Quote:
Originally Posted by Fuzz
^ How does that happen when we have stress tests(at a level I don't think we have reached)? Were banks fudging stuff to make it work?
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I have a variable rate mortgage. I've only got one more 25 bps hike before I'd be negative amortization (ie trigger rate). That definitely doesn't mean I'm going to have an issue making payments. For one thing, the huge paydown from many years of fixed payments when the rate was lower means I'm many years ahead on the principal already, so I don't actually have to increase payment, because the trigger point is years of negative amortization away. That's not what I'll do, but it's a way better option than defaulting.
Someone who bought their max possible 12 months ago in a bidding war and went variable might be in a different position, but the number of mortgages reaching their trigger rate isn't predictive of defaults at all, imo.