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>This will result in drastic increase in what people need to pay to stay in their home This will result in a drastic increase in what a relatively small number

>This will result in drastic increase in what people need to pay to stay in their home This will result in a drastic increase in what a relatively small number of homeowners need to pay to stay in their home. Specifically, those who bought a house to live in in the last 3-4 years. >possibly causing a market crush. Before losing their home, this relatively small number of people (plus a larger number of those who will experience much more moderate mortgage payment increases) will cut back on spending for literally everything else. This will have a very significant impact on the rest of our economy. Which, in fact, is the whole point of inflation targeting - cool down the economy when inflation is out of control.

btilly 4y ago
Specifically, those who bought a house to live in in the last 3-4 years. Also those who renewed in the last 3-4 years. Which realistically means most of those who bought in the last 20-25 years. That's likely over half of all homeowners - not so small a fraction after all!
- kspacewalk2 4y ago
  >Also those who renewed in the last 3-4 years. No. Those who paid the exorbitant prices of the last 3-4 years. I've renewed recently, and borrowed the ~$100k remaining on my mortgage at a historically low rate. If I had to renew at twice that rate it would not make a huge impact on my finances, because I'm currently paying interest on a five-figure principal.
  - btilly 4y ago
    But it still would impact you. Across all Canadians, we're talking about $1.5 trillion (CAN) in mortgage debt. That's on par with the GDP. If you hike the interest rates to match your inflation, that's like sucking 5% of your GDP into interest payments. This will be a pretty dramatic event, no matter how it is distributed.
    - kspacewalk2 4y ago
      It will certainly be a dramatic event, but it still matters how it is distributed. To make up some numbers by way of example, if 4 million people have to pay $50/month more, I believe it has a significantly smaller effect on the economy than 1 million people having to pay $200/month more.
- davidgay 4y ago
  Yes, but interest is front-loaded on mortgages, so the impact is much lower for those 20-25 years in.
cecilpl2 4y ago
> Specifically, those who bought a house to live in in the last 3-4 years. No, everyone in Canada has to renew their mortgage at least every 5 years, into whatever the prevailing interest rate market is at that time.
- kspacewalk2 4y ago
  The vast majority of 28% of Canadian households who are currently carrying a mortgage did not buy their house at peak bubble prices, i.e. within the last 3-4 years. They carry a much more modest debt load, have paid off more of their mortgage, and this will significantly dampen the effect of rising rates on their finance.
  - steve_adams_86 4y ago
    Yes, my understanding is this tends to hit recent buyers and those who have had to remortgage. I don’t have numbers, but it seems reasonable to believe this makes up a small portion of homeowners.

btilly 4y ago

Specifically, those who bought a house to live in in the last 3-4 years. Also those who renewed in the last 3-4 years. Which realistically means most of those who bought in the last 20-25 years. That's likely over half of all homeowners - not so small a fraction after all!

kspacewalk2 4y ago
>Also those who renewed in the last 3-4 years. No. Those who paid the exorbitant prices of the last 3-4 years. I've renewed recently, and borrowed the ~$100k remaining on my mortgage at a historically low rate. If I had to renew at twice that rate it would not make a huge impact on my finances, because I'm currently paying interest on a five-figure principal.
- btilly 4y ago
  But it still would impact you. Across all Canadians, we're talking about $1.5 trillion (CAN) in mortgage debt. That's on par with the GDP. If you hike the interest rates to match your inflation, that's like sucking 5% of your GDP into interest payments. This will be a pretty dramatic event, no matter how it is distributed.
  - kspacewalk2 4y ago
    It will certainly be a dramatic event, but it still matters how it is distributed. To make up some numbers by way of example, if 4 million people have to pay $50/month more, I believe it has a significantly smaller effect on the economy than 1 million people having to pay $200/month more.
davidgay 4y ago
Yes, but interest is front-loaded on mortgages, so the impact is much lower for those 20-25 years in.

cecilpl2 4y ago

> Specifically, those who bought a house to live in in the last 3-4 years. No, everyone in Canada has to renew their mortgage at least every 5 years, into whatever the prevailing interest rate market is at that time.

kspacewalk2 4y ago
The vast majority of 28% of Canadian households who are currently carrying a mortgage did not buy their house at peak bubble prices, i.e. within the last 3-4 years. They carry a much more modest debt load, have paid off more of their mortgage, and this will significantly dampen the effect of rising rates on their finance.
- steve_adams_86 4y ago
  Yes, my understanding is this tends to hit recent buyers and those who have had to remortgage. I don’t have numbers, but it seems reasonable to believe this makes up a small portion of homeowners.