*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[Slava]

Originally Posted by Firebot

https://twitter.com/user/status/1635268439488233477

Pretty clear cut and obvious?

Feds effectively nearly broke the banking system with their incessant quick raising of rates to combat inflation (that inflation they once deemed transitory and kept historically low interest rates for 2 years). They tried to brute force a recession without taking in consideration the fallout at banks in a rapidly increasing rate environment and subsequent loss of confidence, as a result they have to do damage control. Only government intervention and bailout saved the banking industry from potential total collapse and mass contagion. This intervention of course has its own side effects, it will make for an interesting year.

Western Alliance down 50% after being initially down 80%
First Republic Bank down 63% today alone
Charles Schwab stock down 10% after initially being down 20%

What would the numbers have looked like had the government not stepped in to secure deposits?

In other news HSBC bought SVB's British branch for 1 pound, but deposits are safe.

https://www.cnn.com/2023/03/13/inves...hnk/index.html

Yeah, I saw that (really last night there were suggestions that this was going to happen, after I posted that). I'm quite curious to see this week though. CPI comes out tomorrow and while I don't believe in conspiracy theories, I do wonder how good that will look for the fed because they need a positive outcome.

[Hi-Psi]

5 year Canada Bond down 0.30% today. This should hopefully help fixed rates come down a bit.

[Torture]

Originally Posted by Hi-Psi

5 year Canada Bond down 0.30% today. This should hopefully help fixed rates come down a bit.

Rates coming down by my renewal time would be much appreciated. Still a bit of runway but thanks in advance Tiff.

[chemgear]

Originally Posted by Torture

Rates coming down by my renewal time would be much appreciated. Still a bit of runway but thanks in advance Tiff.

Was hoping they would do another solid increase to be sure before this "pause to wait and see". Thinking it would have been nice to get it done and be sure before normalizing without dragging it out potentially.

[nik-]

I've got over 4 years left on my mortgage and I'm expecting at best 1.5% higher than I'm paying now when I renew.

[bizaro86]

Originally Posted by Hi-Psi

5 year Canada Bond down 0.30% today. This should hopefully help fixed rates come down a bit.

And it's gained back about half of that already as the markets have decided we're not having a banking crisis today.

[Yoho]

https://twitter.com/user/status/1641829972296847360

[powderjunkie]

At that point, a fixed-rate mortgage was running around 4 per cent. We asked around, looking for advice on what to choose—a variable or a fixed rate. Variable looked like the way to go, with banks offering rates around 2.5 per cent. And the summer before, Tiff Macklem, the governor of the Bank of Canada, reassured Canadians that interest rates would definitely stay low for a long time to come—it looked like a safe bet. Our realtor and a couple of banks, TD and CIBC, recommended going variable, suggesting it would probably peak at 4 or 4.5 per cent at most.

Tell me this article is ghost written without telling me this article is ghost written ("—As told to Mathew Silver" - I guess they sorta do tell me).

So...rates had already risen, but this informed consumer still deferred to very old advice that was obviously obsolete?

This article contains affiliate links, so we may earn a small commission when you make a purchase through links on our site at no additional cost to you.

The word mortgage is hyperlinked to a B Lender.

[WhiteTiger]

Originally Posted by powderjunkie

Tell me this article is ghost written without telling me this article is ghost written ("—As told to Mathew Silver" - I guess they sorta do tell me).

So...rates had already risen, but this informed consumer still deferred to very old advice that was obviously obsolete?

I'm just wondering how they got an 800,000 mortgage on a 110,000 annual income in the first place...

[opendoor]

Originally Posted by powderjunkie

Tell me this article is ghost written without telling me this article is ghost written ("—As told to Mathew Silver" - I guess they sorta do tell me).

So...rates had already risen, but this informed consumer still deferred to very old advice that was obviously obsolete?


The word mortgage is hyperlinked to a B Lender.

Based on the rates in the article, I suspect they were borrowing from a B lender as well. Despite presumably being CMHC insured (since they bought for less than $1M and put less than 20% down), their variable has no discount from prime, and the fixed rates they're quoting are about 2 percentage points higher than what was available in April of 2021. You could easily get a sub-2% fixed rate at the time they bought their place.

And based on the loan amount compared to their income, I suspect there was something funny going on. Even at their initial variable rate, their Gross Debt Ratio would have been about 45-46% (maximum is supposed to be 39%) at the stress-test rate.

[MillerTime GFG]

Yea that doesn't make sense. No way a household earning 110k qualifies for a 800k mortgage. Zero chance they do on an insured purchase (less than 20% down) as there are no exceptions. They wouldn't have qualified.

MAYBE a bank made an exception on ratios if > 20% down, but that would be a huge exception, so I doubt it. Maybe he qualified with an alternative lender? But they typically don't do variable rates, so that doesn't make sense either. Maybe he did it through a "net worth" program?

I dunno, but something ain't right with that article. Full disclosure - I didn't read the article. Only the headline.

[MillerTime GFG]

Originally Posted by powderjunkie

The word mortgage is hyperlinked to a B Lender.

It was hyperlinked to Nesto when I clicked it. They're not a B-lender. Is that where it went for you, or someone else?

[blankall]

Originally Posted by WhiteTiger

I'm just wondering how they got an 800,000 mortgage on a 110,000 annual income in the first place...

It does say:

By 2019, our rent had gone up to about $2,000 a month, but life was still pretty affordable overall. We were a dual-income family, earning $110,000 a year.

The guy is a software developer. Those jobs saw huge spikes in pay starting around 2019. So it's possible that the household income was significantly higher by the time they bought in April of 2021. It says there current household income is $150k, after the wife got promoted too.

Also, the purchase price was $790,000, but they had at least $80k saved up. So it's more like a $700k mortgage.

[PeteMoss]

I feel for all these people - and I'm sure the mortgage company is going to work with him assuming he's with someone reputable - but get a fixed rate mortgage if you're going to be screwed if rates go up.

[bluejays]

Realistically, barring a black swan event, what are the odds interest rates go up beyond 0.5%?

[GGG]

Originally Posted by bluejays

Realistically, barring a black swan event, what are the odds interest rates go up beyond 0.5%?

Over a 5 year term?

Pretty good.

[bluejays]

Originally Posted by GGG

Over a 5 year term?

Pretty good.

Really? Not arguing but why would the BOC need to keep rates high long term?

[GGG]

Originally Posted by bluejays

Really? Not arguing but why would the BOC need to keep rates high long term?

Because rates aren’t historically high right now. Rates may get lowered to get out of recession. Rates may go up to fight stubborn inflation. I don’t think they will go down just because. So it depends which side are you betting on.

Maybe I should say if you are going to struggle to pay a mortgage if it happens the risk is high enough to re-think a variable product. If you can’t handle a 1-2% increase in rate you likely should be going fixed.

[MillerTime GFG]

Originally Posted by opendoor

Based on the rates in the article, I suspect they were borrowing from a B lender as well. Despite presumably being CMHC insured (since they bought for less than $1M and put less than 20% down),

There are no "B" lenders that do insured mortgages (less than 20% down). And even if they did, they wouldn't be able to make exceptions on ratios anyways. Insurer guidelines (ie. CMHC) trump any lender appetite. 39% GDS, 44% TDS. Cut and dry, no exceptions. (Not even 44.00001% would be approved, ever.)

[nik-]

What are all these acronyms about man?!