*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[Monahammer]

Originally Posted by shermanator

Another 75 bps hike this morning. Overnight rate is up to 3.25%. Sounds like more rate hikes to come in the future as well...



https://www.bankofcanada.ca/2022/09/...se-2022-09-07/

I think the next one we see will be back down to a .25 . Then my bet is they taper it off entirely. As was mentioned above, leading indicators seem to point to us being past peak. Too much gusto on the interest side could tilt a bunch of homes into insolvency without being necessary for the larger economic picture.

[CroFlames]

Thank #### I'm locked in for four more years.

[calgarygeologist]

Originally Posted by Monahammer

I think the next one we see will be back down to a .25 . Then my bet is they taper it off entirely. As was mentioned above, leading indicators seem to point to us being past peak. Too much gusto on the interest side could tilt a bunch of homes into insolvency without being necessary for the larger economic picture.

From an uneducated monetary policy perspective I doubt there will be a drop between now and the start of 2024. My best case scenario prediction is a plateau at 4%.

[Johnny199r]

Will there be any effect on the crazy housing market? Things have cooled slightly, but most bigger markets in the country are still crazy.

[dubc80]

Well, I definitely got boned and made the wrong choice when I renewed my mortgage last year. I took the 5-year variable at prime minus -1.26% with a net interest of 1.19%.
The fixed being offered at the time was in the low 2%'s I think.

My strategy was that I could save money for a while and beat the fixed rate, stomach a few eventual increases, and still be ahead which obviously backfired. I had no idea rates would go up this much and this quickly.

This has resulted in a $400/month increase in payments which fortunately our family can stomach. However there are many families who will have to take a serious look at their spending and finances.

If I try to fix it now, the rates are much higher so may as well ride it out I guess (unless we think it will go even higher).

[The Fonz]

Two announcements remaining for 2022 - Oct 26 and Dec 7. Looking like we'll end the year around 4.00%, about 50bp higher than most experts believed when making projections back in early summer. For reference, our BOC overnight rate has only been at 4%+ for 2 of the last 20 years - 2006 and 2007, where it bounced between 4.00-4.50%.

[MillerTime GFG]

Such a move had been widely anticipated, with Canadian Imperial Bank of Commerce (CIBC) executive director and senior economist Karyne Charbonneau indicating to Canadian Mortgage Professional in the wake of the Bank’s last announcement that the policy rate was likely to peak at 3.25%.
“We don’t think there’s space for this type of hike [one percentage point] anymore,” Charbonneau said in July. “So probably 0.75%, maybe in September, and then take a break… We think that by then, the economy will be slowing significantly on these higher interest rates and still-high inflation.”

https://www.mpamag.com/ca/mortgage-i...A-DB3FF4CE2FC9

Hopefully the bolded comes to fruition and the BoC pauses to see how inflation numbers look over the next few months. A lot of families already struggling with these rate increases.

[Muta]

I renewed in January for a three-year variable rate at, like, nothing. Then, chaos ensued. My timing could not have been worse…. Sigh. Hoping it doesn’t go higher, this is nuts for someone that lives on their own right now.

[fundmark19]

Originally Posted by Muta

I renewed in January for a three-year variable rate at, like, nothing. Then, chaos ensued. My timing could not have been worse…. Sigh. Hoping it doesn’t go higher, this is nuts for someone that lives on their own right now.

Also nuts for someone living with a family. I had planned 1.5-2% of increases over the first year since I renewed in March. Didn't expect things to go this wild this quick. It will be interesting what happens in January as I am sure there are a lot of people struggling with lines of credit now.

[cKy]

Originally Posted by Johnny199r

Will there be any effect on the crazy housing market? Things have cooled slightly, but most bigger markets in the country are still crazy.

Houses in my area (Greater Victoria) are still slowly moving. Prices have dropped off quite a bit since June. My house has been listed since June and not a single offer. Some other comparable houses have sold for quite less than what we're listed for. It's almost like it become illegal to buy a house all of a sudden.

[Shazam]

You have to qualify @ 7% now, $1MM mortgage = $6653/mth for 30 year amortization.

Having said that home prices will not go down materially.

[The Fonz]

Double edit: completely botched this math

[Cecil Terwilliger]

Originally Posted by Shazam

You have to qualify @ 7% now, $1MM mortgage = $6653/mth for 30 year amortization.

Having said that home prices will not go down materially.

It would actually be 2% above contract or the benchmark rate, whichever is higher. And it would be 25 years, not 30. Assuming you’re going with a lender that follows those guidelines. Some credit unions and other lenders do not.

But 7% probably is in the right range for the qualifying rate that would be used for most people based on current rates.

[blankall]

Originally Posted by Shazam

You have to qualify @ 7% now, $1MM mortgage = $6653/mth for 30 year amortization.

Having said that home prices will not go down materially.

Really depends a lot on the area that the houses are located in. I think we'll definitely see slides in outlying areas, that tend to be more linked to local salaries and actual affordability. Affordability for working families has definitely taken a hit.

I don't think we'll see that major crash though. The housing shortage issue only gets worse every day. The drop off we'll likely see will probably see things get closer to the way they were pre-pandemic. Then things will slowly start to creep up again as salaries go up. We'll also likely to see fixed rates drop below prime again, as the bond market changes.

[Shazam]

Originally Posted by Cecil Terwilliger

It would actually be 2% above contract or the benchmark rate, whichever is higher. And it would be 25 years, not 30. Assuming you’re going with a lender that follows those guidelines. Some credit unions and other lenders do not.

But 7% probably is in the right range for the qualifying rate that would be used for most people based on current rates.

Yeah I think the 7% is the current qualifier, doesn't take into account today.

I use 30 because I'm being extremely generous. You can still get 30 year on high ratio loans.

[Shazam]

Originally Posted by blankall

Really depends a lot on the area that the houses are located in. I think we'll definitely see slides in outlying areas, that tend to be more linked to local salaries and actual affordability. Affordability for working families has definitely taken a hit.

A familiar refrain. Mostly wrong though.

I don't think we'll see that major crash though. The housing shortage issue only gets worse every day. The drop off we'll likely see will probably see things get closer to the way they were pre-pandemic. Then things will slowly start to creep up again as salaries go up. We'll also likely to see fixed rates drop below prime again, as the bond market changes.

Bond rates are contingent on prime, not the other way around.

And let's keep some perspective here. The prime rate is now only 3.75%. Hardly the stuff of panic. But whoo, people suck at finances.

Regardless, it takes years to quell inflation. Years, boyos. Last time this idiocy happened it took two decades before rates normalized in Canada.

[The Fonz]

Originally Posted by Shazam

And let's keep some perspective here. The prime rate is now only 3.75%. Hardly the stuff of panic. But whoo, people suck at finances.

Isn't Prime up to 4.7% today?

[Cecil Terwilliger]

Originally Posted by Shazam

Yeah I think the 7% is the current qualifier, doesn't take into account today.

I use 30 because I'm being extremely generous. You can still get 30 year on high ratio loans.

7% is not the benchmark and HR is limited to 25 years. Has been for a while.

BoC left the benchmark at 5.25 last I checked. Since it’s contract +2 or benchmark, they don’t really need to raise it. Not unless they see rates going so much higher that an entirely new benchmark is required.

[Cecil Terwilliger]

Originally Posted by The Fonz

Isn't Prime up to 4.7% today?

People seem to be confusing terms. Prime is set by each FI individually. As the BoC rate goes up, so too do most FIs raise their prime rate because it costs them more to borrow money.

Prime is usually the same at all FIs but can be slightly different from time to time. Not usually longer than a day, as they all tend to mirror changes.

[Shazam]

Originally Posted by Cecil Terwilliger

7% is not the benchmark and HR is limited to 25 years. Has been for a while.

BoC left the benchmark at 5.25 last I checked. Since it’s contract +2 or benchmark, they don’t really need to raise it. Not unless they see rates going so much higher that an entirely new benchmark is required.

7% seems right then if it's rate + 2%, most fixed 5 year rates have been hovering around 5%.

Most people still get a fixed rate mortgage from the big banks.

Ah, HR is max 25 years. Conventional can be 30.