*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[Johnny199r]

Originally Posted by Yoho

https://twitter.com/user/status/1579210878813351936

Photo in tweet from Bear Creek park in Surrey BC.

This sums up Canadian society perfectly today. People took huge mortgages/big risks when when interest rates were low. For some reason, they never financially planned for them to go up and now when they do, it's governments fault and they demand help.

Nothing is ever anyone's fault and people always expect government or some other entity to fix their problems. We live in a country full of idiots who don't believe personal responsibility applies anymore.

[White Out 403]

Or maybe squeezing the middle class with interest rate hikes that don't help inflation rightfully pisses people off?

Price controls should be in effect and government should be focusing entirely on supply issues. But instead they do the easy thing and levy huge pain on the average home owner.

[Johnny199r]

Originally Posted by White Out 403

Or maybe squeezing the middle class with interest rate hikes that don't help inflation rightfully pisses people off?

Price controls should be in effect and government should be focusing entirely on supply issues. But instead they do the easy thing and levy huge pain on the average home owner.

Or people in Vancouver shouldn't be entitled to $200,000 annual gains on their overleveraged properties contributing to the housing bubble and locking out the next generation?

The BoC really has no choice but to follow the U.S. Failing to do so would torpedo our currency and economy.

[Johnny199r]

Originally Posted by White Out 403

Or maybe squeezing the middle class with interest rate hikes that don't help inflation rightfully pisses people off?

Price controls should be in effect and government should be focusing entirely on supply issues. But instead they do the easy thing and levy huge pain on the average home owner.

There is no way to come remotely close to be building enough supply to meet demand in this country. No possible way. All governments are being disingenuous when they pretend they can somehow "cut red tape" and make it happen.

[Yoho]

Originally Posted by White Out 403

Or maybe squeezing the middle class with interest rate hikes that don't help inflation rightfully pisses people off?

Price controls should be in effect and government should be focusing entirely on supply issues. But instead they do the easy thing and levy huge pain on the average home owner.

https://twitter.com/user/status/1579496496877404161

“Yes I own multiple properties.”

[GGG]

Originally Posted by White Out 403

Or maybe squeezing the middle class with interest rate hikes that don't help inflation rightfully pisses people off?

Price controls should be in effect and government should be focusing entirely on supply issues. But instead they do the easy thing and levy huge pain on the average home owner.

These people should have been stress tested at higher rates than they are currently facing. At this point people feeling the pinch 6 months in are their own fault.

3 years from now when the sun 2% pandemic 5 year fixed get renewed into 5-7% mortgages I think at that point I would have sympathy. But people complaining today are victims of their own poor planning.

I would prefer broad tax hikes to fight inflation instead of interest rates but then the government can’t wash their hands of it.

[Winsor_Pilates]

Originally Posted by Johnny199r

This sums up Canadian society perfectly today. People took huge mortgages/big risks when when interest rates were low. For some reason, they never financially planned for them to go up and now when they do, it's governments fault and they demand help.

Nothing is ever anyone's fault and people always expect government or some other entity to fix their problems. We live in a country full of idiots who don't believe personal responsibility applies anymore.

What about the people who had the means to buy a home for the last 10-15 years and chose not to because the "bubble was going to burst" and they wanted to outsmart everyone.

Government fixes their problems all the time. I don't disagree about over leveraged people, but can we play the personal responsibility card both ways?

[Johnny199r]

Originally Posted by Winsor_Pilates

What about the people who had the means to buy a home for the last 10-15 years and chose not to because the "bubble was going to burst" and they wanted to outsmart everyone.

Government fixes their problems all the time. I don't disagree about over leveraged people, but can we play the personal responsibility card both ways?

That was their choice, to buy or not to buy. I didn't see them holding signs in parks asking the government to raise interest rates.

Governments generally cater to homeowners over nonhomeowners because - votes (just look at all those tax free capital gains for people who sell their house vs no such preferential tax treatment for renters)

[PeteMoss]

Originally Posted by Winsor_Pilates

What about the people who had the means to buy a home for the last 10-15 years and chose not to because the "bubble was going to burst" and they wanted to outsmart everyone.



Government fixes their problems all the time. I don't disagree about over leveraged people, but can we play the personal responsibility card both ways?

How does the government fix those people's problem?

[opendoor]

I love the signs complaining about rent control. I'm assuming that protest is a bunch of people who overextended themselves and now aren't making as much money on their properties as they had hoped. Won't someone please think of the landlords?

[Enoch Root]

Originally Posted by Muta

When interest rates go up, who gets the additional interest? The banks? As profit?

It isn't that simple.

For the banks, their cost of capital goes up. When they lend you money, be it a mtge or a personal loan, they aren't using their own money. They borrow it (multiple ways, but one way is your investments - investors invest in GICs and other things, which the banks pay an interest rate on), then lend that money back to borrowers (mtges) at a higher rate. The banks earn the spread - the difference between the rates. That difference remains relatively consistent (but does widen or tighten, depending on demand).

The short answer for banks is that higher rates don't really make much of a difference because they earn a spread. That is over-simplifying it of course, and in the short-term there can be inequalities, but it illustrates why it's good to be a bank - your input costs are directly related to your revenues.

Other investors and borrowers do earn the higher yields. For example, as an investor, if you invest in fixed income products (GICs, bonds, etc) you are now earning a higher interest rate than you were a couple years ago. So - once the shock of this works its way out, and the markets recover - it is a net benefit to savers.

Super low interest rates have been a boon for borrowers, but a huge negative to investors. Reasonably higher rates (3-6%) are arguably better for the economy than the near-zero rates we have seen in the last few years. The big problem with that fact though, is that home prices have risen too much, due to those low interest rates, and are now out of whack with higher rates. And the adjustment for that is going to be very painful for some

[PeteMoss]

Originally Posted by Enoch Root

It isn't that simple.

For the banks, their cost of capital goes up. When they lend you money, be it a mtge or a personal loan, they aren't using their own money. They borrow it (multiple ways, but one way is your investments - investors invest in GICs and other things, which the banks pay an interest rate on), then lend that money back to borrowers (mtges) at a higher rate. The banks earn the spread - the difference between the rates. That difference remains relatively consistent (but does widen or tighten, depending on demand).

The short answer for banks is that higher rates don't really make much of a difference because they earn a spread. That is over-simplifying it of course, and in the short-term there can be inequalities, but it illustrates why it's good to be a bank - your input costs are directly related to your revenues.

Other investors and borrowers do earn the higher yields. For example, as an investor, if you invest in fixed income products (GICs, bonds, etc) you are now earning a higher interest rate than you were a couple years ago. So - once the shock of this works its way out, and the markets recover - it is a net benefit to savers.

Super low interest rates have been a boon for borrowers, but a huge negative to investors. Reasonably higher rates (3-6%) are arguably better for the economy than the near-zero rates we have seen in the last few years. The big problem with that fact though, is that home prices have risen too much, due to those low interest rates, and are now out of whack with higher rates. And the adjustment for that is going to be very painful for some

Banks are also doing the classic move of not moving their rates quickly as they go on the investment side. I was looking at the TD savings accounts rates the other day and they were still at 0.1% for 2 of their 3 savings accounts. (Obviously not where you should hold your money long term)

[shermanator]

People over leverage themselves on cheap interest and then blame the banks when the risks of a variable mortgage come to fruition? I love it.

[Izzle]

Originally Posted by shermanator

People over leverage themselves on cheap interest and then blame the banks when the risks of a variable mortgage come to fruition? I love it.

Everyone thinks they have a high risk tolerance till they get punched in the mouth.

[Winsor_Pilates]

Originally Posted by Johnny199r

That was their choice, to buy or not to buy. I didn't see them holding signs in parks asking the government to raise interest rates.

Governments generally cater to homeowners over nonhomeowners because - votes (just look at all those tax free capital gains for people who sell their house vs no such preferential tax treatment for renters)

Majority of voters in BC are renters

[Johnny199r]

Originally Posted by Winsor_Pilates

Majority of voters in BC are renters

Which changes nothing in my message. Homeowners are like seniors - prized groups that vote in high numbers.

[Winsor_Pilates]

Originally Posted by Johnny199r

Which changes nothing in my message. Homeowners are like seniors - prized groups that vote in high numbers.

And are still outnumbered by renters among actual votes cast in Vancouver and BC.
Governments here must cater to renters to win elections; then rely on home owners to fund everything.

[opendoor]

Originally Posted by Winsor_Pilates

And are still outnumbered by renters among actual votes cast in Vancouver and BC.

Do you have a source on that? That sounds unbelievable to me given home ownership rates and the demographics of voting patterns (i.e. older people tend to vote much more heavily and are much more likely to own their house).

[Winsor_Pilates]

Originally Posted by opendoor

Do you have a source on that? That sounds unbelievable to me given home ownership rates and the demographics of voting patterns (i.e. older people tend to vote much more heavily and are much more likely to own their house).

Going golfing now; will try to find data to link later.

It's something thats come up in discussions here heading into the municipal election.
I believe since affordability is so difficult here and the #1 topic; more people are still renting into their 30s/40s/beyond who will vote and more renters show up to vote in general compared to other provinces since housing is such an important issue here.

Here's one breakdown for BC & Ontario going to a past federal election:
https://betterdwelling.com/canadas-e...c-and-ontario/

That seems to be using voter eligibility data, but I'll try to find data for actual votes cast here in the municipal or provincial levels.

[opendoor]

I mean, just based on the numbers it's hard to see how that could be true. There are ~1.4M households that own their house in BC and ~800K of those are couples, so that's 2.2M adult homeowners at a minimum (there are also cases where multiple people in non-census families own their house together) which is just over 50% of BC's adult population. And I would assume that homeowners are both more likely to be registered to vote and are more likely to actually vote.

It's certainly true that the home ownership rates that are often quoted (e.g. 70%) aren't reflective of what percentage of the population are actually homeowners (it's based on % of households, not population). But I'd be pretty surprised if the majority of voters in elections aren't home owners given how much the voting turnout of the different age demographics correlates so heavily with home ownership rates.