*Updated* Ongoing Bank of Canada Benchmark Rate Announcements

[GGG]

Originally Posted by opendoor

I don't think rates alone will cause a huge issue, though they could very well have to go well above a 2-3% increase to get inflation under control. It's hard to see how a 3% Fed/BoC rate is going to combat 7-8% inflation if it gets entrenched.

The bigger issues will be job losses during a recession and people potentially being underwater when housing prices likely drop. That could lead to a pretty ugly combination.

I see this inflation as still being heavily driven by supply chain, productivity, and global conflict. Those are solvable problems independent of interest rates.

I agree with you that recession leading to job loss is a threat on the housing market.

Ideally instead of interest rates you could just increase taxation and repay debt to combat inflation. That way the wealth just doesn’t go to capitalists.

[Enoch Root]

Originally Posted by GGG

I see this inflation as still being heavily driven by supply chain, productivity, and global conflict. Those are solvable problems independent of interest rates.

I agree with you that recession leading to job loss is a threat on the housing market.

Ideally instead of interest rates you could just increase taxation and repay debt to combat inflation. That way the wealth just doesn’t go to capitalists.

That would suck wealth out of the economy with no benefit (other than hopefully slowing inflation). At least with higher interest rates, there are benefits to those on fixed incomes.

[RichieRich]

Originally Posted by activeStick

Hoping the return to normal lending rates will curb the tons of people from borrowing to live and living beyond their means simply because everyone else is doing it. If you can't afford a mortgage and everything else in life, you shouldn't be borrowing just because. Same with the nice car and vacations.

Totally agree however the entitlement has never been so prevalent as it is today. Far too many people think they DESERVE to have ownership of homes or vehicles. Sure, homes certainly did cost a lot less back in the 70’s and 80’s etc. but they also required 20% down and interest rates were higher then than now. Homes were also simpler and smaller, as were most materialistic wants and demands. Back then it was ok to spend years renting or living at home and not paying mortgage until you were 30+.
So now, after unusually low inflation and interest rates since ~2008, so many are shocked as we return to the mean. Many have lived beyond their means and spent too much for too long, perhaps using their home HELOC like a cash dispensing machine, and so didn’t even conceive this couldn’t continue indefinitely.
Here’s a off-the-cuff list of things we expect now that weren’t prevalent in spending habits in the 80’s (~20% interest rates) and 70’s:
Large complicated vehicles, or multiple large thirsty vehicles
Double car garages attached to large homes
Multiple tvs and internet subscriptions
Everyone has a cell, computer, technology, etc
Spending habits with AliExpress and or Amazon and other retailers
Instant gratification spending and credit cards, instead of saving
High waste levels with goods, materials, food
Eating out very often for lunches and dinners
So so many activities that kids seem to be signed up for

What have I missed?

[Johnny199r]

Originally Posted by RichieRich

Totally agree however the entitlement has never been so prevalent as it is today. Far too many people think they DESERVE to have ownership of homes or vehicles. Sure, homes certainly did cost a lot less back in the 70’s and 80’s etc. but they also required 20% down and interest rates were higher then than now. Homes were also simpler and smaller, as were most materialistic wants and demands. Back then it was ok to spend years renting or living at home and not paying mortgage until you were 30+.
So now, after unusually low inflation and interest rates since ~2008, so many are shocked as we return to the mean. Many have lived beyond their means and spent too much for too long, perhaps using their home HELOC like a cash dispensing machine, and so didn’t even conceive this couldn’t continue indefinitely.
Here’s a off-the-cuff list of things we expect now that weren’t prevalent in spending habits in the 80’s (~20% interest rates) and 70’s:
Large complicated vehicles, or multiple large thirsty vehicles
Double car garages attached to large homes
Multiple tvs and internet subscriptions
Everyone has a cell, computer, technology, etc
Spending habits with AliExpress and or Amazon and other retailers
Instant gratification spending and credit cards, instead of saving
High waste levels with goods, materials, food
Eating out very often for lunches and dinners
So so many activities that kids seem to be signed up for

What have I missed?

Spring break trips to Mexico during university. Big, expensive trips for people with giant student loans, carrying on into adulthood.

So many people during university would cry poverty on student loans but go on trips I couldn't wrap my head around as someone who was trying his best to stay out of debt.

"I need it for my mental health" - ummmm hmmmmm

Those trips continue after university and many people bring their whole family to the resort after having kids.

[RichieRich]

Originally Posted by Johnny199r

Spring break trips to Mexico during university. Big, expensive trips for people with giant student loans, carrying on into adulthood.

So many people during university would cry poverty on student loans but go on trips I couldn't wrap my head around as someone who was trying his best to stay out of debt.

"I need it for my mental health" - ummmm hmmmmm

Those trips continue after university and many people bring their whole family to the resort after having kids.

Ha! So true.

I’ve had bankers tell me straight up that typically blue collar workers are much better with their money and budgets than the higher earners who blow money before they even get it. For example over reaching and booking expensive trips and buying stuff. I know we have certainly spent a lot on trips over the years.

What I didn’t even touch on was the high expense of post secondary schools particularly universities and especially those away from home. Sorry, but if your program graduates can only expect to top out at about 50-60k/yr 10 years after graduating then WTF are you doing spending 40-50k and 4-5 years of your life to get it!!?? Just to SAY you got a Uni degree??! These days most kids don’t know what they want, or can’t even get entry to a Uni program. My advice is generally to chase a 18-24mo Tech program at SAIT and figure out if you like it or not. At least you get something like a good trade that makes good money right away. Then go back to Uni if it still makes sense.

[Cecil Terwilliger]

Originally Posted by RichieRich

Totally agree however the entitlement has never been so prevalent as it is today. Far too many people think they DESERVE to have ownership of homes or vehicles. Sure, homes certainly did cost a lot less back in the 70’s and 80’s etc. but they also required 20% down and interest rates were higher then than now. Homes were also simpler and smaller, as were most materialistic wants and demands. Back then it was ok to spend years renting or living at home and not paying mortgage until you were 30+.
So now, after unusually low inflation and interest rates since ~2008, so many are shocked as we return to the mean. Many have lived beyond their means and spent too much for too long, perhaps using their home HELOC like a cash dispensing machine, and so didn’t even conceive this couldn’t continue indefinitely.
Here’s a off-the-cuff list of things we expect now that weren’t prevalent in spending habits in the 80’s (~20% interest rates) and 70’s:
Large complicated vehicles, or multiple large thirsty vehicles
Double car garages attached to large homes
Multiple tvs and internet subscriptions
Everyone has a cell, computer, technology, etc
Spending habits with AliExpress and or Amazon and other retailers
Instant gratification spending and credit cards, instead of saving
High waste levels with goods, materials, food
Eating out very often for lunches and dinners
So so many activities that kids seem to be signed up for

What have I missed?

People do deserve ownership of a home. It’s a pipe dream for many Canadians due to home prices.

Raising rates won’t affect the wealthy and they’ll just gobble up even more real estate for a discount while the people on the edge are foreclosed on or forced to sell while underwater. Thus leaving even more Canadians to continue to perpetually rent with ownership nowhere in sight. And those wealthy people will raise rents because of the rising interest rates to ensure a nice tidy profit. And people will pay it because of the housing crunch.


People may live beyond their means. But the entire system is set up to not just entice them to do so but to force them to do so.

Blaming a stacked system on materialism just means you’ve fallen victim to the disinformation campaign and propaganda the ruling class have force fed you.

[activeStick]

Originally Posted by Cecil Terwilliger

People do deserve ownership of a home.

Why?

[opendoor]

Yes, the "good old days" when people never spent money on non-essentials. Anyway, here's a comparison of 1973 and 2016 and what the average household spent their income on in various categories based on US Department of Labor stats:

1973:

Housing: 22.3%
Food: 14%
Transportation: 11.4%
Entertainment: 6.2%
Clothing: 5.7%
Healthcare: 4.6%
Alcohol and Tobacco: 2.1%
Education: 1.3%

2016:

Housing: 29.4%
Food: 11.2%
Transportation: 14.1%
Entertainment: 4.5%
Clothing: 2.8%
Healthcare: 7.2%
Alcohol and Tobacco: 1.3%
Education: 2.1%

That works out to:

Higher spending in 2016:

Housing: 32% higher
Transportation: 24% higher
Healthcare: 57% higher
Education: 62% higher

Higher spending in 1973:

Food (including eating out): 25% higher
Entertainment: 38% higher
Clothing: 104% higher
Alcohol and Tobacco: 62% higher.

So basically most of the essentials except for food got more expensive, which led to a reduction in discretionary spending. And those are 2016 numbers; things like housing and transportation have gotten even more expensive since.

[Johnny199r]

Originally Posted by Cecil Terwilliger

People do deserve ownership of a home. It’s a pipe dream for many Canadians due to home prices.

Raising rates won’t affect the wealthy and they’ll just gobble up even more real estate for a discount while the people on the edge are foreclosed on or forced to sell while underwater. Thus leaving even more Canadians to continue to perpetually rent with ownership nowhere in sight. And those wealthy people will raise rents because of the rising interest rates to ensure a nice tidy profit. And people will pay it because of the housing crunch.


People may live beyond their means. But the entire system is set up to not just entice them to do so but to force them to do so.

Blaming a stacked system on materialism just means you’ve fallen victim to the disinformation campaign and propaganda the ruling class have force fed you.

I don't agree with forced, I agree with enticed. It seems like that majority of people I grew up with, went to school with and work with (I graduated high school in 2001) were strongly enticed. These were middle class kids. This wasn't Vancouver or Toronto. They weren't forced to do anything. Saving and being frugal and responsible isn't fun. Spending money to live a fun life without having to miss out on anything is.

[Snuffleupagus]

A $20,000 Toronto house in 1972 should cost $138,000 with inflation but yet 50 years later because of big banks, foreign money and the rich power brokers that same house costs about $1.5 million now. I know it might sound like communism but something should have been done years ago to protect todays young families.

[Snuffleupagus]

Originally Posted by opendoor

Yes, the "good old days" when people never spent money on non-essentials. Anyway, here's a comparison of 1973 and 2016 and what the average household spent their income on in various categories based on US Department of Labor stats:

1973:

Housing: 22.3%
Food: 14%
Transportation: 11.4%
Entertainment: 6.2%
Clothing: 5.7%
Healthcare: 4.6%
Alcohol and Tobacco: 2.1%
Education: 1.3%

2016:

Housing: 29.4%
Food: 11.2%
Transportation: 14.1%
Entertainment: 4.5%
Clothing: 2.8%
Healthcare: 7.2%
Alcohol and Tobacco: 1.3%
Education: 2.1%

That works out to:

Higher spending in 2016:

Housing: 32% higher
Transportation: 24% higher
Healthcare: 57% higher
Education: 62% higher

Higher spending in 1973:

Food (including eating out): 25% higher
Entertainment: 38% higher
Clothing: 104% higher
Alcohol and Tobacco: 62% higher.

So basically most of the essentials except for food got more expensive, which led to a reduction in discretionary spending. And those are 2016 numbers; things like housing and transportation have gotten even more expensive since.

Percentage's a probably correct but the numbers for the 70's are likely a little skewed as most family's only had only one parent working and there was far more kids to feed, today it would be impossible to raise 3-4 kids on one income.

[iggy_oi]

Originally Posted by RichieRich

Totally agree however the entitlement has never been so prevalent as it is today. Far too many people think they DESERVE to have ownership of homes or vehicles. Sure, homes certainly did cost a lot less back in the 70’s and 80’s etc. but they also required 20% down and interest rates were higher then than now. Homes were also simpler and smaller, as were most materialistic wants and demands. Back then it was ok to spend years renting or living at home and not paying mortgage until you were 30+.
So now, after unusually low inflation and interest rates since ~2008, so many are shocked as we return to the mean. Many have lived beyond their means and spent too much for too long, perhaps using their home HELOC like a cash dispensing machine, and so didn’t even conceive this couldn’t continue indefinitely.
Here’s a off-the-cuff list of things we expect now that weren’t prevalent in spending habits in the 80’s (~20% interest rates) and 70’s:
Large complicated vehicles, or multiple large thirsty vehicles
Double car garages attached to large homes
Multiple tvs and internet subscriptions
Everyone has a cell, computer, technology, etc
Spending habits with AliExpress and or Amazon and other retailers
Instant gratification spending and credit cards, instead of saving
High waste levels with goods, materials, food
Eating out very often for lunches and dinners
So so many activities that kids seem to be signed up for

What have I missed?

In your opinion who do you think deserves to own a home?

[RichieRich]

Originally Posted by Snuffleupagus

A $20,000 Toronto house in 1972 should cost $138,000 with inflation but yet 50 years later because of big banks, foreign money and the rich power brokers that same house costs about $1.5 million now. I know it might sound like communism but something should have been done years ago to protect todays young families.

Entitlement: believing that because you want something means you have earned the right to have it. (My definition).

Sorry, not everyone should have the right to “buy” (aka mortgage) a home. It’s simply not realistic. These not-surprising-at-all rising interest rates are going to unfortunately hurt a lot of buyers that should not have bought to begin with. There will be people unable to make payments and have to walk away, just like in the 80’s. That’s sad and I don’t mean ill to them.

Many simply do not understand that owning a home is often more expensive than renting, and in some economic climates renting offers a better monetary return than ownership after taking into consideration ALL costs including opportunity cost related to funds. There is a reason many of the wealthy (individuals as well as corporations) lease or rent their properties - because it makes more sense financially and taxation wise.

As for home costs over the decades here’s a pretty good link below. It’s long though. Touches on regional differences which does matter. https://listwithclever.com/research/...torical-study/

Still however does not address my one statement, which I think matters, and that is how have homes actually changed since the 70’s? In terms of size, technology, safer requirements, future proofing, area and neighborhood and city development and infrastructure, overall complexity? Can’t just say that the 1970’s house of $100k should be a $700k house of today because that would not account for the additional mandatory upgrades.

I know a few people that own/manage a few (1-3) rental properties. They’re not slum lords. They’re pretty normal and they’ve been scared for a few years and moreso now. They have not been making huge dollars, perhaps 3-6% ROI which really has not been great compared to markets since 2008.

[White Out 403]

Richierich is the biggest boomer I've ever seen in this forum.

"#### you, got mine" personified

[Cecil Terwilliger]

Originally Posted by activeStick

Why?

It’s a fundamental human right. Literally everyone needs shelter. It’s one of the basic tenets of survival.

[RichieRich]

Originally Posted by White Out 403

Richierich is the biggest boomer I've ever seen in this forum.

"#### you, got mine" personified

Evidence?

From Urban Dictionary: A boomer is a person over the age of 55. It is usually associated with tik tok/Facebook memes of people using the phrase ‘ok boomer’ it is used to make fun of or sarcastically target the older generation.

Still paying mortgage on my single family home. No other properties. Usually run the numbers on cost/benefit/opportunity cost and exercise buyers restraint instead of instant gratification. Buy most things either used or on discount but still get quality goods. Definitely consider myself grateful for what life has brought despite quite a few setbacks. Had to dig myself out of a few life holes.

Actually I don’t fit the demographic of boomer.
Nor do I live in a certain SE community with its own private lake.
Or Arbor Lake in NW.

[iggy_oi]

Originally Posted by RichieRich

Evidence?

From Urban Dictionary: A boomer is a person over the age of 55. It is usually associated with tik tok/Facebook memes of people using the phrase ‘ok boomer’ it is used to make fun of or sarcastically target the older generation.

Still paying mortgage on my single family home. No other properties. Usually run the numbers on cost/benefit/opportunity cost and exercise buyers restraint instead of instant gratification. Buy most things either used or on discount but still get quality goods. Definitely consider myself grateful for what life has brought despite quite a few setbacks. Had to dig myself out of a few life holes.

Actually I don’t fit the demographic of boomer.
Nor do I live in a certain SE community with its own private lake.
Or Arbor Lake in NW.

Yeah but who do you think deserves to own a home?

[CaptainYooh]

Originally Posted by iggy_oi

Yeah but who do you think deserves to own a home?

Someone who has the downpayment and qualifies for a mortgage, no?

[Cecil Terwilliger]

Originally Posted by CaptainYooh

Someone who has the downpayment and qualifies for a mortgage, no?

That’s not what deserves means.

[Slava]

Originally Posted by RichieRich

Totally agree however the entitlement has never been so prevalent as it is today. Far too many people think they DESERVE to have ownership of homes or vehicles. Sure, homes certainly did cost a lot less back in the 70’s and 80’s etc. but they also required 20% down and interest rates were higher then than now. Homes were also simpler and smaller, as were most materialistic wants and demands. Back then it was ok to spend years renting or living at home and not paying mortgage until you were 30+.
So now, after unusually low inflation and interest rates since ~2008, so many are shocked as we return to the mean. Many have lived beyond their means and spent too much for too long, perhaps using their home HELOC like a cash dispensing machine, and so didn’t even conceive this couldn’t continue indefinitely.
Here’s a off-the-cuff list of things we expect now that weren’t prevalent in spending habits in the 80’s (~20% interest rates) and 70’s:
Large complicated vehicles, or multiple large thirsty vehicles
Double car garages attached to large homes
Multiple tvs and internet subscriptions
Everyone has a cell, computer, technology, etc
Spending habits with AliExpress and or Amazon and other retailers
Instant gratification spending and credit cards, instead of saving
High waste levels with goods, materials, food
Eating out very often for lunches and dinners
So so many activities that kids seem to be signed up for

What have I missed?

Haha, that’s a hilarious list. Congratulations on being alive in the 70’s-80’s and not spending money on the internet or cell phones, or buying things on Amazon. Your austerity should be a lesson for us all!