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Thread: Bank regulator raises mortgage stress test level, making it harder to qualify

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    Default Bank regulator raises mortgage stress test level, making it harder to qualify

    Thoughts on effects of this on market?

    https://www.cbc.ca/news/business/osf...ules-1.5979558

    Just heard on nightly news, this new stress test is only for non-CMHC insured mortgages over $1M, and the realtor they interviewed thought it would increase demand for sub $M homes.
    Last edited by cidley69; 04-08-2021 at 06:42 PM.
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    Quote Originally Posted by cidley69 View Post
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    Thoughts on effects of this on market?

    https://www.cbc.ca/news/business/osf...ules-1.5979558
    Meh, it was there not that long ago

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    This is the start. Fed is put into a corner right now with 3 choices.

    1. Print and keep 10y bonds down (Reducing rate of loans for mortgages/loans)
    2. Let inflation run hot and kill out those over-leveraged companies/borrowers.
    3. Continue to keep injecting some funds into the bonds to keep rates from going up quickly.

    All 3 options suck.

    Option 1: Value of the currency goes down as more is in circulation (I think)
    Option 2: Lots of jobs lost and people losing homes, harder to buy, less demand more supply. prices go down.
    Option 3: Stagflation (like 1970s in the US)

    US: 10y Bond - https://tradingeconomics.com/canada/...ent-bond-yield
    Canada 10y Bond - https://tradingeconomics.com/canada/...ent-bond-yield

    The questions should be
    Why are we in this spot?


    I believe we are going into option #3 until the realize this isn't going to work.

    This can answer ur mask questions more or less, why are restaurants closed, from two perspectives that would want to close them right now as well I believe.

    Anyways here is also Inflation rates in the US (Most data doesnt have it this far back) (Click MAX) : https://tradingeconomics.com/united-.../inflation-cpi

    Look what happened in the 1970s.

    https://www.investopedia.com/article...of%20inflation.

    There is a lot of factors to put in right now, I'm not here to debate what I think is right or wrong, but this is going to be a left or right issue on how we see what the best option is.

    Remember when you try to analyze this for yourself, the IMF was created with the bretton woods agreement. This is very important right now with what the future holds.

    Yes interest rates are 0.25% but the 10y is people in other countries borrowing the money, the higher the risk the higher the %

    Feel free to correct me, from my knowledge this is how I currently see it, but im not in finance and just something I taught myself with reading.
    Last edited by Kobe; 04-08-2021 at 03:40 PM.
    Originally posted by beemerm3
    so if we only seen 5 % of the oceans why not drain them or somethin lol or can u even transfer water from one ocean to another??? think of all the stuff u'd find treasures n eerything.

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    I’m confused on your option 2.... inflation should make debt cheaper, if rate is locked in. If you’re leveraged into assets that increase in value in time of inflation (like housing) and your debt is fixed, your debt is now cheaper in relation to what a dollar is worth than it is now... meaning inflation is working for you, if you have savings today, not linked to equity markets, or other assets that increase with inflation, the “savers” that’s when inflation works against you

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    Will this affect people that are pre-qualified for mortgages?

    How long will it take for this to have an effect? will market sales just slow, or will prices also fall?
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    Where does paying my mortgage in Bitcoin factor into all this?
    Originally posted by Thales of Miletus

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    Originally posted by Toma
    fact.

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    Quote Originally Posted by killramos View Post
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    Where does paying my mortgage in Bitcoin factor into all this?
    Awful idea in hyper inflation haha, get bigger mortgage, buy more btc

    But yes, pre-approvals are meaningless, you will now qualify for like... 5% less mortgage (I’m not doing the math, it might even be less)

    Considering the speed the alt market is picking up market share, and those people are qualifying at over 6% (this won’t change anything for them) and the heat still in the market, this will do sweet fuck all to cool the market, just like when it was originally introduced in 2016

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    Quote Originally Posted by ercchry View Post
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    I’m confused on your option 2.... inflation should make debt cheaper, if rate is locked in. If you’re leveraged into assets that increase in value in time of inflation (like housing) and your debt is fixed, your debt is now cheaper in relation to what a dollar is worth than it is now... meaning inflation is working for you, if you have savings today, not linked to equity markets, or other assets that increase with inflation, the “savers” that’s when inflation works against you

    Your 100% correct I think, inflation is ideal for government this is why they aim for 2% inflation a year, so they can print 2% more and the debt goes down as inflation goes up.

    Yes i agree 100% and we are always taught "Savers lose money" becuase of inflation, but now we can't even hit those inflation goals.

    All of this stimulus has gone to the markets as they hoped or said at least they want it to trickle down to the economy.

    Inflation does not mean your wages increase, it means the price of goods and services increase which causes your purchasing power to decrease. (It's pretty small every year but it does add up)

    And yes a fixed rate and variable rate will be different.

    But it this sense it does work for you, but as mentioned wages aren't going to increase just prices, if you have debt your still paying it off with the same salary you had before. but now your odds of going into debt increase as prices increase so your $100 you could save a year is now $98 after one year.
    Last edited by Kobe; 04-08-2021 at 03:58 PM.
    Originally posted by beemerm3
    so if we only seen 5 % of the oceans why not drain them or somethin lol or can u even transfer water from one ocean to another??? think of all the stuff u'd find treasures n eerything.

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    Quote Originally Posted by cidley69 View Post
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    Will this affect people that are pre-qualified for mortgages?

    How long will it take for this to have an effect? will market sales just slow, or will prices also fall?
    Prices dont have to fall (The federal reserve doesnt want this at least) Option 1 will make Prices actually increase as would Option #3. In theory I'm pretty sure this is what should happen.

    They would want a weaker dollar rather then a stronger one.

    A weaker or stronger dollar does not make you earn more or less money though. It can change your purchasing power though.

    We can use Japan as an example

    Click 50y, Look at 1990 this is the Nikkei225 Index

    https://tradingeconomics.com/japan/stock-market

    Here is the Japan Inflation rate(click ALL) : https://tradingeconomics.com/japan/inflation-cpi

    The lost decade people hear about: https://en.wikipedia.org/wiki/Lost_Decade_(Japan)
    Last edited by Kobe; 04-08-2021 at 04:04 PM.
    Originally posted by beemerm3
    so if we only seen 5 % of the oceans why not drain them or somethin lol or can u even transfer water from one ocean to another??? think of all the stuff u'd find treasures n eerything.

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    Quote Originally Posted by Kobe View Post
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    Your 100% correct I think, inflation is ideal for government this is why they aim for 2% inflation a year, so they can print 2% more and the debt goes down as inflation goes up.

    Yes i agree 100% and we are always taught "Savers lose money" becuase of inflation, but now we can't even hit those inflation goals.

    All of this stimulus has gone to the markets as they hoped or said at least they want it to trickle down to the economy.

    Inflation does not mean your wages increase, it means the price of goods and services increase which causes your purchasing power to decrease. (It's pretty small every year but it does add up)

    And yes a fixed rate and variable rate will be different.

    But it this sense it does work for you, but as mentioned wages aren't going to increase just prices, if you have debt your still paying it off with the same salary you had before. but now your odds of going into debt increase as prices increase so your $100 you could save a year is now $98 after one year.
    In the short term I would agree that wages will not increase, but they will at some point; if they didn’t your entire inflation argument is flawed as we’d still be making $5k/yr like in the 1960s(70s?), lag inflation? Sure... but dollars will become cheaper, and more will be earned. Will they buy as much? No... but that’s why piling on the debt and holding assets that match or beat inflation is key to getting ahead, always has been. You get fucked at renewal though, when debt is no longer as cheap, but if you have held the correct assets and enough of them theoretically the early debt you took on should be cheap enough to easily pay out in full

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    Sucks for some of it happens but won’t affect my ability to buy a house soon which is good.

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    Quote Originally Posted by ercchry View Post
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    In the short term I would agree that wages will not increase, but they will at some point; if they didn’t your entire inflation argument is flawed as we’d still be making $5k/yr like in the 1960s(70s?), lag inflation? Sure... but dollars will become cheaper, and more will be earned. Will they buy as much? No... but that’s why piling on the debt and holding assets that match or beat inflation is key to getting ahead, always has been. You get fucked at renewal though, when debt is no longer as cheap, but if you have held the correct assets and enough of them theoretically the early debt you took on should be cheap enough to easily pay out in full
    Does it though? in the 60's you could survive off a single income of a mid level blue collar worker... now you need 2 decent incomes and a side hustle to get ahead
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    Quote Originally Posted by ercchry View Post
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    In the short term I would agree that wages will not increase, but they will at some point; if they didn’t your entire inflation argument is flawed as we’d still be making $5k/yr like in the 1960s(70s?), lag inflation? Sure... but dollars will become cheaper, and more will be earned. Will they buy as much? No... but that’s why piling on the debt and holding assets that match or beat inflation is key to getting ahead, always has been. You get fucked at renewal though, when debt is no longer as cheap, but if you have held the correct assets and enough of them theoretically the early debt you took on should be cheap enough to easily pay out in full
    Define short-term and long-term

    click for larger version
    » Click image for larger version

    This is why the wealth went to where it is now.

    It used to cost 6 months of an average salary to purchase a home, now it costs 10 years of of average salaries to purchase a home.

    The fact that minimum wages were much lower at the time doesn't mean people in general earned minimum wage.

    Your right aswell, we live in a society that holding any asset class to beat inflation is key. It wasn't always the case though, this happen from the Nixon Shock.

    https://en.wikipedia.org/wiki/Nixon_shock

    Your defining correct assets in the sense of what has gone up not what should of gone up.

    Homes/Car prices/ Costs of goods, etc.

    You're in the belief that this has happened throughout history and not just the last 50 years. Those are two completely different pictures.

    Edit: and homes are going to get A LOT more expensive to build right now as lumber futures are going to the moon.

    https://tradingeconomics.com/commodi...0months%20time.
    Last edited by Kobe; 04-08-2021 at 04:19 PM.
    Originally posted by beemerm3
    so if we only seen 5 % of the oceans why not drain them or somethin lol or can u even transfer water from one ocean to another??? think of all the stuff u'd find treasures n eerything.

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    Quote Originally Posted by ercchry View Post
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    I’m confused on your option 2.... inflation should make debt cheaper, if rate is locked in. If you’re leveraged into assets that increase in value in time of inflation (like housing) and your debt is fixed, your debt is now cheaper in relation to what a dollar is worth than it is now... meaning inflation is working for you, if you have savings today, not linked to equity markets, or other assets that increase with inflation, the “savers” that’s when inflation works against you
    If the central bank borrows too much money, then bond purchasers will demand higher rates as the risk of default naturally rises. The central bank will either have to raise prime or let the currency collapse. Either is a bad choice with very long term ramifications. It took over 20 years for the problem to correct itself the last time it happened.

    - - - Updated - - -

    Quote Originally Posted by Kobe View Post
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    It used to cost 6 months of an average salary to purchase a home, now it costs 10 years of of average salaries to purchase a home.
    That is a very misleading statement. Yeah, homes were cheaper but your rate was anywhere from 13, 18, 20, 25%.

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    Quote Originally Posted by Kobe View Post
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    Define short-term and long-term

    click for larger version
    » Click image for larger version

    This is why the wealth went to where it is now.

    It used to cost 6 months of an average salary to purchase a home, now it costs 10 years of of average salaries to purchase a home.

    The fact that minimum wages were much lower at the time doesn't mean people in general earned minimum wage.

    Your right aswell, we live in a society that holding any asset class to beat inflation is key. It wasn't always the case though, this happen from the Nixon Shock.

    https://en.wikipedia.org/wiki/Nixon_shock

    Your defining correct assets in the sense of what has gone up not what should of gone up.

    Homes/Car prices/ Costs of goods, etc.

    You're in the belief that this has happened throughout history and not just the last 50 years. Those are two completely different pictures.

    Edit: and homes are going to get A LOT more expensive to build right now as lumber futures are going to the moon.

    https://tradingeconomics.com/commodi...0months%20time.
    That’s adjusted to 2019 dollars... I’m talking pure dollars earned, as the debt you are locking in is not increasing in dollars... if the rate is fixed ...fix rate of debt is the key here, and it is possible when talking homes... you can lock that rate in for 10yr, and they can’t even charge you an IRD after 5yr

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    Quote Originally Posted by cidley69 View Post
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    Thoughts on effects of this on market?

    https://www.cbc.ca/news/business/osf...ules-1.5979558
    Sweet fuck all. If they are serious, set the stress test at 7%+ or mandate 30% down on all mortgage, no exemption.

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    Quote Originally Posted by suntan View Post
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    If the central bank borrows too much money, then bond purchasers will demand higher rates as the risk of default naturally rises. The central bank will either have to raise prime or let the currency collapse. Either is a bad choice with very long term ramifications. It took over 20 years for the problem to correct itself the last time it happened.

    - - - Updated - - -



    That is a very misleading statement. Yeah, homes were cheaper but your rate was anywhere from 13, 18, 20, 25%.
    Correct inflation started to skyrocket, as did interest rates (Corrolated)

    Anyways Here is the Dow Jones since 1920 in the Linier and log Scale viewpoints.

    Log Scale: click for larger version
    » Click image for larger version

    Shows the 1929 Great depression as well..

    Linier Scale:

    click for larger version
    » Click image for larger version

    Again look to the 1970s.

    This goes back to the central banks, we make it seem like life is not possible without them.

    Also have this

    click for larger version
    » Click image for larger version
    Originally posted by beemerm3
    so if we only seen 5 % of the oceans why not drain them or somethin lol or can u even transfer water from one ocean to another??? think of all the stuff u'd find treasures n eerything.

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    Quote Originally Posted by Xtrema View Post
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    Sweet fuck all. If they are serious, set the stress test at 7%+ or mandate 30% down on all mortgage, no exemption.
    That’s racist
    Originally posted by Thales of Miletus

    If you think I have been trying to present myself as intellectually superior, then you truly are a dimwit.
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    Quote Originally Posted by killramos View Post
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    That’s racist
    How else can you tackle a bubble. Cap gain on all home sales? Transfer tax or 2x transfer tax if sold within 1st 5 years?

    They already establish they don't want someone to own homes, it's just how high of a barrier you want to set.
    Last edited by Xtrema; 04-08-2021 at 04:46 PM.

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    Quote Originally Posted by Thaco View Post
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    Does it though? in the 60's you could survive off a single income of a mid level blue collar worker... now you need 2 decent incomes and a side hustle to get ahead
    Well in the 60's a family of 4 was happy with 1200sqft, 3 bedrooms one bathroom to be average.
    Nowadays that same family wants 2200 sqft 5br + fully developed basement, 3 bathrooms with double vanities in each, a toilet to be used only by guests that come over 3x per year, along with their leased BMW and Audi.

    I don't think things have changed much in terms of costs if you're trying to buy the same thing. A blue collar worker single income can still buy the 1200sqft 3bed 1 bath home, just that it would be in Whitehorn if closer, or Legacy.

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