BoC lowers interest rate

[SilverRex]

to 4.25% so now I wonder what would really happen. Doesnt it hurt the loonie? Dam, isnt this going to give reason to people to continue to push house prices higher? and with the weaker loonie, say bye bye to cheap cars and incentives

[sputnik]

Originally posted by SilverRex
to 4.25% so now I wonder what would really happen. Doesnt it hurt the loonie? Dam, isnt this going to give reason to people to continue to push house prices higher? and with the weaker loonie, say bye bye to cheap cars and incentives

It is hard to say what it will do to the loonie going forward.

The Canadian dollar has come down about 10% over the past few weeks in anticipation of a rate cut so it is hard to say if it will fall further or not.

When rates are dropped you always run the risk of higher inflation. That will mean higher prices for houses and other consumer goods.

The Bank of Canada has been talking about dropping rates a full percentage point (back down to 3.5%) for a while now so I wouldn't be surprised to see the dollar come down (good for oil companies) and houses begin creeping up again starting this spring (if not earlier).

[SilverRex]

true, the recent decline in the value of the loonie is probablly already factored in, at least I dont think it has any more legs to push any higher against the US. The strong loonie just doesnt last, I remember reading somewhere it should be somewhere in the 98 cents territory for the CAD vs the US.

[civic_rida]

how much will this affect mortgage rates?

[el-nino]

Mortgage rates will drop. Ive been anticipating BoC to drop there rate since the loonie hit par. We'll see what happens i guess...

[The Cosworth]

Originally posted by SilverRex
true, the recent decline in the value of the loonie is probablly already factored in, at least I dont think it has any more legs to push any higher against the US. The strong loonie just doesnt last, I remember reading somewhere it should be somewhere in the 98 cents territory for the CAD vs the US.

trading at .9868 right now




Originally posted by civic_rida
how much will this affect mortgage rates?

Mortgage rates will drop because they are based on the BoC rate. This means people think they can afford more money on a house and will ultimatly drive house prices up again. Yippie :rolleyes:



edit: one thing I am concerned with, are the people who are loaded up to the max on a house at 4 or 5% mortgage rate, what happens when they climb to 8 or 9 or even higher (and trust me it is bound to happen, just who knows when). Can you say 1980's all over again.


Maybe I can get some good property in Rosedale and mount royal when all the wanna be rich buggers lose their houses.

[Splooge]

^ :werd:

[G]

Originally posted by brendankharris


edit: one thing I am concerned with, are the people who are loaded up to the max on a house at 4 or 5% mortgage rate, what happens when they climb to 8 or 9 or even higher (and trust me it is bound to happen, just who knows when). Can you say 1980's all over again.


Maybe I can get some good property in Rosedale and mount royal when all the wanna be rich buggers loose their houses.

If they initially had enough money to get into the house and you didn't what makes you think if interests go up and they end up foreclosing you will be able to afford their house? Rates will go up for everyone not only those who are highly leveraged.

[The Cosworth]

Originally posted by G


If they initially had enough money to get into the house and you didn't what makes you think if interests go up and they end up foreclosing you will be able to afford their house? Rates will go up for everyone not only those who are highly leveraged.

haha good point. I wont loose any money though, so I may be ok if it crash's and I haven't bought yet but had the cash

[Neons4life]

So if the interest rates are going to drop that much would a number of people re-mortgage their homes?

I locked in at 5.1%

[Antonito]

Originally posted by G


If they initially had enough money to get into the house and you didn't what makes you think if interests go up and they end up foreclosing you will be able to afford their house? Rates will go up for everyone not only those who are highly leveraged.

Because unlike what most home owners think the world doesn't stop the minute you buy a house and sometimes peoples lives change? :dunno:

[The Cosworth]

Originally posted by G


If they initially had enough money to get into the house and you didn't what makes you think if interests go up and they end up foreclosing you will be able to afford their house? Rates will go up for everyone not only those who are highly leveraged.


Originally posted by Antonito


Because unlike what most home owners think the world doesn't stop the minute you buy a house and sometimes peoples lives change? :dunno:


Actually you know what, rethinking it I was right to begin with.

If you buy a $750,000 house at 4% and can afford that, when you re-mortgage at 10% and you cant afford the payments, so either you try to sell your house (and no one else can afford the 750K either) so you sell it at a loss, or the bank repo's it and tries to get as much as they can as quickly as they can.

So someone like myself who doesn't lose money on a property can now afford your 750K house being sold for 500K at the same interest rate because the price is lower.

I was right, I am in a better position to buy a property when that hits the fan, lets hope you don't have to renegotiate your mortgage when that happens

[USED1]

^You won't loose anything, learn to fucking spell. It's LOSE

[The Cosworth]

Originally posted by USED1
^You won't loose anything, learn to fucking spell. It's LOSE

fuck didnt have your coffee this morning asshole?

one letter when I was typing like a maniac... jesus

[KappaSigma]

Keep in mind the US is suppose to cut their rates by .25% to .5% in the next couple of weeks as well

[autosm]

Originally posted by G


If they initially had enough money to get into the house and you didn't what makes you think if interests go up and they end up foreclosing you will be able to afford their house? Rates will go up for everyone not only those who are highly leveraged.


Highly leveraged and a lost jobs are a bad thing .

A 100000$ cash saved may buy you in a few years what 300000$ will buy you today . It has happened in the past more than once.

The people that did not buy recently may have the last laugh ?

[SilverRex]

welp at least it lowers my line of rate credit rate. lol

[modded46]

loonie is taking a beating..

http://ichart.finance.yahoo.com/b?s=USDCAD=X

This is a good thing.. More people will opt into buying houses which is exactly what we need right now to get things going again in the housing industry.. :burnout:

Not to mention all the purchasing that has been going on in the US by Canadians.. Need to bring some of that money back to Canada if you want to move forward.

[liquid1010]

I'm happy... just made some good purchases. :D

[civic_rida]

I guess i aint moving out anytime soon lol.

[Xtrema]

Originally posted by brendankharris
If you buy a $750,000 house at 4% and can afford that, when you re-mortgage at 10% and you cant afford the payments, so either you try to sell your house (and no one else can afford the 750K either) so you sell it at a loss, or the bank repo's it and tries to get as much as they can as quickly as they can.

I highly doubt we'll see 10% ever again and if payment is what people are worry about, they can amortize for longer period to keep payment down.

The real question is, in a 10% scenario, how many people will be able to keep a job in order to keep a house? Economy will be slowed and

@ 10% Smart money won't be in real estate. Market will fall and money will be better in a GIC/Saving Account/Stock Market.

So the only way for it to go to 10% is if USA/Canada become Russia in the early 90s.

[jonnycat]

brendankharris
Actually you know what, rethinking it I was right to begin with.

If you buy a $750,000 house at 4% and can afford that, when you re-mortgage at 10% and you cant afford the payments, so either you try to sell your house (and no one else can afford the 750K either) so you sell it at a loss, or the bank repo's it and tries to get as much as they can as quickly as they can.

So someone like myself who doesn't lose money on a property can now afford your 750K house being sold for 500K at the same interest rate because the price is lower.

I was right, I am in a better position to buy a property when that hits the fan, lets hope you don't have to renegotiate your mortgage when that happens



Your example is all wrong. If you couldn't afford the house for $750,000 at 4%, there's no way you could afford $500,000 at 10%.

$500,000 at 8.3% = $750,000 at 4%.

If you think waiting for a market to crash and buy at high interest rates is a good move, best of luck.

[Antonito]

Originally posted by Xtrema


I highly doubt we'll see 10% ever again and if payment is what people are worry about, they can amortize for longer period to keep payment down.

The real question is, in a 10% scenario, how many people will be able to keep a job in order to keep a house? Economy will be slowed and

@ 10% Smart money won't be in real estate. Market will fall and money will be better in a GIC/Saving Account/Stock Market.

So the only way for it to go to 10% is if USA/Canada become Russia in the early 90s.

Or become Canada in the 80's..... but then it'd have to go up to 15% (and for some brief, terrifying times, up to 20%)

Learn from history, or be doomed to repeat it!

[The Cosworth]

Originally posted by jonnycat


Your example is all wrong. If you couldn't afford the house for $750,000 at 4%, there's no way you could afford $500,000 at 10%.

$500,000 at 8.3% = $750,000 at 4%.

If you think waiting for a market to crash and buy at high interest rates is a good move, best of luck.

It was an example, I didn’t work the numbers out, but you understand what I was trying to say.

But how many people in this town do you think are on the breaking point financially.

I have a friend who is a sales man at ford, and he has seen more than a couple guys come in, dressed to the nines with nice superduty's and wanting to purchase roush mustangs and that, when he does credit checks on them they are either financially screwed or already claimed bankruptcy.

In regards to the property purchase statement, I am not waiting, I am starting to work towards my first place now (getting a decent sized DP going) it was just a mental exercize.







Originally posted by Xtrema

I highly doubt we'll see 10% ever again and if payment is what people are worry about, they can amortize for longer period to keep payment down.

The real question is, in a 10% scenario, how many people will be able to keep a job in order to keep a house? Economy will be slowed and

@ 10% Smart money won't be in real estate. Market will fall and money will be better in a GIC/Saving Account/Stock Market.

So the only way for it to go to 10% is if USA/Canada become Russia in the early 90s.

good point I don't think it will get that high again, just making it quite obviously different.







Originally posted by SilverRex


heres the thing though,

the 15-20% back in the 80s were on 50-100k houses.

but we are talking about 500k-700k now, so wont a 10% rate on 500k be just as bad as 15% on 50k?

if that is true, then we dont need rates to hit 15% for shit to hit the fan. all it takes is a few more percentages and people will not be able to afford it anymore, well alot of people cant even afford them now.

This was the point I was trying to make

[SilverRex]

Originally posted by Antonito


Or become Canada in the 80's..... but then it'd have to go up to 15% (and for some brief, terrifying times, up to 20%)

Learn from history, or be doomed to repeat it!

heres the thing though,

the 15-20% back in the 80s were on 50-100k houses.

but we are talking about 500k-700k now, so wont a 10% rate on 500k be just as bad as 15% on 50k?

if that is true, then we dont need rates to hit 15% for shit to hit the fan. all it takes is a few more percentages and people will not be able to afford it anymore, well alot of people cant even afford them now.

[Antonito]

Originally posted by SilverRex


heres the thing though,

the 15-20% back in the 80s were on 50-100k houses.

but we are talking about 500k-700k now, so wont a 10% rate on 500k be just as bad as 15% on 50k?

if that is true, then we dont need rates to hit 15% for shit to hit the fan. all it takes is a few more percentages and people will not be able to afford it anymore, well alot of people cant even afford them now.

Well there's that too, I just get a little worried when people go "it'll never happen!" when it could very, very easily happen, especially given the current atmosphere with regards to the States

[jonnycat]

Something massive will need to happen to halt inflation. As house price ebb and flow the continuing trend will be upwards for a long time. We are living in one of the richest areas in the world. The chances of it all crashing down while we're not even near our peak are almost nil.

[The Cosworth]

Originally posted by jonnycat
Something massive will need to happen to halt inflation. As house price ebb and flow the continuing trend will be upwards for a long time. We are living in one of the richest areas in the world. The chances of it all crashing down while we're not even near our peak are almost nil.

1 Luxembourg $ 68,800
2 Equatorial Guinea $ 50,200
3 United Arab Emirates $ 49,700
4 Norway $ 47,800
5 Ireland $ 43,600
6 United States $ 43,500
7 Andorra $ 38,800
8 Iceland $ 38,100
9 Denmark $ 37,000
10 Austria $ 35,500
11 Canada $ 35,200
12 San Marino $ 34,100
13 Switzerland $ 33,600
14 Japan $ 33,100
15 Australia $ 32,900


http://www.aneki.com/countries_gdp_per_capita.html



We are still fairing pretty well compared to the rest of the world, and Calgary is still pretty cheap within Canada for a big city, just the growth has been unprecidented.

I don't know, I know it is expensive to live here, but what would happen if people like myself ( and Antonito) who have good jobs but aren't keeping up with the current inflation and cant get into the market because the prices keep going up at the current rate.

What happens when my grandparents die (they are in their 80's, I have all 8 still surviving and all own property in calgary) my family does not need 5 more properties, we will sell them all and that will be the start of the baby boomers checking out.

What happens if Brazil finds an easy way to access their 6 billion BPD oil reserves.

What if oil crashes to $10.00 a barrell again.


Lots can happen and NO ONE can say it can never happen

[sputnik]

I have said it before and I will say it again.

If house prices drop dramatically we will all be looking for jobs at the same time.

The only way you will see house prices drop in this city is due to mass unemployment. Right now as long as people are working they will be able to keep their houses. Even if interest rates jump a few percentage points you may see some people forced to sell but most will sell their leased vehicles and toys before giving up their house at a loss.

You also have to remember that quite a few people lock in for 4-7 years. So even if you see a sudden jump in interest rates many will still be in their fixed rate mortgages and capable of paying it for a number of years to come.

[jonnycat]

I was thinking more regionally than the country as a whole.

Alberta's GDP per Capita is $69,789 as of 2006.

[88CRX]

Originally posted by sputnik
I have said it before and I will say it again.

If house prices drop dramatically we will all be looking for jobs at the same time.


I've been telling my friends that are "waiting" the exact same thing for months.... housing crash = no jobs.


Banks 5 year posted closed rates seem to be hovering around 7.3% or so... what are they expected to drop to roughly?

[freshprince1]

glad to see the lower rate, as I can afford a new house and have budgeted for a 5%+- rate...good news for me.

[SilverRex]

Originally posted by 88CRX


I've been telling my friends that are "waiting" the exact same thing for months.... housing crash = no jobs.


Banks 5 year posted closed rates seem to be hovering around 7.3% or so... what are they expected to drop to roughly?

speaking for housing crash, how bout the US? is the main reason the crash because ppl lost their jobs? or is it because they borrowed beyond their means?

Dont get me wrong, I totally understand that many people can afford the extra rate increase, but at the same time, we have to wonder just how many people went to the limits to get into the housing market.

[Xtrema]

Originally posted by SilverRex


speaking for housing crash, how bout the US? is the main reason the crash because ppl lost their jobs? or is it because they borrowed beyond their means?

Dont get me wrong, I totally understand that many people can afford the extra rate increase, but at the same time, we have to wonder just how many people went to the limits to get into the housing market.

Read this:

http://www.washingtonpost.com/wp-dyn/content/article/2007/03/13/AR2007031301733_pf.html

This is how people who can't afford housing end up buying one. Cause the real estate market to artificially inflate. Once they default, house went back to the market. But enough of it happening, the market crashes. Bank are unable to recover their collateral and loses money.

We do see the same in Calgary. You hear these mortgage firms on radio all the time offering NINJA loans. Our credit system is failing us. There was a time when cash was king. Then you need some reputation to get credit but now almost anyone can have access to credit.

In the end, financial manager get all the big bonues, investors get screwed and poor people loses their home.

[urban.one]

Lately these real estate threads end up in the same way:

1) People who dont own a home and want to buy their first home will argue that the market must come down and theres no way the fundamentals support current prices.

or

2) People who are significantly leveraged in real estate they own, either primary residence or investment property who argue that prices have no where to go except for up and that all the fundamentals sho that prices will continue rising. (More and more Id include people who have significant invesments in real estate but arent leveraged in this group.)

Reality for the average person:

3) The only real estate you own is your primary residence and maybe a vacation property. You bought a house you could afford and look at it as a long term holding. You have enough leeway that if rates go up a bit you will be OK. If prices drop, you will be OK too because you need a house to live and with your time horizon prices will rebound.

[Toma]

Originally posted by SilverRex


heres the thing though,

the 15-20% back in the 80s were on 50-100k houses.

but we are talking about 500k-700k now, so wont a 10% rate on 500k be just as bad as 15% on 50k?


10% on $500k is exactly $50k a year in interest alone.

Even in the 80's when my parents were paying 20% on $100k, that was only $20k a year.

Seeing that adjusted for inflation, our wages have not really gone up.... there are very few now that would be able to afford a $500 k house..... since your mortgage is not tax deductible.... you would have to earn $80k a year to simply service your mortgage interest and prorerty tax payment.

We are in VERY bad shape. They need to ahlt the flow of cheap money in order to prevent the big recession we are heading for. That means leaving rates where they are, or increasing them slightly. This would ease the force of the downturn when it comes.

Otherwise, it will be brutal. Lowering rates to 3.5% is like committing economic suicide.

[Xtrema]

Originally posted by Toma
Otherwise, it will be brutal. Lowering rates to 3.5% is like committing economic suicide.

You know that lowering rate is for the east right? It actually not that good for the us. Watch inflation in the west go out of control.

[sputnik]

Originally posted by Xtrema


Read this:

http://www.washingtonpost.com/wp-dyn/content/article/2007/03/13/AR2007031301733_pf.html

This is how people who can't afford housing end up buying one. Cause the real estate market to artificially inflate. Once they default, house went back to the market. But enough of it happening, the market crashes. Bank are unable to recover their collateral and loses money.

We do see the same in Calgary. You hear these mortgage firms on radio all the time offering NINJA loans. Our credit system is failing us. There was a time when cash was king. Then you need some reputation to get credit but now almost anyone can have access to credit.

In the end, financial manager get all the big bonues, investors get screwed and poor people loses their home.

The difference is that in the US the lenders aren't regulated like they are in Canada.

In Canada you cannot have a mortgage payment higher than 32% of your gross monthly income and you cannot have a monthly debt load of 40% total. In the US all they look at is your credit rating and income.

Banks ended up lending money to people who were already in some pretty heavy debt.

[Toma]

Originally posted by sputnik




In Canada you cannot have a mortgage payment higher than 32% of your gross monthly income and you cannot have a monthly debt load of 40% total. In the US all they look at is your credit rating and income.

This is not true. There are so many scumbag brokers now, every pos that can't even scratch two nickels together in Canada is getting a mortgage.

We are in for some shit.

[broken_legs]

Originally posted by sputnik


The difference is that in the US the lenders aren't regulated like they are in Canada.

In Canada you cannot have a mortgage payment higher than 32% of your gross monthly income and you cannot have a monthly debt load of 40% total. In the US all they look at is your credit rating and income.

Banks ended up lending money to people who were already in some pretty heavy debt.


Theres a company on 660 AM advertising no money, no income, no credit mortgages for purchases as large as multi unit apartment buildings.

I'd say based on that its safe to say that people are finding ways around that minimum debt service stuff.



Also someone said what if Brazil finds a way to get out all that oil? So what. All that oil would only power the world as it is right now for 3 months. Its peanuts. The world is going to run out of oil. See what OPEC does here in teh next few weeks. I dont think they are going to raise production we already hit peak oil in 2005 or something...

I think house prices are going to continue to drop until we start experiencing the mass exodus of people from Ontario to ALberta. Why would prices continue to go up if there is no demand?

Its already started. A friend of mine just got laid off in Toronto and says there are droves of people getting the axe out there and not just auto workers. He'll be moving here soon looking for a job.

I'm in GP right now and there are ENTIRE COMMUNITIES with 'For Sale' signs on them... Scary

I paid 15% less than market for my house here last November 06. It was immediately appraised by the bank for 30% above what I paid for it in January 07.

Today I met a neighbour who moved in to a house next door and he only paid 3% more than I did last year for a comparable house.

Whats not scary though is that there is one of the largest oil reserves in the world right up the road in Peace River and companies are now working on ways to extract it.

US fed will cut rates. CAD will go back up for a little while at least.

Bank of Canada will cut again.

ah frig theres too much variables to consider in all this.

Long term we'll all be OK

I think

haha

[willyC]

Well... in the end, if anyone currently wants to afford a 500k+ house, there is a simply solution.

Grab your lunch kit, kiss your wife goodbye, get on highway 63.

ANYONE with a bit of brains can start out at 100k+ a year there. With a large portion of that 100k+ being tax free LOA at $160 bucks a day (some get even more then that), you can easily pay off a house in under 5 years before your locked in rate is up for renewal.

Most people dont like the idea of doing such a thing. But the option is there.