10 ms·

Nah. Canada real estate has to take the hit.

ericmay 4y ago
What effect will that have? If some Canadians go underwater on mortgages, won’t others who were priced out be able to afford now? I guess some will lose jobs but what’s the big downside from a country perspective with having cheaper housing? Or are you concerned about immediate effects?
- myth_drannon 4y ago
  It's not only about being underwater on mortgages, but having your morgtage payment double (and maybe tripling soon...). Reddit is full of panicking homeowners who are starting to straggle with payments. This will have a wide effect on the whole economy because any discretionary spending will evaporate.
  - endtime 4y ago
    Are adjustable rate mortgages common in Canada?
    - visiblink 4y ago
      Canadian mortgages have separate amortization periods (say 20 or 25 years for example) and interest rate terms (generally 1-5 years, after which the rate has to be renegotiated -- and you have the option of transferring the mortgage to another lender at that time). You can also let your rate float with the market, which is called a variable rate mortgage.
      - kansface 4y ago
        Interesting. Do you know why mortgages in Canada are so different from the US? They seem much more risky on the buyer’s side.
        Analemma_ 4y ago
        Nobody but the United States has long-term fixed rate mortgages: they're horrible for lenders because the lender has to assume all interest rate risk. The reason they exist in the US is because the government acts as a backstop due to pro-homeownership politics, but it causes a bunch of market distortions that are made invisible to American borrowers.
        rvense 4y ago
        30 year fixed-rate is very much the norm here in Denmark. There was a period of experimentation leading up to 2007, but I think fixed rate is very popular. I'm certainly happy that's what we went for when we bought our first house two years ago.
        lupire 4y ago
        It's hard to call it a "norm" when it's so new that no one has yet seen one completed.
        rvense 4y ago
        It's been like this for at least 50 years, maybe more - the underlying system of credit associations goes back to the lat 1700's. The mortgage market was very tightly regulated to really only permit the 30-year fixed-rate mortgages until 2002.
        synu 4y ago
        We have them in the Netherlands.
        prottog 4y ago
        > a bunch of market distortions that are made invisible to American borrowers Anyone who has taken a five-minute look at the real estate market in any major US city can see those market distortions plain as day.
        mikem170 4y ago
    - mostly_harmless 4y ago
      supposedly about a 1/3 of mortgages are variable in Canada. But more importantly, fixed mortgages are almost all 5 year terms (or less). That is, every 5 years you have to renew your rate (even though the mortgage amount is for 25 years). That means every year, about 20% of homeowners are updating to the current fixed rate (assuming an random distribution of purchase date). Perhaps a big chunk renewed early in 2020, but by 2025/2026 all mortgaged homeowners will have a new higher rate.
  - sleepdreamy 4y ago
    The allure of home ownership in America is the fixed mortgage rate among other things. (Rent goes up each year, without question). I purchased a home at the start of this mess with an 2.6%. Right now it's hovering around 6%. I would say I MASSIVELY lucked out. Does Canada not fix the rate? I am confused -
    - xxpor 4y ago
      No, the US is the outlier with the 30 year fixed rates. Canada not only has variable rate mortgages, but instead of the rate just adjusting, they essentially have 5 year mortgages, with a balloon payment at the end. If you can't roll it over into a new load (say because your debt to income is now too high), you're screwed.
      - gambiting 4y ago
        Sounds the same as UK then.
      - sleepdreamy 4y ago
        Wow - this is mind boggling. Also..kind of scary? I guess any big financial decision is scary but I didn't know that was America exclusive. Do you know if European countries have fixed rates or does it go up ever 5 years or so
        ddorian43 4y ago
        Europe is like Canada. Often there is 3 or 5 years of fixed, but then it's often euribor 12month + spread. Often in Albania it's euribor 12M + 3 or 4.
roflyear 4y ago
Has to? Why?
- dragontamer 4y ago
  It is common to have adjustable rates in Canada, while the standard in USA is fixed rates. So in these times where rates go up, it makes Canadian homeowners suddenly have to pay more for their houses they're already living in.
  - roflyear 4y ago
    Well, I hope those people don't end up homeless. I don't see how the housing market crashing is going to be good for them.
    - _whiteCaps_ 4y ago
      IMO the best option for Canadian real estate is for prices to remain stagnant for a long time, allowing wages to catch up, and decouple the idea of your primary residence as being a good retirement plan.
      - lupire 4y ago
        Why would wages catch up? Wages can go down.
  - _whiteCaps_ 4y ago
    https://www.cibc.com/en/personal-banking/mortgages/resource-centre/variable-rate-mortgage.html https://www.cibc.com/en/personal-banking/mortgages/resource-... In variable rate mortgages, the amount going to principal vs interest changes. The monthly payments remain constant.
    - humanlion87 4y ago
      Until you hit a trigger rate (depending on the mortgage specifics) at which point you have to start increasing your payments.
spywaregorilla 4y ago
Sure. And that will suck. But the country will still be better positioned than anyone. Especially once they finish the pipeline to ship LNG to Asia
- suoduandao2 4y ago
  >Especially once they finish the pipeline to ship LNG to Asia I have my doubts that the US will allow that to happen. The resource curse is real.
kylehotchkiss 4y ago
Canada's real estate situation makes no sense to me as a US citizen. * Plenty of land * Plenty of wood * Plenty of sources of fresh water * Pro-immigrantion policy could reducing construction costs * Seemingly high rate of 'cottage' ownership which seems like a second home to me, which seems to indicate abundance? * Remote working situation good * Fiber can't be that hard to roll out to new places right next to roads plus Starlink exists * People don't seem to mind the weather too much? In US, these things seem less abundant as lots of our land is allocated already as opposed to just being crown land
- lotsofpulp 4y ago
  > * People don't seem to mind the weather too much? I would start with questioning this assumption. Also, based on their terrible choices of ISP and mobile networks, I would question this one too: > Fiber can't be that hard to roll out to new places right next to roads plus Starlink exists
- BirdieNZ 4y ago
  > Plenty of land Land is generally not very valuable by itself, it is locations that are valuable (specifically desirable locations in growing cities). There are highly limited locations available in Canadian cities, particularly the desirable cities of Toronto and Vancouver. Same with the Bay Area, NYC, Hong Kong, Singapore, Sydney, Auckland etc. Singapore does probably the best job of the above at keeping housing relatively affordable despite very limited locations.
- 972811 4y ago
  I think the US and Canada are really similar here (and maybe it's global), but essentially the trend is: 1. There has been more demand for living in cities and less for rural areas 2. That demand has not been met with the same increases in housing supply, so prices rise 3. Low interest rates make housing an even more attractive investment, and throw gasoline on the fire

What effect will that have? If some Canadians go underwater on mortgages, won’t others who were priced out be able to afford now? I guess some will lose jobs but what’s the big downside from a country perspective with having cheaper housing? Or are you concerned about immediate effects?

myth_drannon 4y ago
It's not only about being underwater on mortgages, but having your morgtage payment double (and maybe tripling soon...). Reddit is full of panicking homeowners who are starting to straggle with payments. This will have a wide effect on the whole economy because any discretionary spending will evaporate.
- endtime 4y ago
  Are adjustable rate mortgages common in Canada?
  - visiblink 4y ago
    Canadian mortgages have separate amortization periods (say 20 or 25 years for example) and interest rate terms (generally 1-5 years, after which the rate has to be renegotiated -- and you have the option of transferring the mortgage to another lender at that time). You can also let your rate float with the market, which is called a variable rate mortgage.
    - kansface 4y ago
      Interesting. Do you know why mortgages in Canada are so different from the US? They seem much more risky on the buyer’s side.
      - Analemma_ 4y ago
        Nobody but the United States has long-term fixed rate mortgages: they're horrible for lenders because the lender has to assume all interest rate risk. The reason they exist in the US is because the government acts as a backstop due to pro-homeownership politics, but it causes a bunch of market distortions that are made invisible to American borrowers.
        rvense 4y ago
        30 year fixed-rate is very much the norm here in Denmark. There was a period of experimentation leading up to 2007, but I think fixed rate is very popular. I'm certainly happy that's what we went for when we bought our first house two years ago.
        lupire 4y ago
        It's hard to call it a "norm" when it's so new that no one has yet seen one completed.
        rvense 4y ago
        It's been like this for at least 50 years, maybe more - the underlying system of credit associations goes back to the lat 1700's. The mortgage market was very tightly regulated to really only permit the 30-year fixed-rate mortgages until 2002.
        synu 4y ago
        We have them in the Netherlands.
        prottog 4y ago
        > a bunch of market distortions that are made invisible to American borrowers Anyone who has taken a five-minute look at the real estate market in any major US city can see those market distortions plain as day.
      - mikem170 4y ago
  - mostly_harmless 4y ago
    supposedly about a 1/3 of mortgages are variable in Canada. But more importantly, fixed mortgages are almost all 5 year terms (or less). That is, every 5 years you have to renew your rate (even though the mortgage amount is for 25 years). That means every year, about 20% of homeowners are updating to the current fixed rate (assuming an random distribution of purchase date). Perhaps a big chunk renewed early in 2020, but by 2025/2026 all mortgaged homeowners will have a new higher rate.
- sleepdreamy 4y ago
  The allure of home ownership in America is the fixed mortgage rate among other things. (Rent goes up each year, without question). I purchased a home at the start of this mess with an 2.6%. Right now it's hovering around 6%. I would say I MASSIVELY lucked out. Does Canada not fix the rate? I am confused -
  - xxpor 4y ago
    No, the US is the outlier with the 30 year fixed rates. Canada not only has variable rate mortgages, but instead of the rate just adjusting, they essentially have 5 year mortgages, with a balloon payment at the end. If you can't roll it over into a new load (say because your debt to income is now too high), you're screwed.
    - gambiting 4y ago
      Sounds the same as UK then.
    - sleepdreamy 4y ago
      Wow - this is mind boggling. Also..kind of scary? I guess any big financial decision is scary but I didn't know that was America exclusive. Do you know if European countries have fixed rates or does it go up ever 5 years or so
      - ddorian43 4y ago
        Europe is like Canada. Often there is 3 or 5 years of fixed, but then it's often euribor 12month + spread. Often in Albania it's euribor 12M + 3 or 4.

roflyear 4y ago

Has to? Why?

dragontamer 4y ago
It is common to have adjustable rates in Canada, while the standard in USA is fixed rates. So in these times where rates go up, it makes Canadian homeowners suddenly have to pay more for their houses they're already living in.
- roflyear 4y ago
  Well, I hope those people don't end up homeless. I don't see how the housing market crashing is going to be good for them.
  - _whiteCaps_ 4y ago
    IMO the best option for Canadian real estate is for prices to remain stagnant for a long time, allowing wages to catch up, and decouple the idea of your primary residence as being a good retirement plan.
    - lupire 4y ago
      Why would wages catch up? Wages can go down.
- _whiteCaps_ 4y ago
  https://www.cibc.com/en/personal-banking/mortgages/resource-centre/variable-rate-mortgage.html https://www.cibc.com/en/personal-banking/mortgages/resource-... In variable rate mortgages, the amount going to principal vs interest changes. The monthly payments remain constant.
  - humanlion87 4y ago
    Until you hit a trigger rate (depending on the mortgage specifics) at which point you have to start increasing your payments.

spywaregorilla 4y ago

Sure. And that will suck. But the country will still be better positioned than anyone. Especially once they finish the pipeline to ship LNG to Asia

suoduandao2 4y ago
>Especially once they finish the pipeline to ship LNG to Asia I have my doubts that the US will allow that to happen. The resource curse is real.

kylehotchkiss 4y ago

Canada's real estate situation makes no sense to me as a US citizen. * Plenty of land * Plenty of wood * Plenty of sources of fresh water * Pro-immigrantion policy could reducing construction costs * Seemingly high rate of 'cottage' ownership which seems like a second home to me, which seems to indicate abundance? * Remote working situation good * Fiber can't be that hard to roll out to new places right next to roads plus Starlink exists * People don't seem to mind the weather too much? In US, these things seem less abundant as lots of our land is allocated already as opposed to just being crown land

lotsofpulp 4y ago
> * People don't seem to mind the weather too much? I would start with questioning this assumption. Also, based on their terrible choices of ISP and mobile networks, I would question this one too: > Fiber can't be that hard to roll out to new places right next to roads plus Starlink exists
BirdieNZ 4y ago
> Plenty of land Land is generally not very valuable by itself, it is locations that are valuable (specifically desirable locations in growing cities). There are highly limited locations available in Canadian cities, particularly the desirable cities of Toronto and Vancouver. Same with the Bay Area, NYC, Hong Kong, Singapore, Sydney, Auckland etc. Singapore does probably the best job of the above at keeping housing relatively affordable despite very limited locations.
972811 4y ago
I think the US and Canada are really similar here (and maybe it's global), but essentially the trend is: 1. There has been more demand for living in cities and less for rural areas 2. That demand has not been met with the same increases in housing supply, so prices rise 3. Low interest rates make housing an even more attractive investment, and throw gasoline on the fire