1 in 4 Canadians Say They Will Have To Sell Homes If Rates Rise Further

[Economy 52,859]

https://www.bnnbloomberg.ca/nearly-1-in-4-homeowners-would-have-to-sell-if-interest-rates-rise-more-survey-finds-1.1778069

 

1 in 4 Canadians polled say they can't afford anymore payments and will have to sell their homes if rates rise any further

 

Given homes in many cities selling for well over $1M is the norm even with the recent drop in prices, even a 1% increase in interest can increase monthly payments in many mortgages by hundreds of dollars

 

 

[Economy 52,859]

@OBEY @GagaSine @LaLa @Torontomonster 

 

This is not gonna be pleasent. I think a recession in the next 6-12 months is all but guaranteed at least a mild one

 

As much as Canada benefits from high Oil, Natural Gas, Metal, fertilizer and other comodity prices, the benefits from this are not enough to offset severe housing market declined especially in the Eastern Half of the Country that doesn't benefit from high Commodity prices as much as the West

 

Construction alone is 6% of Canada's GDP (vs 3% in a typical developed Nation) and that doesn't count all the other activity tied to real estate (finance, real estate agents, staging etc)

[Monster647 444]

Didn’t see the actual survey so it’s difficult to comment but I cannot make sense of it tbh. 
 

Canadian mortgage rules are tough. The rate at which you have to qualify against is still much higher than the current rate. It’s not like banks give you a mortgage only if you can afford the current rate, they require you to be able to prove that you can afford the mortgage at much higher rates….

[Economy 52,859]

31 minutes ago, Monster647 said:

Didn’t see the actual survey so it’s difficult to comment but I cannot make sense of it tbh. 
 

Canadian mortgage rules are tough. The rate at which you have to qualify against is still much higher than the current rate. It’s not like banks give you a mortgage only if you can afford the current rate, they require you to be able to prove that you can afford the mortgage at much higher rates….

Well first of all there's a lot of anecdotal evidence (hard to prove) that people try to lie about incomes to try to qualify for those higher rates

 

Second thing is rates have already gone up a fair bit in the last 6 months alone. So much so that the 2% stress test margin is already partially exhausted for anyone that took out a variable mortgage not that long ago or for anyone that will renew a fixed later down the road

 

Third of all this high inflation in basic necessities like food may have reduced income buffers that people had before

 

So yeah we have tough rules but when rates rise quickly and cost of living as well that buffer the rules are meant to create can quickly get eaten up so I can believe it

 

That being said I suspect at least a few people are saying this on the survey out of pessimism and frustration. Im sure at least some of those 1 in 4 people if they try hard enough and look into their budget there may be things they can cut or adjust before resorting to selling their house

[YourWhiskyMouth 4,014]

59 minutes ago, Economy said:

1 in 4 Canadians polled say they can't afford anymore payments and will have to sell their homes if rates rise any further

Are adjustable rate mortgages the norm in Canada?

I’m in the US and fixed rate is more common unless you struggle to qualify for a traditional fixed rate. Im used to people foreclosing only when they get laid off and can’t make payments or the property taxes get too high.

[Economy 52,859]

14 minutes ago, YourWhiskyMouth said:

Are adjustable rate mortgages the norm in Canada?

I’m in the US and fixed rate is more common unless you struggle to qualify for a traditional fixed rate. Im used to people foreclosing only when they get laid off and can’t make payments or the property taxes get too high.

5 year Fixed rates have long been the most popular mortgage format to take

 

But in recent years due to the extreme unaffordability in the housing market and people stretching their budget to buy a place, the cheaper variable rates have grown in popularity

 

As a result a higher share of the population is now affect by rising rates immediately without delay than in the past

 

But even fixed mortgages get renewed, so anyone coming up on renewal soon is bound to feel the strain too as they renew at a higher rate

 

My parents renew next year. My mom is already stressed about it however I tried to explain to her (she sucks at math) that in their case because most of their mortgage is already paid, most of the payments are now principal not interest and that 1% or 2% or even 3% increase in mortgage rates won't make a significant difference in their payments. 

[Monster647 444]

18 hours ago, Economy said:

Well first of all there's a lot of anecdotal evidence (hard to prove) that people try to lie about incomes to try to qualify for those higher rates

 

Second thing is rates have already gone up a fair bit in the last 6 months alone. So much so that the 2% stress test margin is already partially exhausted for anyone that took out a variable mortgage not that long ago or for anyone that will renew a fixed later down the road

 

Third of all this high inflation in basic necessities like food may have reduced income buffers that people had before

 

So yeah we have tough rules but when rates rise quickly and cost of living as well that buffer the rules are meant to create can quickly get eaten up so I can believe it

 

That being said I suspect at least a few people are saying this on the survey out of pessimism and frustration. Im sure at least some of those 1 in 4 people if they try hard enough and look into their budget there may be things they can cut or adjust before resorting to selling their house

Minimum qualifying rate for stress test is 5.25% 

It’s only current rate + 2% if that’s higher than 5.25%. Rates are literally only half of the qualifying rate. Test margin is not exhausted at all.

[Concertaholic 6,581]

Omg I had no clue that’s how y’all do lending in Canada. What a mess.
The usual 30 year fixed here in the US is so much better, especially if you buy a home when interest rates are low.

[Economy 52,859]

5 hours ago, Monster647 said:

Minimum qualifying rate for stress test is 5.25% 

It’s only current rate + 2% if that’s higher than 5.25%. Rates are literally only half of the qualifying rate. Test margin is not exhausted at all.

For fixed mortgages they are already approaching that. If ur coming up on a renewal ur not far off that rate

 

Besides, the stress test is hardly a perfect science. Families circumstances will vary. Some may have higher medical bills, more expensive dietary restrictions, longer commutes, who knows accidents on their record that give them much more expensive car insurance rates

 

The income required to qualify for rates is very standardised but I can believe that for many individual families they can still be stretched to the limit

 

And again, these stress tests were also before all this inflation increasing costs of non housing related things. Basic necessities have totally surged. My grocery bills are way up and a tank of gas has nearly doubled. It's insane.

 

Again I do think 1 in 4 reflects sentiment and pessimism more than the real number of people that will actually default but I can believe it that people are stretched very thin despite the stress tests. 

[Bling 31,680]

King @Economy, how would a recession in 2022 affect a non-homeowner? I keep hearing about this for the US and I don't understand how I would be affected if I don't own property

[Economy 52,859]

11 minutes ago, WheresMy911Alice said:

King @Economy, how would a recession in 2022 affect a non-homeowner? I keep hearing about this for the US and I don't understand how I would be affected if I don't own property

The way recessions usually affect people. Possible job losses and a fall in investment values

 

But if u don't loose ur job and u don't need to sell investment stocks a Recession is largely a non event for most people. It ends up being more fear than anything. Only a few people are actually affect by a recession typically

 

It would likely also help with the inflation problem cuz right now the economy is overheating

 

[Bling 31,680]

4 minutes ago, Economy said:

The way recessions usually affect people. Possible job losses and a fall in investment values

 

But if u don't loose ur job and u don't need to sell investment stocks a Recession is largely a non event for most people. It ends up being more fear than anything. Only a few people are actually affect by a recession typically

 

It would likely also help with the inflation problem cuz right now the economy is overheating

 

That's what I was thinking. My poor ass staying poor, nothing to see here 

[Economy 52,859]

5 hours ago, Concertaholic said:

Omg I had no clue that’s how y’all do lending in Canada. What a mess.
The usual 30 year fixed here in the US is so much better, especially if you buy a home when interest rates are low.

So ur rate stays the same for 30 whole years??????

 

I don't even know if that's an option here (actually if it existed it would be 25 years cuz that's the max amortizations now)

 

But yeah the most popular here is 5 year fixed. To a lesser extent there's also 3 and 4 year fixed (my parents on last renewal did a 3 year fixed which renews next year)

 

And as I said, variable has grown in popularity last few years as well but I suspect any that get burned with rising rates may go back to fixed again and maybe it will loose popularity again (although variables despite the rise are still cheaper than fixed)

 

[Economy 52,859]

1 minute ago, WheresMy911Alice said:

That's what I was thinking. My poor ass staying poor, nothing to see here 

It's obviously gonna vary by person tho

 

I literally got my last job (the highest paying job I ever got) during the first shut down of COVID when there was almost no hiring and lots of unemployment

 

I lost that job recently in the middle of a labor shortage

 

Now that's irony

[Bling 31,680]

3 minutes ago, Economy said:

It's obviously gonna vary by person tho

 

I literally got my last job (the highest paying job I ever got) during the first shut down of COVID when there was almost no hiring and lots of unemployment

 

I lost that job recently in the middle of a labor shortage

 

Now that's irony

I'm sorry babes. You'll find something soon