*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[calgarygeologist]

So what do folks think might be the best plan for a mortgage renewal next year? My variable rate is up December 2023 and just out curiousity I submitted a request to my lender for a conversion agreement and they provided me with an opportunity to lock in at 5.09% until Jan 2028. I wish I had a crystal ball but it seems like 5.09% might be decent for the next 2 or 3 years and that rates could go down after that. It looks like posted rates are mid to high 5% or low 6% right now so I'm somewhat tempted at 5.09%.

[Locke]

Originally Posted by calgarygeologist

So what do folks think might be the best plan for a mortgage renewal next year? My variable rate is up December 2023 and just out curiousity I submitted a request to my lender for a conversion agreement and they provided me with an opportunity to lock in at 5.09% until Jan 2028. I wish I had a crystal ball but it seems like 5.09% might be decent for the next 2 or 3 years and that rates could go down after that. It looks like posted rates are mid to high 5% or low 6% right now so I'm somewhat tempted at 5.09%.

How's your insurance?

[calgarygeologist]

Originally Posted by Locke

How's your insurance?

Let me check. We can take this offline. I'd gladly move to the Caribbean if I didn't have a house to pay for up here

[Enoch Root]

Originally Posted by calgarygeologist

So what do folks think might be the best plan for a mortgage renewal next year? My variable rate is up December 2023 and just out curiousity I submitted a request to my lender for a conversion agreement and they provided me with an opportunity to lock in at 5.09% until Jan 2028. I wish I had a crystal ball but it seems like 5.09% might be decent for the next 2 or 3 years and that rates could go down after that. It looks like posted rates are mid to high 5% or low 6% right now so I'm somewhat tempted at 5.09%.

No one knows where interest rates are going.

It really comes down to a choice between risk/opportunity and safety. If the uncertainty of higher rates stresses you out, then lock in. If you are comfortable with the risk, and think you can do better by waiting, then go for it.

But do it based on which strategy makes sense for you, not out of an irrational belief that you can outsmart the market.

[Yoho]

https://twitter.com/user/status/1605049498472177664

This might spell the end to any idea the Fed will pivot on rates in 2023. Japan reversing course with fears of inflation

[tony-soprano]

Originally Posted by Locke

How's your insurance?

Originally Posted by calgarygeologist

Let me check. We can take this offline. I'd gladly move to the Caribbean if I didn't have a house to pay for up here

Check for cameras first!

https://bc.ctvnews.ca/fire-at-unfini...ting-1.6199341

[Yoho]

Originally Posted by GGG

Are these articles published to garner sympathy or are they actually to get the reasonably well put together people to sneer at people who screw up. If it’s the latter we are leaning into the creation of poverty porn stories.

https://twitter.com/user/status/1604828636694974464




Some startling numbers in the article.

[MillerTime GFG]

Originally Posted by calgarygeologist

So what do folks think might be the best plan for a mortgage renewal next year? My variable rate is up December 2023 and just out curiousity I submitted a request to my lender for a conversion agreement and they provided me with an opportunity to lock in at 5.09% until Jan 2028. I wish I had a crystal ball but it seems like 5.09% might be decent for the next 2 or 3 years and that rates could go down after that. It looks like posted rates are mid to high 5% or low 6% right now so I'm somewhat tempted at 5.09%.

That's the important part right there, and I tend to agree. I would lean towards a 2 or 3 year term if in the same situation, depending on what your lender offers for those, and depending what your current variable rate is. I would not want to lock in at over 5% for a full 5 years.

As someone else said though, no one can predict interest rates, and it depends on your overall risk tolerance.

[Slava]

Originally Posted by Yoho

https://twitter.com/user/status/1604828636694974464




Some startling numbers in the article.

Not the exact same thing, but with pre-construction this stuff happens. I've known people in Calgary who put down say $100k on a place for a purchase of $1m when the construction is complete. As the time approaches, the place isn't worth $1m, and now it's worth say $800k. So...do you honor that commitment and pay $1m, or walk away from the $100k knowing that it's not worth it?

Financially, you obviously walk and lose the $100k because it makes the most sense. But psychology gets in the way and makes it hard for people to do that.

I realise that isn't eh exact same as what is happening here, but there's an element where thy would finance those purchases (and effectively overpay), and the only thing stopping them is that interest rates are higher.

[Enoch Root]

Originally Posted by Yoho

https://twitter.com/user/status/1605049498472177664

This might spell the end to any idea the Fed will pivot on rates in 2023. Japan reversing course with fears of inflation

Or, it might help the global situation, and facilitate the pivot you're looking for.

[shermanator]

Leverage yourself to the tits and then try and get out of the deal when the value of the property isn't what you agreed to pay. Classic...

[Slava]

Originally Posted by shermanator

Leverage yourself to the tits and then try and get out of the deal when the value of the property isn't what you agreed to pay. Classic...

Well they're not over-leveraged though...they want to be! You know how people were complaining earlier that the institutions should help protect people and not let them get into trouble? That's effectively what is happening here...and these guys are upset.

[username]

I find it very hard to feel bad from an Uber driver who thought it was a good idea to buy a 1.9 Million dollar house.

[tvp2003]

Originally Posted by Slava

Not the exact same thing, but with pre-construction this stuff happens. I've known people in Calgary who put down say $100k on a place for a purchase of $1m when the construction is complete. As the time approaches, the place isn't worth $1m, and now it's worth say $800k. So...do you honor that commitment and pay $1m, or walk away from the $100k knowing that it's not worth it?

Financially, you obviously walk and lose the $100k because it makes the most sense. But psychology gets in the way and makes it hard for people to do that.

I realise that isn't eh exact same as what is happening here, but there's an element where thy would finance those purchases (and effectively overpay), and the only thing stopping them is that interest rates are higher.

Originally Posted by Slava

Well they're not over-leveraged though...they want to be! You know how people were complaining earlier that the institutions should help protect people and not let them get into trouble? That's effectively what is happening here...and these guys are upset.

Great points. They didn't lose their deposit because they can't get a mortgage, they've already lost their deposit (on paper) now that their $2M house is now only worth $1.7M. They would actually save money by walking away now versus trying to close the deal and sign a mortgage they can't afford (yes I realize they could also get sued for breach of contract but the builder already has their $260k deposit).

It says he's a first time homebuyer so ignoring his job/income he was probably going to live in the house versus flipping it, but when you buy a house that you probably can't afford at the top of the market, it's a risk.

[tony-soprano]

The bank will only approve the mortgage on the assessed value, which is 300k less than the amount on the contract. So the buyer will need to pay that difference upfront to the developer and rest can go on mortgage or he can walk away and give up his deposit.

Odds are he planned to reassign that contract to someone else. In Vancouver theirs a lot of non-resident buyers that solely buy to flip the contract for a profit, but for them it’s 30% down.

[Enoch Root]

Originally Posted by username

I find it very hard to feel bad from an Uber driver who thought it was a good idea to buy a 1.9 Million dollar house.

Their occupation is irrelevant, and we should not be judging them for it. We do not know their situation - maybe there are multiple income-earners in the family, or maybe they have saved money or brought it to Canada from a business elsewhere, or whatever. Bottom line is that we are not in a position to judge that.

The issue here is that the market has changed, and now they are blaming externalities, and looking for assistance, for something that was their own choice. I don't want to be dispassionate, but I struggle to have much patience for people that blame the market, and look for assistance, to correct their own decisions.

[Enoch Root]

Originally Posted by tony-soprano

The bank will only approve the mortgage on the assessed value, which is 300k less than the amount on the contract. So the buyer will need to pay that difference upfront to the developer and rest can go on mortgage or he can walk away and give up his deposit.

Odds are he planned to reassign that contract to someone else. In Vancouver theirs a lot of non-resident buyers that solely buy to flip the contract for a profit, but for them it’s 30% down.

And if you can sell/flip before it closes, it's zero percent down. But if you want to play that game, you have to accept the risk, which is that the market might go the other way and leave you holding the bag with a loss.

[bizaro86]

Originally Posted by Yoho

https://twitter.com/user/status/1605049498472177664

This might spell the end to any idea the Fed will pivot on rates in 2023. Japan reversing course with fears of inflation

The BoJ didn't move because they are worried about inflation, it was to protect the yen and to to protect Japanese corporate borrowers having access to funds.

And they didn't move their short rate, they only relaxed their peg on the 10 year. I don't think any other open economy pegs long rates, so Japan is a bit of an unusual case for sure.

[blankall]

Originally Posted by Slava

Not the exact same thing, but with pre-construction this stuff happens. I've known people in Calgary who put down say $100k on a place for a purchase of $1m when the construction is complete. As the time approaches, the place isn't worth $1m, and now it's worth say $800k. So...do you honor that commitment and pay $1m, or walk away from the $100k knowing that it's not worth it?

Financially, you obviously walk and lose the $100k because it makes the most sense. But psychology gets in the way and makes it hard for people to do that.

I realise that isn't eh exact same as what is happening here, but there's an element where thy would finance those purchases (and effectively overpay), and the only thing stopping them is that interest rates are higher.

You cannot just walk away from a lot of contacts for purchase. Sometimes it's as simple as forfeiting the deposit. Other times you could be held accountable for any additional loss to the seller

[corporatejay]

Originally Posted by The Fisher Account

Man, this self-righteous victim blaming is getting tiresome.

Who is the victim?