4 ms·

In Canada, the govt is pulling the brakes via policy (foreign buyer ban, non-resident tax, etc.) amid the rise in rates. Unlike the US, we have max 5 year fixed

In Canada, the govt is pulling the brakes via policy (foreign buyer ban, non-resident tax, etc.) amid the rise in rates. Unlike the US, we have max 5 year fixed rate mortgages for the most part. The govt initiatives are a drop in the bucket but the impact of rate increases is very concerning. On the flip side, govt policies are fueling the fire as they help first time buyers with more tax incentives. I wonder if anyone in charge passed econ 101. As others have commented, the rate increase in the US is nuts. People were paying the max monthly payments their income would give them in some markets (e.g. Bay area). With rates doubling so fast, I worry about fiscal solvency of anyone who did not get a long-term locked rate.

andrewmcwatters 5y ago
It sounds like the mortgage situation is quite sane in Canada compared to the US. Over US history, mortgage periods continued to bleed upwards.
- rpeden 5y ago
  Mortgages in Canada are typically amortized over 25 years. The 5 year term is the length of your contract with your current lender. Once that is up, you can renew with them or shop around for a better deal or better service. At once point in the not-too-distant past we had mortgages with 40 year amortization periods but they eventually pared that back down to 25 years - unless you put 20% down, in which case you can push it to 30 years.
  - toxik 5y ago
    In Sweden there is a rule that new loans must be amortized 1% per annum (2% if your principal is more than 60% of the value), so I guess that’s basically saying “pay it in 100 years”? Edit: actually the rule is 1% if principal to value is above I think 40%, so not even that is true. We are basically not expected to pay it off entirely unless we want to.
  - wiredfool 5y ago
    Max amortization in Ireland is years to retirement age, which is pretty much universally at 65. This was a bit of a shock when buying a house, but it does help push the principal/interest split in the right direction. No idea how that works if you need to relocate at 55+. Mortgages can be fixed rate for a few years, but are typically month to month adjustable. If you do opt for a fixed rate, it's generally lower than the adjustable, but there are penalties for selling before the term is up, or refinancing out of it.
onlyrealcuzzo 5y ago
> With rates doubling so fast, I worry about fiscal solvency of anyone who did not get a long-term locked rate. <5% of mortgages are ARMs in the US.
- rubiquity 5y ago
  That’s about to change. It’s anecdotal, but in Southern California realtors are pushing 10/1 ARMs now.
  - wil421 5y ago
    Why would you listen to a realtor about financing? Rather, why would the realtor be pushing financing terms? Shouldn’t you be able to find a bank or credit union with typical 15/30 year fixed rates?
    - rubiquity 5y ago
      As for your first question, I don’t know why anyone would other than home buying is an emotional process. As for why realtors would push it: they want to close deals. Plain and simple.
    - frumper 5y ago
      It’s not that you can’t find fixed rate, it’s that ARM rates would be lower and you can get more house for your payment. As the sibling commented, realtors want to close. Obviously you’ll just refinance in a few years when rates go back down to zero or your house is worth 80% more /s
  - mrep 5y ago
    Also, second home 30 year fixed rates spiked in February for some reason I forget so I just got a 10/1 ARM myself as the rate was like 1% lower or something than a 30 year fixed.
overton 5y ago
The Canadian government knows what they're doing. They're more afraid of a crash than they want to rein in prices.
- voisin 5y ago
  This works until inflation starts stressing enough of the populace to the point they bubble over in fury. I think we’ve seen steps towards this recently as the have-nots stage freedom rallies. Being house rich on paper but not being able to afford groceries isn’t a trade off anyone wants.
  - overton 5y ago
    Yeah, I doubt it's a viable long term strategy, but I think they're terrified of the crash being on their watch.
cmrdporcupine 5y ago
They're not pulling the brakes hard enough, it's just still insanely stupid out there. As it is now, I could sell my little hobby farm here in Ontario and buy several properties in Edmonton where my family is and real estate is still a bit depressed (cuz oil prices were low for so long). But I'm tied down here.

andrewmcwatters 5y ago

It sounds like the mortgage situation is quite sane in Canada compared to the US. Over US history, mortgage periods continued to bleed upwards.

rpeden 5y ago
Mortgages in Canada are typically amortized over 25 years. The 5 year term is the length of your contract with your current lender. Once that is up, you can renew with them or shop around for a better deal or better service. At once point in the not-too-distant past we had mortgages with 40 year amortization periods but they eventually pared that back down to 25 years - unless you put 20% down, in which case you can push it to 30 years.
- toxik 5y ago
  In Sweden there is a rule that new loans must be amortized 1% per annum (2% if your principal is more than 60% of the value), so I guess that’s basically saying “pay it in 100 years”? Edit: actually the rule is 1% if principal to value is above I think 40%, so not even that is true. We are basically not expected to pay it off entirely unless we want to.
- wiredfool 5y ago
  Max amortization in Ireland is years to retirement age, which is pretty much universally at 65. This was a bit of a shock when buying a house, but it does help push the principal/interest split in the right direction. No idea how that works if you need to relocate at 55+. Mortgages can be fixed rate for a few years, but are typically month to month adjustable. If you do opt for a fixed rate, it's generally lower than the adjustable, but there are penalties for selling before the term is up, or refinancing out of it.

onlyrealcuzzo 5y ago

> With rates doubling so fast, I worry about fiscal solvency of anyone who did not get a long-term locked rate. <5% of mortgages are ARMs in the US.

rubiquity 5y ago
That’s about to change. It’s anecdotal, but in Southern California realtors are pushing 10/1 ARMs now.
- wil421 5y ago
  Why would you listen to a realtor about financing? Rather, why would the realtor be pushing financing terms? Shouldn’t you be able to find a bank or credit union with typical 15/30 year fixed rates?
  - rubiquity 5y ago
    As for your first question, I don’t know why anyone would other than home buying is an emotional process. As for why realtors would push it: they want to close deals. Plain and simple.
  - frumper 5y ago
    It’s not that you can’t find fixed rate, it’s that ARM rates would be lower and you can get more house for your payment. As the sibling commented, realtors want to close. Obviously you’ll just refinance in a few years when rates go back down to zero or your house is worth 80% more /s
- mrep 5y ago
  Also, second home 30 year fixed rates spiked in February for some reason I forget so I just got a 10/1 ARM myself as the rate was like 1% lower or something than a 30 year fixed.

overton 5y ago

The Canadian government knows what they're doing. They're more afraid of a crash than they want to rein in prices.

voisin 5y ago
This works until inflation starts stressing enough of the populace to the point they bubble over in fury. I think we’ve seen steps towards this recently as the have-nots stage freedom rallies. Being house rich on paper but not being able to afford groceries isn’t a trade off anyone wants.
- overton 5y ago
  Yeah, I doubt it's a viable long term strategy, but I think they're terrified of the crash being on their watch.

cmrdporcupine 5y ago

They're not pulling the brakes hard enough, it's just still insanely stupid out there. As it is now, I could sell my little hobby farm here in Ontario and buy several properties in Edmonton where my family is and real estate is still a bit depressed (cuz oil prices were low for so long). But I'm tied down here.