Home affordability to deteriorate as mortgage costs rise: RBC

[HR-ZD403]

I saw this article online at CTV Calgary: CTV Calgary - Home Affordability To Deteriorate As Mortgage Costs Rise: RBC (http://www.ctvnews.ca/business/home-affordability-to-deteriorate-as-mortgage-costs-rise-rbc-1.1702546)

For someone that's a first time home buyer (such as myself) is it possible to get pre-approved and lock in a lower mortgage rate before they rise?

I'm not planning to purchase for another few months, but am wondering what your thoughts are.

[ExtraSlow]

90 day lock-in is pretty common. it also shouldn't be a surprise that interest rate has a big effect on affordability. it's no coincidence that the average house price has risen so much when interest rates have been at historic lows for nearly a decade.

[TimLacroix]

Originally posted by HR-ZD403
I saw this article online at CTV Calgary: CTV Calgary - Home Affordability To Deteriorate As Mortgage Costs Rise: RBC (http://www.ctvnews.ca/business/home-affordability-to-deteriorate-as-mortgage-costs-rise-rbc-1.1702546)

For someone that's a first time home buyer (such as myself) is it possible to get pre-approved and lock in a lower mortgage rate before they rise?

I'm not planning to purchase for another few months, but am wondering what your thoughts are.

Hi HR-ZD403,

Yes, you can get pre-approved and hold a rate for up to 120 days. There is 180 day rate holds but a they are slightly higher (0.20%) higher than a 120 day rate hold.

Today the 120 rate holds are 3.29% and 180 day holds are 3.49%.

[variance]

Can you do rate holds for mortgage renewals?

[BigMass]

Still, the report predicts that with bond yields expected to drift upwards on the strength of an improving economy, mortgage rates will be pushed north as well.

Read more: http://www.ctvnews.ca/business/home-affordability-to-deteriorate-as-mortgage-costs-rise-rbc-1.1702546#ixzz2uLwDAm2E


ahahahaha more crap to push people into buying ASAP to sustain the bubble. "Improving economy, rising rates" LMAO what planet do these people live on

[403ep3]

You can lock in a rate but you have to make sure your house gets built or you move in before the end of the 120/180 days.

[TimLacroix]

Originally posted by variance
Can you do rate holds for mortgage renewals?

Yes you can... same rate holds apply for renewals, purchases and refinances.

We usually start renewals 6-7 months in advance to ensure that there are no issues and to give some form of protection... especially if in a rate rising market.

[mr2mike]

Fear inducing news. I've been on a variable mortgage for the past 4.5 years and even back when I first got it. Everyone would tell me, lock in, we did. It's historically low and will probably go up in 6 months. That was 4.5 years ago.

Interest rates up, House prices down.

I can't see rates shooting up. There would be a lot of defaulted mortgages if it did.

[CapnCrunch]

Originally posted by BigMass


ahahahaha more crap to push people into buying ASAP to sustain the bubble. "Improving economy, rising rates" LMAO what planet do these people live on

They've been saying rates are going to go up for the last 6 years.

Obviously rates have no where to go but up, but throwing a dart at a calender and saying that's when rates will go up is pointless.

These ridiculous "news" articles trying to predict world market timing is a joke.

[Canucks3322]

Leave lots of wiggle room in your budget and don't buy more than you can afford and you won't have to worry about these things. .. That being said if you're buying a few months get a rate hold now it won't hurt you because of the rate goes dowm they give you that updated rate if it goes up then you're set cuz you got the hold. ..

[n1zm0]

Sidenote, I didn't know we had 2 mortgage broker sponsors on beyond now.

[sputnik]

How many articles do we need saying if (and that is a big "if") mortgage rates go up mortage payments will be higher?

Just yesterday there was news about a credit union in Ontario offering 2.99% 5yr fixed rates again and it's not like the bond rate has been climbing much lately.

[quick_scar]

Originally posted by mr2mike

I can't see rates shooting up. There would be a lot of defaulted mortgages if it did.

This... If anything we may see a quarter of a percent bump, but then the government will sit back and wait for that to be adjusted for before they bump it again.

My prediction, I would be surprised if we see more then half a percent in the next 4-5 years.

[ercchry]

from reading the comments on that article i guess the occupy movement isnt dead yet :rofl:

[BigMass]

Originally posted by quick_scar


This... If anything we may see a quarter of a percent bump, but then the government will sit back and wait for that to be adjusted for before they bump it again.

My prediction, I would be surprised if we see more then half a percent in the next 4-5 years.

more like a 2 basis point drop. We'll follow the US down to zero then turn on the monetary spigot full blast. Remember, you and your half million dollar mortgage is nothing compared to the biggest debtors on earth. Governments. The US government cannot afford to ever raise rates again. They have to monetize their debt and lower the value of their dollar. This makes other governments jump into a currency war and a race to the bottom to keep their exports attractive to broke American consumers. This will cause poverty and inflation in exporting nations that bow down to their masters the USA. Canada will never raise rates and will destroy the dollar to help the USA as much as they can. This means that what you want to do is get a mortgage, buy stocks and get into debt as much as you can because then you will be in a good company and your debt will be wiped away due to inflation just as the government's will. Biggest mistake you can make is save cash and hold out for asset bubbles to pop. They wont pop.

[Meback]

Originally posted by BigMass


This means that what you want to do is get a mortgage, buy stocks and get into debt as much as you can because then you will be in a good company and your debt will be wiped away due to inflation just as the government's will. Biggest mistake you can make is save cash and hold out for asset bubbles to pop. They wont pop.

Low interest rates could be the new norm, nobody knows, but regardless you should not get yourself in debt based on the assumption that debt will be wiped away by inflation. That idea is reckless, lets get eyeballs deep into debt, two houses and buy stock on margin :rolleyes: Because house prices will continue to raise and stock prices will climb forever! The BIGGEST mistake you can make is to get into as much debt as you can.

[mr2mike]

I feel that ZenOps just hacked BigMass' beyond account.

That being said, I don't totally disagree. There's more at play than just us peons with household debt.


Originally posted by BigMass


more like a 2 basis point drop. We'll follow the US down to zero then turn on the monetary spigot full blast. Remember, you and your half million dollar mortgage is nothing compared to the biggest debtors on earth. Governments. The US government cannot afford to ever raise rates again. They have to monetize their debt and lower the value of their dollar. This makes other governments jump into a currency war and a race to the bottom to keep their exports attractive to broke American consumers. This will cause poverty and inflation in exporting nations that bow down to their masters the USA. Canada will never raise rates and will destroy the dollar to help the USA as much as they can. This means that what you want to do is get a mortgage, buy stocks and get into debt as much as you can because then you will be in a good company and your debt will be wiped away due to inflation just as the government's will. Biggest mistake you can make is save cash and hold out for asset bubbles to pop. They wont pop.

[ercchry]

Originally posted by mr2mike
I feel that ZenOps just hacked BigMass' beyond account.





i was going to say the same thing :rofl:

but back here on earth.... a 2% jump for someone that locked in a 5 year rate would be pretty much the same payment at renewal if it was put back over 25yrs :dunno:

i dont see the end of the world happening due to defaulted mortgages... but maybe im just not enough of a pessimist

[max_boost]

Nah BigMass was a Zerohedge guy before Zenops. It's nice hearing the other side for some perspective or reality lol :thumbsup:

[Sugarphreak]

...

[msommers]

Last I heard we won't see a rate change until summer 2015. But who really knows these days.

[BigMass]

Originally posted by Sugarphreak


Good post!

Only thing is that inflation here hasn't been going up like crazy

The bigger issue is that at somepoint in the next 2 to 3 years, the economy will tank again... and there won't be an option to lower interest rates to soften it anymore.

They should have been hiking them back up over the last 2 years IMO

sure, but government inflation numbers are BS. Huge inflation. Money printing in the hands of the rich is used to blow up asset bubbles. Dow from 7000 at the low in 2009 to 16,000 now. Houses from $300k in 2009 to $600k now. Bitcoin from 1 cent to $1000 dollars. Facebook buying a software company at doctcombubble levels. Fed balance sheet from 1 trillion to 3 trillion. Gold from $250 to $1350. That's all just inflation manifesting itself in different places. It's not like the economy is great. Record unemployment and labour participation. Record levels of people on food stamps and living off government assistance. Right now the super rich are using inflation to blow bubbles everywhere. Once monetary velocity proliferates into the middle class, it will be far too late at that point.

You think the economy will tank? Probably but it won't be like before where we have deflation. An economic crash now will lead to hyperinflation and scarcity. Far worse. Saving cash hoping to buy up cheap crap is not going to work when the dollar has no value. And that they should have been raising interest rates over the past 2 years? Maybe the 'should have'. But I don't think it's a matter of should or shouldn't they. It's a matter of "can't" IMO. There is no way for them to raise interest rates without completely collapsing the entire economy and financial system. That is why it's laughable when people talk about rising rates. They won't because they can't.

[max_boost]

So BigMass, what's one to do? I am a couple years away from being completely free and clear of all debt obligations, or quicker if I unload some cars. I wanna be prepared....for what I don't know lol

[BigMass]

Originally posted by max_boost
So BigMass, what's one to do? I am a couple years away from being completely free and clear of all debt obligations, or quicker if I unload some cars. I wanna be prepared....for what I don't know lol

"How I Learned to Stop Worrying and Love the Bomb"

unless you're one of the elite making geopolitical and financial decisions that affect the entire planet, you really are at their mercy. Why do you think we have terms like "don't fight the Fed". Because you can't. No point stressing over it. Live your live and don't do anything too crazy. If SHTF you won't be the only person effected. Everyone will be. On a planet of 7 billion, you're going to have a tough time trying to be the "one lucky guy that made it out ok"

[Tik-Tok]

Originally posted by max_boost
I am a couple years away from being completely free and clear of all debt obligations, or quicker if I unload some cars. I wanna be prepared....for what I don't know lol

Something I've thought about when becoming mortgage free, is just re-mortgaging for as much as I can, and shovelling all the funds into RRSP's.

You're already used to having monthly mortgage payments, and that much money now will earn you more money than investing 'X' monthly.

[TimLacroix]

Lots of great feedback and perspective. The media & economists continually try to influence people one way or another... to act or back out.

In the end, there is always a possibility for rates to rise... last year we saw almost a 1% increase to 5 year fixed rates from as low as 2.79 to 3.89% in some cases. These rates have settled back to just above 3% right now.

With that said, the conversations typically in the media is about the Bank of Canada rate which has not changed since 2010. BoC rate currently sits at 1% which relates to Prime that the banks offer to consumers at 3% today.

Prime affects variable/ adjustable mortgages, HELOC's, personal line's of credits, student loans, etc... It is expected or assumed that BoC rate/ Prime will remain as is till 2015.

However, Fixed rate conversations are different.. the bond market is up and down depending on a number of factors. As the spread shrinks or increase, the rates can drop or jump at anytime.

To view the bond click on Canada 5-Year Bond Yield (http://www.investing.com/rates-bonds/canada-5-year-bond-yield). The typical spread is approx. 1.70 to 1.80% to determine increases or decreases...

Example: Todays rate is 3.29% - Bond Yield is 1.67% = 1.62%

This would indicate pressure for rates to rise or stay put since it is below the 1.70% spread. But there could be other indicators that are keeping rates status quo!

[HR-ZD403]

Thanks for all the great feedback and perspectives on the topic.