Interest rate increases this year?

[FlamesAddiction]

Originally Posted by Johnny199r

Just because there's low rates, doesn't mean people should lose the ability to think rationally and use their brain about long term consequences.

The lenders are often just guilty. Sometimes people simply get in over their heads because there are always other people trying to push them to that edge where they are constantly making payments. That is how a lot of lenders make their money. Yeah, it can backfire if the person goes bankrupt, but if they can get them in that sweet spot where they are always owing but getting by, then they are laughing. Big picture-wise, they don't care if some of them go bankrupt as long as most of the people they are "helping" stay indentured.

Do I feel sorry for people that obviously make dumb decisions, like buying an extravagant home on a small salary, or people buying a sports car when a Honda Civic would do? Not really. But there are a lot of people in this country that put in full time honest labour and barely get by because of debt.

Not that this would ever happen, but what if interest rates were kept low enough that "most" people could own a home and be able to save money... would that be such a terrible country to live in? Personally, I think every hard working person should be able to own a home that they can live in, raise a family in, and die in. Giving almost all your money to someone else for rent sucks.

[Johnny199r]

Originally Posted by 4X4

Well you don't seem to be able to use yours to figure out how to buy a house. Your strategy is to hope that the government bankrupts people that already bought, so that you can pick up a foreclosure? Thanks for your contribution here.

When did I say bankrupt? With higher interest rates, buyers would not be able to afford to borrow such high funds, therefore lowering the market price.

[T@T]

Free advice from a dummy.

Lock your mortgage...NOW!

[Johnny199r]

Originally Posted by FlamesAddiction

The lenders are often just guilty. Sometimes people simply get in over their heads because there are always other people trying to push them to that edge where they are constantly making payments.

Do I feel sorry for people that obviously make dumb decisions, like buying an extravagant home on a small salary, or people buying a sports car when a Honda Civic would do? Not really. But there are a lot of people in this country that put in full time honest labour and barely get by because of debt.

Not that this would ever happen, but what if interest rates were kept low enough that "most" people could own a home and be able to save money... would that be such a terrible country to live. Personally, I think every hard working person should be able to own a home that they can live in, raise a family in, and die in. Giving almost all your money to someone else for rent sucks.

No doubt lenders aren't blameless, but that's how they make their money.

I too think it would be nice if everyone could own a home in a perfect world, but unfortunately, this isn't a perfect world. With really low interest rates and high levels of borrowing, I don't think that enables people to own a home and save money. It just allows them to live in a home and have no savings.

[Antithesis]

Originally Posted by Johnny199r

When did I say bankrupt? With higher interest rates, buyers would not be able to afford to borrow such high funds, therefore lowering the market price.

Originally Posted by Johnny199r

I don't see interest rates rising. The Feds manufactured this ridiculous problem of everyone out there buying houses with inflated monopoly * edited* money. They're not going to turn around and bankrupt those same people, as much as I would like them to.

Originally Posted by Johnny199r

They're not going to turn around and bankrupt those same people, as much as I would like them to.

uh ...

[jayswin]

Haha

[stampsx2]

Originally Posted by T@T

Free advice from a dummy.

Lock your mortgage...NOW!

Uh oh, this post has me convinced. I'll call first thing tomorrow morning.

[GP_Matt]

If you are thinking about locking in a variable mortgage remember that you can shop it around and negotiate. Our last variable mortgage had a penalty of three months interest to break it. If your bank offers you their posted (read crappy) rate paying the penalty is far cheaper than paying the posted rate.

[Vulcan]

Originally Posted by Johnny199r

No doubt lenders aren't blameless, but that's how they make their money.

I too think it would be nice if everyone could own a home in a perfect world, but unfortunately, this isn't a perfect world. With really low interest rates and high levels of borrowing, I don't think that enables people to own a home and save money. It just allows them to live in a home and have no savings.

You understand that with an increase in interest rates the housing prices may go down but also your monthly payments probably won't go down. The profits will just be funnelled more to the banks instead of the developers.

[Red]

How Canadians should prepare for rising rates. If they do go up that is.

1. Pay down debts
2. Lock in
3. Don't rush to buy a house
4. Sell the house if over levereged

http://www.huffingtonpost.ca/2015/01...n_6421634.html

[FlamesAddiction]

Originally Posted by Johnny199r

No doubt lenders aren't blameless, but that's how they make their money.

I too think it would be nice if everyone could own a home in a perfect world, but unfortunately, this isn't a perfect world. With really low interest rates and high levels of borrowing, I don't think that enables people to own a home and save money. It just allows them to live in a home and have no savings.

I just remember when I was in mortgage discussions with our broker. They approved me to buy home worth about 60% more than what I actually ended up buying. But when I did the calculations to not just include debt payments, but actual cost of living plus breathing room, there was no possible way that such a mortgage would have been reasonable. It almost certainly would have set me up for failure in the long run, yet they seemed fine trying to convince me otherwise.

Getting credit is way too easy in this country. I would much prefer a system that allowed people to save without having to rely so much on lenders to begin with. Canada has some of the worst house price to salary ratios in the world it's insane. I always hear stories from older generations about how they bought their homes with cash because that ratio used to be much more favourable to the consumer, but I digress. It just seems like easy credit was the Pandora's box, and while the onus is on the borrower, the way things work nowadays, people are just resigned to the fact that their lives are going to be all about paying back debt so they have few reservations about putting themselves there.

[OutOfTheCube]

Just finalized our mortgage two months ago -- locked in at 2.89% for five years, so we're good for a while!

[Schraderbrau]

Originally Posted by OutOfTheCube

Just finalized our mortgage two months ago -- locked in at 2.89% for five years, so we're good for a while!

That's a great rate. Who did you lock in with? We are getting close to completing our build and are about to get a new mortgage. If I could land a locked in rate like that for five years I would be one happy guy.

[BigNumbers]

Originally Posted by T@T

Free advice from a dummy.

Lock your mortgage...NOW!

With oil pricing where it's at, and O&G representing the biggest part of Canadian GDP, I expect the 1H 2015 interest rate hikes by the BoC, which they started foreshadowing about last year, will not happen... "Hey guys the Cdn economy is tanking and interest rates are likely not going to increase in the near term - LOCK IN NOW!"

Very interested to hear your thoughts on why folks should lock in?

[OutOfTheCube]

Originally Posted by Schraderbrau

That's a great rate. Who did you lock in with? We are getting close to completing our build and are about to get a new mortgage. If I could land a locked in rate like that for five years I would be one happy guy.

I'll PM you

[Bill Bumface]

I do kind of wonder if we're at a spot where rates have been too low for too long, and once oil takes it's next violent price upswing and inflation starts picking up steam, if the BoC ends up in a real pickle.

[mrkajz44]

I don't think the rate is going to go up any time soon - maybe half a percentage point over the next year or two at the most.

One thing about fixed rates that people never seem to talk about. Sometimes, its not always about getting the best possible rate over the five years. There is value in peace of mind with a fixed and determinable mortgage payment for five years. Personally, I am willing to pay a slightly higher fixed rate to ensure I have a payment that fits in my budget without worrying about every interest rate announcement.

[nfotiu]

Originally Posted by BigNumbers

With oil pricing where it's at, and O&G representing the biggest part of Canadian GDP, I expect the 1H 2015 interest rate hikes by the BoC, which they started foreshadowing about last year, will not happen... "Hey guys the Cdn economy is tanking and interest rates are likely not going to increase in the near term - LOCK IN NOW!"

Very interested to hear your thoughts on why folks should lock in?

Wouldn't they need to raise rates to try to stop the fall of the Canadian dollar at some point?

I've always found it strange that in the US, we have 30 year fixed mortgages, but Canadians can't lock in for more than 5 years.

[bizaro86]

Originally Posted by Slava

OK so say you bought bonds when the rates were low (say for the past five years). How does that rising interest rate help you?

You improve your returns on reinvested interest and on reinvesting bonds that come due. Assuming you kept maturities reasonable (say by laddering 5 years) this would really help you.

Yes, your existing bonds will decline in value, but assuming decent credit quality they'll still pay you the contracted amount, so you haven't "lost" anything unless you need to sell them.

Edited to add: I wrote this: http://seekingalpha.com/article/2214...interest-rates on how to prepare for higher interest rates. It's not a rate forecast (it was in response to a reader question on how to prepare for higher interest rates). It's a bit US focused (ie, in Canada it would be lock in for 5 years not lock in for 30) but the general principles are the same. Canadian rates will rise eventually, but low oil prices probably put that back a bit

[stampsx2]

Originally Posted by BigNumbers

With oil pricing where it's at, and O&G representing the biggest part of Canadian GDP, I expect the 1H 2015 interest rate hikes by the BoC, which they started foreshadowing about last year, will not happen... "Hey guys the Cdn economy is tanking and interest rates are likely not going to increase in the near term - LOCK IN NOW!"

Very interested to hear your thoughts on why folks should lock in?

Because low oil prices give people more disposable income and the u.s. economy's picking up.