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Apr 21, 2004
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I think BoC will wait for the minimum wage to take effect and see what happens. Ontario is after all the most populous province, for now.
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Feb 22, 2011
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alanbrenton wrote:
Dec 1st, 2017 2:04 pm
I think BoC will wait for the minimum wage to take effect and see what happens. Ontario is after all the most populous province, for now.
It's 62% bigger than the second biggest province Quebec. It is also growing 40% faster than them so it seems impossible for this to change unless something drastic happens. It's also 38% of the country so this is a really big change. Also 30% of people make under $15, and 10% make min wage in the province so it's a massive impact.
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May 31, 2007
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rjg4235 wrote:
Dec 1st, 2017 2:02 pm
So you think in a recession prices go down, in a boom prices go down? In that case you think they'd always be going down? Or you think they go up in recessions? I am confused how you come to this. People who are highly leveraged have to get 5 year fixed rates. Anyone renewing now would get a lower rate than 5 years ago..... anyone not renewing would not be effected because they'd have been required to get a fixed rate.

Honestly though if you think land value goes down in a city when it's economy is booming you must be insane.
About 50% of Canadians are renewing in 1-2 years and rates forecasted will be higher. This means new buyers will qualify for less loans and require more interest payment to service debt. And I'm not even talking about OFSI here which is the cement in the impact of all this.

RE does not have to work on the same cycle as economy. For example, last two recessions it did not.


  1. Brutal recession in the early 90's. Economy and stock market recovered following 10 years after, but RE fell during the same time period.
  2. 2008 recession, small impact on RE but low interest rate then added fuel to RE bull market to continue, that is the only reason why it did. Household debt stats supports this.
The fuel is disappearing fast (low interest rates) to keep RE cycle from continuing upward price action. Plus RE bull market is getting very old.

There is no other demand, whether domestic or specualtion, that can exceed or overcome what impact increasing interest rates will do.

However the stock market will continue to benefit as a result of growing economy and higher interest rate. The cycle for RE has already started a revision. This does not happen overnight, and IMO 2018 looks bearish for RE.

If we hit a total recession in the economy, you can bet the biggest risk is household debt (like the BOC just recently said is the biggest risk to economy) and I'm really afraid it will be a brutal one to get through because so many have over extended in too much debt.
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May 31, 2007
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All those people renewing mortgage in 1-2 years will face a large increase in monthly payment because OFSI closed the door on lowing your payment by refinancing your debt. if you refinance, you face the stress test at rates probably higher than 5%

Banks who extend amortization for those with equity will be capped at how much they can do, due to strict lending rules and use of loop holes.
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Feb 22, 2011
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Jungle wrote:
Dec 1st, 2017 2:37 pm
About 50% of Canadians are renewing in 1-2 years and rates forecasted will be higher. This means new buyers will qualify for less loans and require more interest payment to service debt. And I'm not even talking about OFSI here which is the cement in the impact of all this.
Do you have a source for this? Sounds like BS to me. Even with a couple more bumps, which they have already indicated they will wait, we are still lower than when they would have initially gotten the mortgage if they are renewing in 1-2 years. Even if it was slightly higher it would be so marginal to the overall cost of ownership.
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Jan 20, 2016
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Jungle wrote:
Dec 1st, 2017 2:45 pm
All those people renewing mortgage in 1-2 years will face a large increase in monthly payment because OFSI closed the door on lowing your payment by refinancing your debt. if you refinance, you face the stress test at rates probably higher than 5%

Banks who extend amortization for those with equity will be capped at how much they can do, due to strict lending rules and use of loop holes.
We are not even reached 2011 level with 3.6-3.9% for 5y, you need 2-3 hikes just to get back to 2011 rates, not saying how much you need to get "large increase". Even +1% with 4.15% on 500k vs current 3.15% it is "large increase" of $200 per month. And do not forget, that once economy is booming as you said, wages will grow as well.
Make the Trudeau drama teacher again!
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Feb 22, 2011
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asa1973 wrote:
Dec 1st, 2017 4:04 pm
We are not even reached 2011 level with 3.6-3.9% for 5y, you need 2-3 hikes just to get back to 2011 rates, not saying how much you need to get "large increase". Even +1% with 4.15% on 500k vs current 3.15% it is "large increase" of $200 per month. And do not forget, that once economy is booming as you said, wages will grow as well.
Not only that but even in this worst case scenario they could just extend the amortization and have the same or lower payment if they want. I don't see any of this being a major factor. If anything a growing economy and rates is a net benefit.
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May 31, 2007
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rjg4235 wrote:
Dec 1st, 2017 3:49 pm
Do you have a source for this? Sounds like BS to me. Even with a couple more bumps, which they have already indicated they will wait, we are still lower than when they would have initially gotten the mortgage if they are renewing in 1-2 years. Even if it was slightly higher it would be so marginal to the overall cost of ownership.
Was in the Bank Of Canada Quarterly Assessment of Financial Risks.

"BoC analysts expect half of mortgage rates will “reset” over the next year"

https://betterdwelling.com/bank-of-cana ... next-year/

Some might get better rate, but OFSI Stress Test allows Banks to be uncompetitive.. because if you leave, you get a stress test.

Plus in the next year rates will most likely be higher than today, expect 0.5- even 1% higher.

So unlikely people will be locking in lower rate.
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May 31, 2007
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asa1973 wrote:
Dec 1st, 2017 4:04 pm
We are not even reached 2011 level with 3.6-3.9% for 5y, you need 2-3 hikes just to get back to 2011 rates, not saying how much you need to get "large increase". Even +1% with 4.15% on 500k vs current 3.15% it is "large increase" of $200 per month. And do not forget, that once economy is booming as you said, wages will grow as well.
rjg4235 wrote:Not only that but even in this worst case scenario they could just extend the amortization and have the same or lower payment if they want. I don't see any of this being a major factor. If anything a growing economy and rates is a net benefit.


Current wage growth is a positive for inflation, rate hikes and stock markets. Not for consumers because cost of living also increases. A net natural, there is no lever to expel that. (now that RE has peeked) And in real life, inflation is much more than BOC headline.

I'm not so sure 50% of Canadians are ready for rate hike surprise next year. A recent CIBC survey says most can't cut back more than $360 a month before "feeling the pinch"

https://www.bnn.ca/85-of-canadians-say- ... l-1.921592

I'm also not sure of bank policy to "extend amortization" at a whim anymore, especially with OFSI loop hole being watched closely. I know BNS required a claim of "financial hardship" back in 2011 to extend an amortization I had enquired about. They might require it to be refinance, which needs a stress test now. (5%+) testing rate.
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Feb 22, 2011
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Jungle wrote:
Dec 1st, 2017 4:54 pm
Current wage growth is a positive for inflation, rate hikes and stock markets. Not for consumers because cost of living also increases. A net natural, there is no lever to expel that. (now that RE has peeked) And in real life, inflation is much more than BOC headline.
By this you mean home prices and rent right? Or are those not impacted by inflation?
[OP]
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Feb 22, 2011
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Jungle wrote:
Dec 1st, 2017 4:37 pm
Was in the Bank Of Canada Quarterly Assessment of Financial Risks.

"BoC analysts expect half of mortgage rates will “reset” over the next year"

https://betterdwelling.com/bank-of-cana ... next-year/

Some might get better rate, but OFSI Stress Test allows Banks to be uncompetitive.. because if you leave, you get a stress test.

Plus in the next year rates will most likely be higher than today, expect 0.5- even 1% higher.

So unlikely people will be locking in lower rate.
Your own source shows why it's a non issue;

"The Debt Is “Manageable For Most”
The BoC believes the renewals would be “manageable for most.” Specifically, they cited higher income, and more home equity at the time of renewal to be mitigating factors. Additionally, if you renew in the next year, there’s a good chance you’re locking in rates better than you did 5 years ago. More equity, higher income (hopefully), and lower rates are a likely scenario for almost half of the country’s borrowers."

The only people they claimed are at risk are those who are highly indebted. Even in their worst case they claim $180 a month. You seriously think a few people having to pay $180 more will crash the market? Even this is pure speculation, and even if true seems like a non issue.

The average person who bought 4 years ago in Toronto and is renewing now will have a property that has appreciated $368,000. Plus they will have paid down the mortgage. This is absolutely a non issue.
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May 31, 2007
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rjg4235 wrote:
Dec 1st, 2017 5:04 pm
By this you mean home prices and rent right? Or are those not impacted by inflation?
They have well exceeded inflation and wage growth over the last 50 years.. fundamental support was way beyond this and only excelled further by recent debt and speculation demand over the last 10 years. This will be gone now because interest payments, debt risks and cost of living on all goods should match and exceed any are wage growth and spending power for most. Especially with minimum wage increase coming, more squeeze to the working poor (aka now middle class) and upper class.

High income earners maybe not so much, subjective to your spend, but they are minority.

this is why you can't buy a house anymore like your parents did and raise a family the same way 50 years ago BTW- wage growth barely matches inflation. Houses went bonkers.
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Feb 22, 2011
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Jungle wrote:
Dec 1st, 2017 5:14 pm
They have well exceeded inflation and wage growth over the last 50 years.. fundamental support was way beyond this and only excelled further by recent debt and speculation demand over the last 10 years. This will be gone now because interest payments, debt risks and cost of living on all goods should match and exceed any are wage growth and spending power for most. Especially with minimum wage increase coming, more squeeze to the working poor (aka now middle class) and upper class.

High income earners maybe not so much, subjective to your spend, but they are minority.

this is why you can't buy a house anymore like your parents did and raise a family the same way 50 years ago BTW- wage growth barely matches inflation. Houses went bonkers.
The proportion of homes that are now condos vs houses has also changed dramatically. Makes sense only the wealthier can afford them when they are proportionately much less available. In that last 20 years alone the proportion of housing that are condos has rocketed from 34% to 57%.
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Jan 27, 2006
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alanbrenton wrote:
Dec 1st, 2017 2:04 pm
I think BoC will wait for the minimum wage to take effect and see what happens. Ontario is after all the most populous province, for now.
They might not be able to afford to do that. Interest rates changes typically take 6 months for it to show it's effects on the economy.
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craftsman wrote:
Dec 1st, 2017 6:35 pm
They might not be able to afford to do that. Interest rates changes typically take 6 months for it to show it's effects on the economy.
The last one was in August/September so March it is?

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