*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[MacDaddy77]

Personally fine to absorbed the higher payments on variable and wait for the incoming recession drop. renewal is spring 2024.

Severely dislike the pressure the bank tried to put on to get us to lock in for fixed. So much so we will be shopping around come renewal time

[The Fonz]

Originally Posted by MacDaddy77

Personally fine to absorbed the higher payments on variable and wait for the incoming recession drop. renewal is spring 2024.

Severely dislike the pressure the bank tried to put on to get us to lock in for fixed. So much so we will be shopping around come renewal time

When did the bank pressure you?

[MacDaddy77]

over the last month saying they expect to have another increase and that we should lock in. We advised that we will stay on the variable and increase payments to pay Principle.

several times they tried pushing the fixed mortgage

[MillerTime GFG]

I've been trying to relay the message to my clients in a variable rate...it's understandable these increases are cause for concern, but you need to be willing to ride it out. You need to absorb the high interest periods in order to take advantage of the lows.

Guaranteed the majority of people panicking about their variable rates are those within the first year or two of their 5-year term. Those in a variable rate in year 3-4 of the term not nearly as concerned.


This is not to say people shouldn't be concerned, as the increase has been staggering, but that you shouldn't have a knee-jerk reaction and lock into a fixed rate without seriously looking ahead.

@MacDaddy - you're totally right. Many banks are using this as an opportunity for retention. "Quick - you need to lock in for 5 years b/c of these increases."


Those that lock in for 5 years at ~5-5.50% like we've seen over the past 6 months are in for a rude awakening should rates come back down and they want to switch to lower rates. IRD penalties are going to be through the roof. This will be the trend come 2024/2025 in my opinion.

[Yoho]

Originally Posted by MacDaddy77

over the last month saying they expect to have another increase and that we should lock in. We advised that we will stay on the variable and increase payments to pay Principle.

several times they tried pushing the fixed mortgage

Interesting game of chicken your playing with your house, you must really be confident in something that no one really knows if rates will drop anytime soon.

I heard people speak similar things late 2021.

[Slava]

Originally Posted by Yoho

Interesting game of chicken your playing with your house, you must really be confident in something that no one really knows if rates will drop anytime soon.

I heard people speak similar things late 2021.

Wait, people thought that rates were going to drop in late 2021? That's news to me. I saw quite a few predictions of rate increases (and I want to say that a couple economists were predicting 8 increases through 2022, with the lowest I can recall being 4/5 increases). Maybe some layman somewhere thought that they'd be cutting rates, but I don't think any professional had that in the cards?

[Yoho]

Originally Posted by Slava

Wait, people thought that rates were going to drop in late 2021? That's news to me. I saw quite a few predictions of rate increases (and I want to say that a couple economists were predicting 8 increases through 2022, with the lowest I can recall being 4/5 increases). Maybe some layman somewhere thought that they'd be cutting rates, but I don't think any professional had that in the cards?

What was said at the time was “The BOC can’t do it” because of debt levels.
That was incorrect.

Saw this morning. Interesting thread.

https://twitter.com/user/status/1600507839126159371

[Slava]

Originally Posted by Yoho

What was said at the time was “The BOC can’t do it” because of debt levels.
That was incorrect.

Makes sense. I've heard people say that now and say that the federal reserve can't raise rates because of government debt levels and servicing costs. I think that if that's your line of thinking, you had better prepare for disappointment though. Despite some populist thoughts to the contrary, the central banks are not politically operated.

[Shazam]

I'm going to say the prime rate will top out 5%. And then will stay at around 4% for at least two years.

So, um, pepper your angus.

[Yoho]

https://twitter.com/user/status/1600528037170536448

Prominent realtor and YouTuber in BC.

[opendoor]

Originally Posted by Yoho

Interesting game of chicken your playing with your house, you must really be confident in something that no one really knows if rates will drop anytime soon.

Bond markets are predicting the same thing. There's a reason that the policy rate went up to 50 points to 4.25% while the 5-year bond yield is virtually unchanged at just over 3%.

Banks and bond investors aren't charities. In times where you can get fixed-rate mortgage for a lower rate than a variable one (as you can right now), it's because the expectation is that interest rates will drop in the relatively near future and whomever is receiving the return on the fixed-rate loans will come out ahead in the end.

[Fuzz]

My favourite opinions on interests rates always come from realtors, becuase they have such a deep understanding of the broader financial market, and absolutely no self interest at all.

[opendoor]

Originally Posted by Johnny199r

It's ironic how many people are complaining about these rates saying they are crippling the economy/homeowners, yet this range of rates is historically where rates usually sit.

Rates mean almost nothing on their own if asset prices reflect those rates. A $300K house at 10% is the same payment as a $625K house at 2% and people are going to treat those as equivalents.

The issue is that rates are rising so quickly, so people who bought at 2% are getting pinched. I guess you could say no one should have ever bought a house when rates were so far below the historical norm, but when you have a sustained 10+ year period of low rates, that's really not a realistic argument.

And it's important to think in relative terms. People know the difficulties that people had in the early '80s when mortgages went from 12% to 20% in a short period of time, but that increase is about the same as mortgages going from 2% to 6.25% now.

[Shazam]

Originally Posted by Yoho

https://twitter.com/user/status/1600528037170536448

Prominent realtor and YouTuber in BC.

A bear market in real estate??!?!? That means I have to BUY NOW!!

[MacDaddy77]

Originally Posted by Yoho

Interesting game of chicken your playing with your house, you must really be confident in something that no one really knows if rates will drop anytime soon.

I heard people speak similar things late 2021.

how do you assume its a game of chicken with our house when I already stated we have the financial means to absorb the higher payments to pay principle.

[sketchyt]

Originally Posted by Fuzz

My favourite opinions on interests rates always come from realtors, becuase they have such a deep understanding of the broader financial market, and absolutely no self interest at all.

Also, Realtors' understanding of the real estate market, in general, is nowhere near deep. LOL.

[The Fisher Account]

Originally Posted by MillerTime GFG

I've been trying to relay the message to my clients in a variable rate...it's understandable these increases are cause for concern, but you need to be willing to ride it out. You need to absorb the high interest periods in order to take advantage of the lows.

Guaranteed the majority of people panicking about their variable rates are those within the first year or two of their 5-year term. Those in a variable rate in year 3-4 of the term not nearly as concerned.


This is not to say people shouldn't be concerned, as the increase has been staggering, but that you shouldn't have a knee-jerk reaction and lock into a fixed rate without seriously looking ahead.

@MacDaddy - you're totally right. Many banks are using this as an opportunity for retention. "Quick - you need to lock in for 5 years b/c of these increases."


Those that lock in for 5 years at ~5-5.50% like we've seen over the past 6 months are in for a rude awakening should rates come back down and they want to switch to lower rates. IRD penalties are going to be through the roof. This will be the trend come 2024/2025 in my opinion.

Thanks for saving me a phone call to you.

[The Fonz]

Originally Posted by Shazam

I'm going to say the prime rate will top out 5%. And then will stay at around 4% for at least two years.

Prime rate at most banks is already at 5.95%.

The BOC rate of 4.25% today is the benchmark/overnight rate, not prime.

[IliketoPuck]

When I looked at our renewal two years ago, prime was at 0.25%.

Empirically, floating rate mortgages outperform fixed rate mortgages (from a home owner perspective) over a long enough time period. However in medium term scenarios, you can find timing windows to optimize between the two.

It seemed clear at the time that the only direction rates could go was up, and that locking in a fixed rate was the optimal 5 year strategy.

[Hockeyguy15]

I'm sitting at 1.49% until May 2026. I will not complain about that.