ronincelwarrior t1_j5gmd4n wrote on January 22, 2023 at 9:37 PM

Reply to comment by ameldrum902 in The dichotomy of FT by Johs92

Interest rates aren’t locked in in Canada, though.

ameldrum902 t1_j5gnfmq wrote on January 22, 2023 at 9:44 PM

Mortgages come in fixed and variable. Banks have been calling the variable holders and offering to go fixed mid-term on their mortgage lately in an attempt to prevent defaults. Those that are too deep are being offered to just pay the interest portion and defer the principal portion back into sum owed. The banks know people over leveraged themselves on property that has an over inflated price.

dvo3000 t1_j5hguwn wrote on January 23, 2023 at 1:00 AM

Where did you hear this?

ameldrum902 t1_j5ht0w8 wrote on January 23, 2023 at 2:26 AM

I know 3 people, two with cibc and one with bmo, who got called to go fixed 5yr to drop their variable 5yr. One person I know took it because they had 3 years left on the floating variable mortgage they were currently in.

And the deferred principle payments, that was in the news for a bit a couple months back.

dvo3000 t1_j5huh40 wrote on January 23, 2023 at 2:36 AM

That’s interesting, and could mean different things. Thanks

ameldrum902 t1_j5huvs5 wrote on January 23, 2023 at 2:39 AM

Canadian banks hold too much consumer debt. Defaults would sink them. The numbers are in on this. I believe Scotiabank and TD were in the worst spot at the moment. I just hope we, the tax payers, aren't going to be on the hook for a 2008 style bail out.

loudifu t1_j5ivutc wrote on January 23, 2023 at 8:53 AM

Had the Canadian RE ever come back down to earth? I don't follow the Canadian RE market, but I'm under the impression that the RE market in the metro areas like the greater Toronto/Vancouver went to the moon, and pretty much stayed there until the pandemic hit. But as soon as the coast was clear, it rebounded with full vengence surpassing pre-pandemic levels, just like the rest of the world. Sure, sales have cooled off substantially now, but prices remain elevated if the Canadian market is anything like its southern neighbor. I wonder how many actually overpaid and were stuck with high interest rates??

ameldrum902 t1_j5ix3y1 wrote on January 23, 2023 at 9:11 AM

I'm in Vancouver. There's a population here that bought at the peak with 2.5% interest rates. When it comes time to refinance it will be painful or you will just be paying more in the long run. And if market value drops below your trigger, you will need to pony up the difference upon refinancing. Housing payments already account for 50%+ of people's household income. People are over leveraged on extremely heavy debt loads also. You add up all these factors and I'd say there might be a storm brewing.