves into a lose lose situation entering the bid if they stretch themselves thin or can't afford it.
The buyer is the one who takes the risk, not the person that didn't buy.
Or be more productive, make more and save more so one can actually afford own dwelling and contribute to building a great city and nation.

Fairness should be established given amount saved, but the current rules just cap off those just begun their accumulation.

But fairness will never be the focus, you will hear from those who didn't save or saved little demanding free public money to subsidize their purchase.

Original point is that condo prices are now about to deviate the so-called fundamentals. Point of this thread cueing the bear due to rising rate is going to be moot.

English, rising rate won't make a dent to prices, GTA condos at least.
Deal Addict
Jul 14, 2002
1726 posts
610 upvotes
LongLiveRFD wrote:
May 10th, 2018 10:51 pm
Or be more productive, make more and save more so one can actually afford own dwelling and contribute to building a great city and nation.

Fairness should be established given amount saved, but the current rules just cap off those just begun their accumulation.

But fairness will never be the focus, you will hear from those who didn't save or saved little demanding free public money to subsidize their purchase.

Original point is that condo prices are now about to deviate the so-called fundamentals. Point of this thread cueing the bear due to rising rate is going to be moot.

English, rising rate won't make a dent to prices, GTA condos at least.
What you mention is exactly who the higher interest rate qualification is getting rid of. Those people who don't have much savings and can't put a larger downpayment.
The ones who are more productive, make and save more will be the ones who can afford.
Deal Addict
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Jan 6, 2011
4763 posts
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GTA
dantey wrote:
May 10th, 2018 11:31 pm
What you mention is exactly who the higher interest rate qualification is getting rid of. Those people who don't have much savings and can't put a larger downpayment.
The ones who are more productive, make and save more will be the ones who can afford.
Price is not driven by those timid anyways, soon we will find.

These applicants just return to the rental pool, have landlords' carry costs passed onto them, and save longer. But price departs from their speed of accumulation, then some of them become discouraged.

And market sees that too, so instead, fundamentals catch up to price. Before govts gives free money, they may lower hurdles for FHB, or builders giving out int free loan.

We don't even need to invite foreign investors, just those who profited from previous rounds can jump back in again, and how sensitive are those people with mild rate hikes?

Don't forget, we are north of the wealthiest nation in the solar system with 10x population. Trump's tweet is enough to drive some of the capital our way.

Toronto is no longer a Torontonians' city, and that was the democratic outcome.
Deal Expert
User avatar
Apr 21, 2004
45945 posts
12300 upvotes
Lots of good discussion but the BoC has stood pat the last couple of interest rate decisions.

So many got it all wrong.


Didn't know there are 3.4 m subprime mortgages in Canada. Maybe HCG mortgages are all considered subprime? 36 m population divided by three = 12 m households, conservatively. So more than 25% are considered subprime? Would Subprime be >680 credit score? I think subprime in the US was so much worst than that.

Bank of Canada should be ‘careful’ with future rate moves for subprime borrowers, lender says
For Canada’s 3.4 million subprime borrowers, the Bank of Canada can’t go slowly enough.
https://www.thestar.com/business/2018/0 ... -says.html
Sr. Member
Dec 4, 2016
882 posts
314 upvotes
alanbrenton wrote:
May 11th, 2018 2:19 pm
Lots of good discussion but the BoC has stood pat the last couple of interest rate decisions.

So many got it all wrong.


Didn't know there are 3.4 m subprime mortgages in Canada. Maybe HCG mortgages are all considered subprime? 36 m population divided by three = 12 m households, conservatively. So more than 25% are considered subprime? Would Subprime be >680 credit score? I think subprime in the US was so much worst than that.

Bank of Canada should be ‘careful’ with future rate moves for subprime borrowers, lender says
For Canada’s 3.4 million subprime borrowers, the Bank of Canada can’t go slowly enough.
https://www.thestar.com/business/2018/0 ... -says.html
I read the article, and to me, that 3.4 million are not households, but individuals. 11.9% of Canadians with active credit profiles are considered sub-prime by the standard of one agency. If we assume owners have better credit profiles than renters, on average, just on the virtue that people with really, really bad credit scores can't get mortgages, we can safely say that less than 11.9% of home owners are sub-prime. On the other hand, not all owners have mortgages.
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Apr 21, 2004
45945 posts
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Makes sense. I read the article entirely, probably yesterday, but forgot reading about the 11.9%.

But with really bad credit, only silly landlords will take on these renters. Not sure how these people are putting roofing over their heads unless they live at home.
Deal Addict
Nov 9, 2013
2495 posts
1144 upvotes
Edmonton, AB
alanbrenton wrote:
May 11th, 2018 2:19 pm
Lots of good discussion but the BoC has stood pat the last couple of interest rate decisions.

So many got it all wrong.


Didn't know there are 3.4 m subprime mortgages in Canada. Maybe HCG mortgages are all considered subprime? 36 m population divided by three = 12 m households, conservatively. So more than 25% are considered subprime? Would Subprime be >680 credit score? I think subprime in the US was so much worst than that.

Bank of Canada should be ‘careful’ with future rate moves for subprime borrowers, lender says
For Canada’s 3.4 million subprime borrowers, the Bank of Canada can’t go slowly enough.
https://www.thestar.com/business/2018/0 ... -says.html
What is the working definition of a sub prime mortgage? Is any mortgage with an alt lender considered sub prime?

My mortgage is with First National (and not big 5) largely because I got a great interest rate with FN compared to RBC, TD, etc. My credit score is above 680 and I would have qualified with a big bank.

Never mind - I don't think I meet the sub prime definition - https://www.investopedia.com/terms/s/su ... rtgage.asp
Last edited by treva84 on May 11th, 2018 2:57 pm, edited 2 times in total.
Deal Expert
User avatar
Apr 21, 2004
45945 posts
12300 upvotes
treva84 wrote:
May 11th, 2018 2:57 pm
Is any mortgage with an alt lender considered sub prime?

My mortgage is with First National (and not big 5) largely because I got a great interest rate with FN compared to RBC, TD, etc. My credit score is above 680 and I would have qualified with a big bank.
Maybe I was considered subprime with HCG a few years ago and now with Lendwise, lol.
Newbie
Jul 25, 2008
99 posts
37 upvotes
ottawa
Not sure if this is the right place to talk about it, but I'd like to remind everyone that CPP enhancement is starting in 2019. From 2019-2023 contribution rates will increase by a total of 2%, and from 2024-2025 AYMPE will be phased in, eventually covering YMPE to ~$82,700 with an 8% contribution rate. (Those contribution rates are combined, so would be split 50/50 between employee and employer unless self-employed) This should soak up some of the wage growth and inflation expected over this period of time.
Deal Fanatic
User avatar
Jul 19, 2003
7464 posts
385 upvotes
So the new decision is definitely going to floor people below 1m?
hi!
Deal Addict
Dec 27, 2006
1736 posts
748 upvotes
http://www.cbc.ca/news/business/mortgag ... -1.4661884

Higher mortgage stress test also putting the squeeze on renewals | CBC News

It's not just new homeowners who are feeling the impact of higher interest rates and tougher lending standards: even those who bought years ago are feeling the heat of increased scrutiny.

In January, new rules brought in a so-called "stress test" for mortgage borrowers, where their finances are tested to make sure they would be able to pay higher rates. The benchmark that must be met is either the average of what the big banks currently offer as their posted rate for a five-year fixed term, or two percentage points higher than the actual loan.

Bank of Canada's 'stress test' rate inches higher, to 5.34%
"They want to make sure you can afford your mortgage with a good, solid rate in place," said Cynthia Holmes, with the Faculty of Real Estate Management at Toronto's Ryerson University. "Not that you can only afford it if rates are really really low."

If you can't pass the test at a federally regulated lender, the lender isn't allowed to give you the loan, which either forces you into a smaller mortgage and cheaper home — or out of the market entirely.

As a result of the new rules, mortgage brokers say new buyers are seeing their purchasing power drastically reduced. Others are flocking to alternative lenders or credit unions, who are outside the new rules.

But for those coming up for mortgage renewal at one of the big banks, the new rules are making it much harder to leave their existing lenders — in many cases forcing them to re-up at higher rates.

That's what happened to Toronto-area homeowner Sharan Mahesan.

"We knew our mortgage was going to be up for renewal in June," Mahesan said of his loan on the Markham home he bought in 2011. "But when we got the notice saying we had to renew, they provided us a rate which was significantly higher than what we were paying previously."


Sharan Mahesan says when he first got a notice saying it was time to renew the mortgage on his home in Markham, Ont., his bank provided a rate that was significantly higher than what he had been paying. (CBC)
Mortgage broker Varshan Thavarajah says Mahesan's experience is common as of late, noting that the big banks he works with have been sending out renewal options anywhere from 20 to 50 basis points — or between 0.2 and 0.5 per cent — higher than the previous loan's term.

And that's just based on the modest rate hikes that have already happened. The five-year Canadian government bond last week hit its highest level in more than seven years, which raises financing costs for the big banks. They can be expected to soon turn around and pass those added costs on to borrowers.

Big Canadian banks hike mortgage rates as bond yields rise
Financing costs may legitimately be going up, but according to Bank of Canada numbers, some $700 million of mortgage debt is up for renewal in the next 12 months, which is going to give the big banks ample opportunity to renegotiate loans in this era of new laws — and possibly squeeze more money out of their existing customers.

Borrowers don't have to undergo a stress test when they renew with their existing lender — only when they switch. That gives the existing lender a window to offer a higher rate, as they know the borrower may not be in the best position to leave.

Small fees add up

The fees sound small but can add up. On a $300,000 mortgage, even a tiny rate hike of less than 50 basis points can add up to $4,000 to the interest cost of the loan. On a million-dollar monster mortgage, it can mean as much as an extra $13,000.

In Mahesan's case, the rate he was first offered represented several hundred dollars more every mortgage payment. He managed to pass the stress test, so he was able to negotiate a better rate with his lender. But even then, his new rate is still higher than his old one, and he said he had to go through the paperwork rigmarole of basically applying for a new loan.

"I guess we got spoiled by the rates and the monthly payments," he said.

Thavarajah said he's seen a lot of that sentiment: "There's a lot of shock in our clients' reactions."

Holmes points out that 86 per cent of borrowers end up renewing their mortgage with their original lender — a trend the banks are clearly trying to leverage to their advantage in the stressful new world of stress tests.

Thavarajah said while he's seen a slowdown in his business from new buyers, he's experienced a surge in the number of people coming to him for advice on the sticker shock while renewing. While most have options, he admits the mortgage landscape has changed — and not necessarily in borrowers' favour.

His advice is blunt: "It's important to shop around," he said. "Don't just sign it."
Deal Fanatic
Feb 9, 2009
6650 posts
3742 upvotes
Motoss wrote:
May 15th, 2018 5:45 am
http://www.cbc.ca/news/business/mortgag ... -1.4661884

Higher mortgage stress test also putting the squeeze on renewals | CBC News

It's not just new homeowners who are feeling the impact of higher interest rates and tougher lending standards: even those who bought years ago are feeling the heat of increased scrutiny.

In January, new rules brought in a so-called "stress test" for mortgage borrowers, where their finances are tested to make sure they would be able to pay higher rates. The benchmark that must be met is either the average of what the big banks currently offer as their posted rate for a five-year fixed term, or two percentage points higher than the actual loan.

Bank of Canada's 'stress test' rate inches higher, to 5.34%
"They want to make sure you can afford your mortgage with a good, solid rate in place," said Cynthia Holmes, with the Faculty of Real Estate Management at Toronto's Ryerson University. "Not that you can only afford it if rates are really really low."

If you can't pass the test at a federally regulated lender, the lender isn't allowed to give you the loan, which either forces you into a smaller mortgage and cheaper home — or out of the market entirely.

As a result of the new rules, mortgage brokers say new buyers are seeing their purchasing power drastically reduced. Others are flocking to alternative lenders or credit unions, who are outside the new rules.

But for those coming up for mortgage renewal at one of the big banks, the new rules are making it much harder to leave their existing lenders — in many cases forcing them to re-up at higher rates.

That's what happened to Toronto-area homeowner Sharan Mahesan.

"We knew our mortgage was going to be up for renewal in June," Mahesan said of his loan on the Markham home he bought in 2011. "But when we got the notice saying we had to renew, they provided us a rate which was significantly higher than what we were paying previously."


Sharan Mahesan says when he first got a notice saying it was time to renew the mortgage on his home in Markham, Ont., his bank provided a rate that was significantly higher than what he had been paying. (CBC)
Mortgage broker Varshan Thavarajah says Mahesan's experience is common as of late, noting that the big banks he works with have been sending out renewal options anywhere from 20 to 50 basis points — or between 0.2 and 0.5 per cent — higher than the previous loan's term.

And that's just based on the modest rate hikes that have already happened. The five-year Canadian government bond last week hit its highest level in more than seven years, which raises financing costs for the big banks. They can be expected to soon turn around and pass those added costs on to borrowers.

Big Canadian banks hike mortgage rates as bond yields rise
Financing costs may legitimately be going up, but according to Bank of Canada numbers, some $700 million of mortgage debt is up for renewal in the next 12 months, which is going to give the big banks ample opportunity to renegotiate loans in this era of new laws — and possibly squeeze more money out of their existing customers.

Borrowers don't have to undergo a stress test when they renew with their existing lender — only when they switch. That gives the existing lender a window to offer a higher rate, as they know the borrower may not be in the best position to leave.

Small fees add up

The fees sound small but can add up. On a $300,000 mortgage, even a tiny rate hike of less than 50 basis points can add up to $4,000 to the interest cost of the loan. On a million-dollar monster mortgage, it can mean as much as an extra $13,000.

In Mahesan's case, the rate he was first offered represented several hundred dollars more every mortgage payment. He managed to pass the stress test, so he was able to negotiate a better rate with his lender. But even then, his new rate is still higher than his old one, and he said he had to go through the paperwork rigmarole of basically applying for a new loan.

"I guess we got spoiled by the rates and the monthly payments," he said.

Thavarajah said he's seen a lot of that sentiment: "There's a lot of shock in our clients' reactions."

Holmes points out that 86 per cent of borrowers end up renewing their mortgage with their original lender — a trend the banks are clearly trying to leverage to their advantage in the stressful new world of stress tests.

Thavarajah said while he's seen a slowdown in his business from new buyers, he's experienced a surge in the number of people coming to him for advice on the sticker shock while renewing. While most have options, he admits the mortgage landscape has changed — and not necessarily in borrowers' favour.

His advice is blunt: "It's important to shop around," he said. "Don't just sign it."
They'll repel the rules for current mortgage holders soon enough, thats interference in free market economies with the commies having to stress test people with mortgages already who want to shop around. What a mess the govt is creating, just a mess... need to stay out.
Deal Addict
Dec 27, 2006
1736 posts
748 upvotes
Sanyo wrote:
May 15th, 2018 9:04 am
They'll repel the rules for current mortgage holders soon enough, thats interference in free market economies with the commies having to stress test people with mortgages already who want to shop around. What a mess the govt is creating, just a mess... need to stay out.
Thoughts on the CMHC or emergency interest rates?

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