*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[GGG]

Originally Posted by Bill Bumface

Ignoring the economic implications, I'm sad that the era of rewarding people for personal fiscal prudence is coming to such a quick end.

I'd be curious to see what household savings numbers look like in high interest rate vs. low interest rate environments.

I think the idea of saving because of high interest rates isn’t a thing anymore. No one should have significant amounts of savings in cash anymore. Essentially just money to be used in the next 5 years. The bulk of savings is in the market which lower rates tend to bolster

[bizaro86]

Originally Posted by GGG

I think the idea of saving because of high interest rates isn’t a thing anymore. No one should have significant amounts of savings in cash anymore. Essentially just money to be used in the next 5 years. The bulk of savings is in the market which lower rates tend to bolster

Forward expected returns in the market will generally be higher in high interest rate environments, because starting valuations will be lower and dividend/earning yields higher.

[GGG]

Originally Posted by bizaro86

Forward expected returns in the market will generally be higher in high interest rate environments, because starting valuations will be lower and dividend/earning yields higher.

Yeah, but there is no real starting point for the market. So a change from low to high interest rates punishes investors who then get better returns are their reduced investments.

The other challange is less economic activity can meet the threshold to be economic so borrowing drops and essentially the economy slows.

None of these things are good for savers. Perhaps for market timers but that level of expertise isn’t the average person.

[blankall]

Originally Posted by Bill Bumface

Ignoring the economic implications, I'm sad that the era of rewarding people for personal fiscal prudence is coming to such a quick end.

I'd be curious to see what household savings numbers look like in high interest rate vs. low interest rate environments.

The last few years has been an awful time to be a saver. Returns have been extremely low across the board, but inflation has been sky high. If you saved and invested $20k a few years ago, it's probably lost value, relative to buying power anyways.

[Reaper]

All I know is that my mortgage is up for renewal in 2 months and that 50 point drop is going to help my rate.

[bizaro86]

Originally Posted by GGG

Yeah, but there is no real starting point for the market. So a change from low to high interest rates punishes investors who then get better returns are their reduced investments.

The other challange is less economic activity can meet the threshold to be economic so borrowing drops and essentially the economy slows.

None of these things are good for savers. Perhaps for market timers but that level of expertise isn’t the average person.

If we are talking about the incentive to save that used to be provided by high interest rates, I think expected market returns should provide that same incentive.

Unfortunately I think it's too complicated for most people. When the market goes down expected future returns are higher, but there are definitely people who sell and not many who add new cash.

[MillerTime GFG]

Originally Posted by Reaper

All I know is that my mortgage is up for renewal in 2 months and that 50 point drop is going to help my rate.

If you're going to go with a variable/adjustable rate, then yes it will help your rate. If you're going with a fixed rate, bond yields are actually up since yesterday, and up almost 30bps since the end of September. Fixed rates have actually been going up recently as they go as the US 10 year treasury goes.


Fixed rates aren't going to continue to go up, so timing is everything when locking in a rate. Essentially what's happening is the US is coming out with their jobs report stating "look how many jobs we've created!", only to revise it later on, as they didn't really create that many. Most revisions in US history in 2024. Election in November.......

Bond yields are an absolute roller coaster right now.

[Bill Bumface]

Originally Posted by GGG

I think the idea of saving because of high interest rates isn’t a thing anymore. No one should have significant amounts of savings in cash anymore. Essentially just money to be used in the next 5 years. The bulk of savings is in the market which lower rates tend to bolster

Originally Posted by blankall

The last few years has been an awful time to be a saver. Returns have been extremely low across the board, but inflation has been sky high. If you saved and invested $20k a few years ago, it's probably lost value, relative to buying power anyways.

Good points. I think what I really mean to go with is "financial prudence". Maybe that's not even the right word. In low interest environments, we had people taking on all kinds of personal debt. While that can be smart if it's to allow you to invest more, for a lot of people it was a way to boost their lifestyle, taking on the risk that if interest rates skyrocketed they'd be screwed.

A high interest rate environment rewarded people who were more conservative on that front. At least I perceive it be that way. Now all you smart guys can tell my why I'm wrong yet again haha.

One example - poor market returns and high interest rates actually made it appealing to pay down your mortgage for more than emotional reasons for once.

[Reaper]

Originally Posted by MillerTime GFG

If you're going to go with a variable/adjustable rate, then yes it will help your rate. If you're going with a fixed rate, bond yields are actually up since yesterday, and up almost 30bps since the end of September. Fixed rates have actually been going up recently as they go as the US 10 year treasury goes.

Fixed rates aren't going to continue to go up, so timing is everything when locking in a rate. Essentially what's happening is the US is coming out with their jobs report stating "look how many jobs we've created!", only to revise it later on, as they didn't really create that many. Most revisions in US history in 2024. Election in November.......

Bond yields are an absolute roller coaster right now.

I've been offered 3.99% on a 3 year fixed. I'm hoping the rate cut knocks that down to 3.75% before I accept the renewal.

[Muta]

Originally Posted by Reaper

All I know is that my mortgage is up for renewal in 2 months and that 50 point drop is going to help my rate.

My renewal is up in three months; I think I'm gonna go variable for three years (may be more attractive than fixed) and pay off as much mortgage as I can while rates are (relatively) low during this period, so I can get that overall principal amount down more before the next renewal.

[opendoor]

Originally Posted by Reaper

I've been offered 3.99% on a 3 year fixed. I'm hoping the rate cut knocks that down to 3.75% before I accept the renewal.

3.99 is already exceedingly low for a 3 year. Unless economic conditions change drastically, I don’t think you’ll do better than that, particularly since 3Y bond yields have actually been rising over the last month. Hopefully that 3.99 offer isn’t time limited.

[MillerTime GFG]

Yea if you're getting 3.99% on a 3-year, take that and run...


Or at least lock it in for now, and monitor things as you get closer to renewal.

[Torture]

Originally Posted by Reaper

I've been offered 3.99% on a 3 year fixed. I'm hoping the rate cut knocks that down to 3.75% before I accept the renewal.

Mind sharing what bank that's from?

[Reaper]

Originally Posted by Torture

Mind sharing what bank that's from?

Scotiabank but it is a preferred rate.

[MillerTime GFG]

No surprise. Scotia has been very aggressive this year coming out of 2023, where they literally did not want mortgages.

[Torture]

Originally Posted by Reaper

Scotiabank but it is a preferred rate.

Interesting. Already with Scotia on my mortgage and have banking with them as well - what did it take for you to get 'preferred' rate?

[Reaper]

Originally Posted by Torture

Interesting. Already with Scotia on my mortgage and have banking with them as well - what did it take for you to get 'preferred' rate?

Essentially a lifetime customer with over half of our current mortgage with Scotiabank. It doesn't feel as preferred as we're coming from 1.43%

[Sylvanfan]

Originally Posted by MillerTime GFG

No surprise. Scotia has been very aggressive this year coming out of 2023, where they literally did not want mortgages.

I had read something from their CEO like a month ago where they said they were not going to try and beat other competitors for Mortgages. They would only look to be competitive in that segment for customers with multiple products in their portfolio. Essentially the mortgage market in Canada was already unreasonably competitive for the amount of risk they're taking in at the price point.

So if you had a HELOC an unsecured line, credit cards, and maybe investments there...they might offer that customer a better mortgage. But if I go there looking to better a mortgage rate and don't have anything else they'll shoo me away.

[rotten42]

Originally Posted by Sylvanfan

People always talk about the rate. But amortization and outstanding balance are huge factors too.

Buddy of mine who has 5 years left...the rate increase for him is not that bad as he's in the stage where a lot of the payment is against Principal. 6% vs 2% doesn't move his payment all that much. If you have a high ratio 500k mortgage with 20 years left, it's going to hurt.

I have a little over $100k left. I had upped my monthly payments when I had such a low rate.

[MillerTime GFG]

Originally Posted by Sylvanfan

I had read something from their CEO like a month ago where they said they were not going to try and beat other competitors for Mortgages. They would only look to be competitive in that segment for customers with multiple products in their portfolio. Essentially the mortgage market in Canada was already unreasonably competitive for the amount of risk they're taking in at the price point.

So if you had a HELOC an unsecured line, credit cards, and maybe investments there...they might offer that customer a better mortgage. But if I go there looking to better a mortgage rate and don't have anything else they'll shoo me away.

Yes that is correct. If you're a new mortgage customer to Scotia - they will offer two products. Standard mortgage with a slightly higher rate, or a "mortgage +" product that comes with a lower rate, but you need to open a Scotia chequing account for mortgage payments + one other product. Many banks do this now.