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For the American's that don't know. In Canada our banks won't give you a 25 or 30 rate. We typically renew our rates every 5 years, while still amortizing our

For the American's that don't know. In Canada our banks won't give you a 25 or 30 rate. We typically renew our rates every 5 years, while still amortizing our mortgages over 25-30 years. So rate adjustments tend to hurt more than they do in the US. Our overnight rate is now 3.25% so we're a bit ahead of our neighbor to the south. And our equivalent to the dot plot suggests no more rate raises this year, though we do have a chance for one more in December, but unless our inflation rate jumps again, we're probably done until the US catches up to us. I guess I should note that the new 3.25% rate is 25bps above what the BOC considers to be the neutral rate. Our two year rate( the one I tend to think is the most important) is currently trading around 3.62% which is up, while the 10 year hasn't really budged, indicating that the markets think we may be close to the end of rate hikes. Our inflation rate "falling" to 7.6% in July from 8.4% in June also suggests that rate hikes are starting to work. We're in a weird not often seen situation where we are seemingly heading into a recession with full employment and high inflation and already high interest rates(by recent memory) while also having high debt levels for both individuals and businesses. The BOC( and US FED) have been pretty clear which side they'll come done as they have constantly said inflation is job #1, so people with debt will be feeling pain for along time to come

rinze 4y ago
> And our equivalent to the dot plot suggests no more rate raises this year They say this in the linked press release, though: "Given the outlook for inflation, the Governing Council still judges that the policy interest rate will need to rise further." I guess we'll see what happens by the end of October. I wouldn't be surprised if they keep hiking. edit: a missing space.
- ryanisnan 4y ago
  As a variable rate holder, I am not the most pleased.
  - chx 4y ago
    I personally never understood how could anyone take a variable rate mortgage. I would never have a good night's sleep. But that's just me.
    - liketochill 4y ago
      It was cheaper than fixed for the last 15 years
      - idiocratic 4y ago
        Marginally, from a historic perspective.
      - bawolff 4y ago
        It should almost always be cheaper - you're trading risk of rate changes for lower prices on average. The person you are responding to is almost certainly aware of this.
    - koolba 4y ago
      Most jurisdictions let you repay in full without penalty so assuming you can refinance down the road or simply sell the place during the lock period, you come out ahead. It doesn’t change nightly either. It’s in fixed windows every X months (e.g. every six months) and the maximum delta per hike or drop is usually fixed as well.
    - throw0101c 4y ago
      Going with a variable rate mortgage would have been better at least 75% of the time, as possibly as much as 90%: * https://www.ratespy.com/the-most-misconstrued-study-in-mortgage-history-03105681 https://www.ratespy.com/the-most-misconstrued-study-in-mortg... * http://astarmortgage.com/pdf/moshe.pdf http://astarmortgage.com/pdf/moshe.pdf We just happening to be in a rising rate environment currently. There are two types of variable mortgages: > With a fixed payment, when prime rate rises you simply pay more interest and less principal, and vice versa when prime falls. But your actual payment stays the same (unless rates soar so much that you’re not even covering the minimum interest due, which is rare). > That’s opposed to an adjustable rate mortgage (ARM) where both your payment and interest cost vary as prime rate fluctuates. * https://www.ratespy.com/offers-fixed-payment-variable-mortgages-03275087 https://www.ratespy.com/offers-fixed-payment-variable-mortga... > With a VRM, a rise in the interest rate leaves the regular mortgage payment unchanged but the interest charged rises and the amount of the payment allocated to pay down the principal balance drops and this means it will take longer to pay-off the mortgage. A lower rate has the opposite effect accelerating your pace of mortgage repayment. > With an ARM, a rise in the interest rate results in a rise in the regular mortgage payment to cover the higher interest cost to ensure that the dollar amount allocated to pay down the mortgage principal remains intact. On the flip side, a drop in rates will drop your regular payment without accelerating the pace with which you repay the debt. * https://www.mortgagesandbox.com/news/types-of-variable-rate-mortgage https://www.mortgagesandbox.com/news/types-of-variable-rate-...
- chollida1 4y ago
  > They say this in the linked press release, though: "Given the outlook for inflation, the Governing Council still judges that the policy interest rate will need to rise further." Well I was just talking about this year so its entirely possible(and I'd say probable) they hike next year > I guess we'll see what happens by the end of October. Probably not, the BOC doesn't meet again till December so I'm not sure what we'd see at the end of October.
  - throw0101c 4y ago
    October 26 and December 7: * https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/#schedule https://www.bankofcanada.ca/core-functions/monetary-policy/k...
  - rinze 4y ago
    > Probably not, the BOC doesn't meet again till December so I'm not sure what we'd see at the end of October. From the linked press release: "The next scheduled date for announcing the overnight rate target is October 26, 2022."
    - chollida1 4y ago
      Oh, shoot, you are indeed correct and I am wrong on this :( I misread the dot plot. Thanks for correcting me, so we could indeed see a hike in October, though the current plot suggests a max of 25bps for the end of the year.
dragontamer 4y ago
There seems to be a fair bit of "demand destruction" here in the USA. Hard for me to tell if its from our 2.25%ish overnight interest rates, or if it is due to inflation. Either way, the September 20th meeting is currently expected to be +.75% by the bond futures market. So I think we're gonna catch up to you sooner, rather than later.
- onlyrealcuzzo 4y ago
  "Demand destruction" is one way to look at it. The other is that artificially low interest rates synthesized demand, and this is a normalization.
  - dragontamer 4y ago
    I mean, whatever it is, there's fewer people buying things. (or many people buying fewer things). So I don't see much point arguing the semantics / precise words used to describe the phenomenon.
voisin 4y ago
> while still amortizing our mortgages over 25-30 years I thought the government eliminated the 30 year amortization?
- chollida1 4y ago
  No, any of the banks will give you a 30 year amortization. it was the longer duration mortgages they killed. There was a small windows where they allowed durations longer than 30 years but they killed those recently. Probably a very wise decision given the real estate market in Canada.
  - throw0101c 4y ago
    > No, any of the banks will give you a 30 year amortization. A federally regulated bank may offer a 30 year ammortization if you put i ≥20% equity. Non-federally regulated institutions (e.g., provincially regulated credit unions) may offer more options too.
- BoGs83 4y ago
  Only if you need CHMC insurance max is 25 years. Otherwise if you put down 20% you can have 30 years since you do not need CHMC.
- deleted 4y ago
  [deleted]
brianmcc 4y ago
>> We're in a weird not often seen situation where we are seemingly heading into a recession with full employment and high inflation and already high interest rates(by recent memory) while also having high debt levels for both individuals and businesses. Hi from the UK too :-) High energy prices and fuel costs here are just annihilating people's spending ability, yet Bank of England has been upping interest rates similarly aggressively, to, you know, reduce people's spending ability. Fun times. And the people with serious disposable money to spend are seeing better savings rates and so... have more money to spend! I think there's simply a "this is the tool we've always used to combat inflation so here we go" attitude among central banks. IIRC Japan took a more nuanced view and bet on inflation being transient and with a distinct (COVID plus Russia/Ukraine) cause different to normal inflation causes, and they seem to be doing pretty well? https://tradingeconomics.com/japan/inflation-cpi https://tradingeconomics.com/japan/inflation-cpi
- bryanlarsen 4y ago
  And because Japan is not raising interest rates as highly, its bonds aren't in demand so its exchange rate is falling. This makes imports more expensive which will increase inflation. So people will take this as evidence that Japan did the wrong thing and other central banks did the right thing, when really it's the rate raises at other banks causing Japanese inflation.
  - jbay808 4y ago
    The main difference is that the Bank of Japan, unlike the rest of the world right now, wants more inflation.
throw0101c 4y ago
> For the American's that don't know. In Canada our banks won't give you a 25 or 30 rate. Section 10 of the Canada's federal Interest Act states (emphasis added): > 10 (1) Whenever any principal money or interest secured by mortgage on real property or hypothec on immovables is not, under the terms of the mortgage or hypothec, payable until a time more than five years after the date of the mortgage or hypothec, then, if at any time after the expiration of the five years, any person liable to pay, or entitled to pay in order to redeem the mortgage, or to extinguish the hypothec, tenders or pays, to the person entitled to receive the money, the amount due for principal money and interest to the time of payment, as calculated under sections 6 to 9, together with three months further interest in lieu of notice, no further interest shall be chargeable, payable or recoverable at any time after the payment on the principal money or interest due under the mortgage or hypothec. * https://laws-lois.justice.gc.ca/eng/acts/i-15/page-1.html https://laws-lois.justice.gc.ca/eng/acts/i-15/page-1.html So since penalties on cancelling >5 year term mortgages are restricted, which means banks have no (major) recourse if you cancel a >5 year mortgage, so the banks have little incentive to offer >5 year mortgages. (Amortization periods are >5 years of course.) The US has no such restriction, and so if you cancel a 30 year mortgage there, banks can theoretically go after you for the entire amount of lost profits. Note that, while there have been some spikes, interest rates have been on a generally centuries-long trend of going lower: * https://www.visualcapitalist.com/700-year-decline-of-interest-rates/ https://www.visualcapitalist.com/700-year-decline-of-interes... * https://www.bankofengland.co.uk/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018 https://www.bankofengland.co.uk/working-paper/2020/eight-cen... Renewing often has, in general, gotten you a lower rate. It's why, historically speaking in Canada, going with a variable rate mortgage would have been better at least 75% of the time, as possibly as much as 90%: * https://www.ratespy.com/the-most-misconstrued-study-in-mortgage-history-03105681 https://www.ratespy.com/the-most-misconstrued-study-in-mortg... * http://astarmortgage.com/pdf/moshe.pdf http://astarmortgage.com/pdf/moshe.pdf We just happening to be in a rising rate environment currently. This may be a reason, and not the only one, or unrelated to the situation entirely. > Section 10 of the Interest Act (Canada) allows a borrower who is a natural person to prepay a mortgage loan or hypothec having a term of 5 years or more at any time after the first 5 years, in exchange for 3 months’ interest payments (in addition to the principal and interest owing). This right of prepayment protects individuals from being locked into a long-term mortgage at a high interest rate with either no ability to prepay or with prepayment subject to a large penalty. However, the same rule restricts individuals from negotiating their own prepayment terms which may preclude them from securing more favorable long-term financing. * https://obj.ca/article/five-interest-rate-provisions-be-aware-prior-financing https://obj.ca/article/five-interest-rate-provisions-be-awar... * https://www.mondaq.com/canada/real-estate-and-construction/132798/prepayment-rights-under-the-interest-act https://www.mondaq.com/canada/real-estate-and-construction/1...*
dangerboysteve 4y ago
Those inflation numbers can change once more data a looked at.
michael1999 4y ago
That's not strictly true. See https://www.rbcroyalbank.com/mortgages/mortgage-rates.html#posted-rates https://www.rbcroyalbank.com/mortgages/mortgage-rates.html#p... While 25-year fixed is uncompetitive (9.75% !!!!!! vs 5.9% on a 3-year fixed), the banks definitely sell them.
- jbay808 4y ago
  Does anybody buy them?
  - peeters 4y ago
    I have to imagine the greasy bank advisor who manages to sell one gets a free trip to Cancun.

rinze 4y ago

> And our equivalent to the dot plot suggests no more rate raises this year They say this in the linked press release, though: "Given the outlook for inflation, the Governing Council still judges that the policy interest rate will need to rise further." I guess we'll see what happens by the end of October. I wouldn't be surprised if they keep hiking. edit: a missing space.

ryanisnan 4y ago
As a variable rate holder, I am not the most pleased.
- chx 4y ago
  I personally never understood how could anyone take a variable rate mortgage. I would never have a good night's sleep. But that's just me.
  - liketochill 4y ago
    It was cheaper than fixed for the last 15 years
    - idiocratic 4y ago
      Marginally, from a historic perspective.
    - bawolff 4y ago
      It should almost always be cheaper - you're trading risk of rate changes for lower prices on average. The person you are responding to is almost certainly aware of this.
  - koolba 4y ago
    Most jurisdictions let you repay in full without penalty so assuming you can refinance down the road or simply sell the place during the lock period, you come out ahead. It doesn’t change nightly either. It’s in fixed windows every X months (e.g. every six months) and the maximum delta per hike or drop is usually fixed as well.
  - throw0101c 4y ago
    Going with a variable rate mortgage would have been better at least 75% of the time, as possibly as much as 90%: * https://www.ratespy.com/the-most-misconstrued-study-in-mortgage-history-03105681 https://www.ratespy.com/the-most-misconstrued-study-in-mortg... * http://astarmortgage.com/pdf/moshe.pdf http://astarmortgage.com/pdf/moshe.pdf We just happening to be in a rising rate environment currently. There are two types of variable mortgages: > With a fixed payment, when prime rate rises you simply pay more interest and less principal, and vice versa when prime falls. But your actual payment stays the same (unless rates soar so much that you’re not even covering the minimum interest due, which is rare). > That’s opposed to an adjustable rate mortgage (ARM) where both your payment and interest cost vary as prime rate fluctuates. * https://www.ratespy.com/offers-fixed-payment-variable-mortgages-03275087 https://www.ratespy.com/offers-fixed-payment-variable-mortga... > With a VRM, a rise in the interest rate leaves the regular mortgage payment unchanged but the interest charged rises and the amount of the payment allocated to pay down the principal balance drops and this means it will take longer to pay-off the mortgage. A lower rate has the opposite effect accelerating your pace of mortgage repayment. > With an ARM, a rise in the interest rate results in a rise in the regular mortgage payment to cover the higher interest cost to ensure that the dollar amount allocated to pay down the mortgage principal remains intact. On the flip side, a drop in rates will drop your regular payment without accelerating the pace with which you repay the debt. * https://www.mortgagesandbox.com/news/types-of-variable-rate-mortgage https://www.mortgagesandbox.com/news/types-of-variable-rate-...
chollida1 4y ago
> They say this in the linked press release, though: "Given the outlook for inflation, the Governing Council still judges that the policy interest rate will need to rise further." Well I was just talking about this year so its entirely possible(and I'd say probable) they hike next year > I guess we'll see what happens by the end of October. Probably not, the BOC doesn't meet again till December so I'm not sure what we'd see at the end of October.
- throw0101c 4y ago
  October 26 and December 7: * https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/#schedule https://www.bankofcanada.ca/core-functions/monetary-policy/k...
- rinze 4y ago
  > Probably not, the BOC doesn't meet again till December so I'm not sure what we'd see at the end of October. From the linked press release: "The next scheduled date for announcing the overnight rate target is October 26, 2022."
  - chollida1 4y ago
    Oh, shoot, you are indeed correct and I am wrong on this :( I misread the dot plot. Thanks for correcting me, so we could indeed see a hike in October, though the current plot suggests a max of 25bps for the end of the year.

dragontamer 4y ago

There seems to be a fair bit of "demand destruction" here in the USA. Hard for me to tell if its from our 2.25%ish overnight interest rates, or if it is due to inflation. Either way, the September 20th meeting is currently expected to be +.75% by the bond futures market. So I think we're gonna catch up to you sooner, rather than later.

onlyrealcuzzo 4y ago
"Demand destruction" is one way to look at it. The other is that artificially low interest rates synthesized demand, and this is a normalization.
- dragontamer 4y ago
  I mean, whatever it is, there's fewer people buying things. (or many people buying fewer things). So I don't see much point arguing the semantics / precise words used to describe the phenomenon.

voisin 4y ago

> while still amortizing our mortgages over 25-30 years I thought the government eliminated the 30 year amortization?

chollida1 4y ago
No, any of the banks will give you a 30 year amortization. it was the longer duration mortgages they killed. There was a small windows where they allowed durations longer than 30 years but they killed those recently. Probably a very wise decision given the real estate market in Canada.
- throw0101c 4y ago
  > No, any of the banks will give you a 30 year amortization. A federally regulated bank may offer a 30 year ammortization if you put i ≥20% equity. Non-federally regulated institutions (e.g., provincially regulated credit unions) may offer more options too.
BoGs83 4y ago
Only if you need CHMC insurance max is 25 years. Otherwise if you put down 20% you can have 30 years since you do not need CHMC.
deleted 4y ago
[deleted]

brianmcc 4y ago

>> We're in a weird not often seen situation where we are seemingly heading into a recession with full employment and high inflation and already high interest rates(by recent memory) while also having high debt levels for both individuals and businesses. Hi from the UK too :-) High energy prices and fuel costs here are just annihilating people's spending ability, yet Bank of England has been upping interest rates similarly aggressively, to, you know, reduce people's spending ability. Fun times. And the people with serious disposable money to spend are seeing better savings rates and so... have more money to spend! I think there's simply a "this is the tool we've always used to combat inflation so here we go" attitude among central banks. IIRC Japan took a more nuanced view and bet on inflation being transient and with a distinct (COVID plus Russia/Ukraine) cause different to normal inflation causes, and they seem to be doing pretty well? https://tradingeconomics.com/japan/inflation-cpi https://tradingeconomics.com/japan/inflation-cpi

bryanlarsen 4y ago
And because Japan is not raising interest rates as highly, its bonds aren't in demand so its exchange rate is falling. This makes imports more expensive which will increase inflation. So people will take this as evidence that Japan did the wrong thing and other central banks did the right thing, when really it's the rate raises at other banks causing Japanese inflation.
- jbay808 4y ago
  The main difference is that the Bank of Japan, unlike the rest of the world right now, wants more inflation.

throw0101c 4y ago

> For the American's that don't know. In Canada our banks won't give you a 25 or 30 rate. Section 10 of the Canada's federal Interest Act states (emphasis added): > 10 (1) Whenever any principal money or interest secured by mortgage on real property or hypothec on immovables is not, under the terms of the mortgage or hypothec, payable until a time more than five years after the date of the mortgage or hypothec, then, if at any time after the expiration of the five years, any person liable to pay, or entitled to pay in order to redeem the mortgage, or to extinguish the hypothec, tenders or pays, to the person entitled to receive the money, the amount due for principal money and interest to the time of payment, as calculated under sections 6 to 9, together with three months further interest in lieu of notice, no further interest shall be chargeable, payable or recoverable at any time after the payment on the principal money or interest due under the mortgage or hypothec. * https://laws-lois.justice.gc.ca/eng/acts/i-15/page-1.html https://laws-lois.justice.gc.ca/eng/acts/i-15/page-1.html So since penalties on cancelling >5 year term mortgages are restricted, which means banks have no (major) recourse if you cancel a >5 year mortgage, so the banks have little incentive to offer >5 year mortgages. (Amortization periods are >5 years of course.) The US has no such restriction, and so if you cancel a 30 year mortgage there, banks can theoretically go after you for the entire amount of lost profits. Note that, while there have been some spikes, interest rates have been on a generally centuries-long trend of going lower: * https://www.visualcapitalist.com/700-year-decline-of-interest-rates/ https://www.visualcapitalist.com/700-year-decline-of-interes... * https://www.bankofengland.co.uk/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018 https://www.bankofengland.co.uk/working-paper/2020/eight-cen... Renewing often has, in general, gotten you a lower rate. It's why, historically speaking in Canada, going with a variable rate mortgage would have been better at least 75% of the time, as possibly as much as 90%: * https://www.ratespy.com/the-most-misconstrued-study-in-mortgage-history-03105681 https://www.ratespy.com/the-most-misconstrued-study-in-mortg... * http://astarmortgage.com/pdf/moshe.pdf http://astarmortgage.com/pdf/moshe.pdf We just happening to be in a rising rate environment currently. This may be a reason, and not the only one, or unrelated to the situation entirely. > Section 10 of the Interest Act (Canada) allows a borrower who is a natural person to prepay a mortgage loan or hypothec having a term of 5 years or more at any time after the first 5 years, in exchange for 3 months’ interest payments (in addition to the principal and interest owing). This right of prepayment protects individuals from being locked into a long-term mortgage at a high interest rate with either no ability to prepay or with prepayment subject to a large penalty. However, the same rule restricts individuals from negotiating their own prepayment terms which may preclude them from securing more favorable long-term financing. * https://obj.ca/article/five-interest-rate-provisions-be-aware-prior-financing https://obj.ca/article/five-interest-rate-provisions-be-awar... * https://www.mondaq.com/canada/real-estate-and-construction/132798/prepayment-rights-under-the-interest-act https://www.mondaq.com/canada/real-estate-and-construction/1...*

dangerboysteve 4y ago

Those inflation numbers can change once more data a looked at.

michael1999 4y ago

That's not strictly true. See https://www.rbcroyalbank.com/mortgages/mortgage-rates.html#posted-rates https://www.rbcroyalbank.com/mortgages/mortgage-rates.html#p... While 25-year fixed is uncompetitive (9.75% !!!!!! vs 5.9% on a 3-year fixed), the banks definitely sell them.

jbay808 4y ago
Does anybody buy them?
- peeters 4y ago
  I have to imagine the greasy bank advisor who manages to sell one gets a free trip to Cancun.