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Austin
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2.74% 5 year fixed - craziness.

Mon Aug 25, 2014 9:08 pm

You can get like 2.23 2 year fixed.

Like zirp or something?
Redistribute consumption, not income.
 
Geyser
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Re: 2.74% 5 year fixed - craziness.

Mon Aug 25, 2014 10:31 pm

It's common knowledge that the best way to put out a fire is to pour gasoline on it. We're screwed!
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
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Warren12
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 8:25 am

TD put a full page ad out recently at 2.43% for a 2 year fixed. I'm sure you could get a little better if you went in and talked to them.

What's interesting to me is we are starting to see the big 5 banks take different positions. Usually they move in sync.
 
eyesthebye2
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 9:49 am

looks like banks might be more addicted to mortgage profit than a potential buyer is to the low rate.
Shareholders demand profit. Higher interest rates only serve to choke off any new business...try
explaining that to shareholders.
 
Geyser
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 11:05 am

looks like banks might be more addicted to mortgage profit than a potential buyer is to the low rate.
Shareholders demand profit. Higher interest rates only serve to choke off any new business...try
explaining that to shareholders.
If you look at the history of mortgage interest rates you will see that they've had to explain it plenty of times in the past. It's not to difficult, the mortgage rate is controlled by the bond market moves, not by what the bank wants. Money always moves to where the risk:reward ratio is most attractive and bond prices can move with startling speed.

If you think that low rates are here forever, go and talk to somebody who understands market dynamics, you're in for a rude awakening.
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
Geyser
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 11:22 am

You can get like 2.23 2 year fixed.

Like zirp or something?
Did anybody notice what happened in Ukraine last Tuesday?
Ukraine’s central bank raised its overnight refinancing rate to 17.5 percent today from 15 percent as it seeks to support the hryvnia. The Ukrainian currency fell as much as 1.6 percent before trading little changed at to 13.03 per dollar, taking its decline for the month to 5.8 percent.

Read more at http://globaleconomicanalysis.blogspot. ... zxXhUxX.99
Yes, of course it's different there, but we did see an even more dramatic run up right here in Canada in the early 1980s. Of course, our dollar could never come under selling pressure and start dropping too much, could it?
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
eyesthebye2
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 11:24 am

Those kind of rates aren't here forever - but I don't think we'll ever see double digit rates in my lifetime.
It could be another 10 years before we see a 5 year fixed above 5 or 6%. Think about it...rates would have to double to get to 6%!!!!!
If you've been paying attention to the clues this shouldn't be surprising news
 
westcoastfella
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 11:43 am

Those kind of rates aren't here forever - but I don't think we'll ever see double digit rates in my lifetime.
It could be another 10 years before we see a 5 year fixed above 5 or 6%. Think about it...rates would have to double to get to 6%!!!!!
If you've been paying attention to the clues this shouldn't be surprising news
It could be 10 years, it could be 2 years... hard to say. If you've been paying attention to the clues, you should not be surprised by the fact that many economists are forecasting interest rate hikes earlier than expected: http://business.financialpost.com/2014/ ... est-rates/. This was from July, recently I've been reading about possible rate hikes in H1/15...

With rates as low as they are, it does not take much raising to see them double.
 
westcoastfella
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 11:45 am

Those kind of rates aren't here forever - but I don't think we'll ever see double digit rates in my lifetime.
It could be another 10 years before we see a 5 year fixed above 5 or 6%. Think about it...rates would have to double to get to 6%!!!!!
If you've been paying attention to the clues this shouldn't be surprising news
It could be 10 years, it could be 2 years... hard to say. If you've been paying attention to the clues, you should not be surprised by the fact that many economists are forecasting interest rate hikes earlier than expected: http://business.financialpost.com/2014/ ... est-rates/. This was from July, recently I've been reading about possible rate hikes in H1/15...

With rates as low as they are, it does not take much raising to see them double.[/quote]
Did anybody notice what happened in Ukraine last Tuesday?
You know what else happened in the Ukraine? A land invasion from Russia, as part of a larger war that has been raging for months. Using the Ukraine as an example of what could happen here is ridiculous.
 
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 12:28 pm

Westcoastfella wrote:
Using the Ukraine as an example of what could happen here is ridiculous.
Oh really? So Our rates could never move from 15% to 17.5% or higher? Are you sure about that?

Comparing Ukraine's rate to Canada's would have been ridiculous if I hadn't immediately followed it with the this clarification:
Yes, of course it's different there, but we did see an even more dramatic run up right here in Canada in the early 1980s. Of course, our dollar could never come under selling pressure and start dropping too much, could it?
Instead of initiating a knee-jerk response to one paragraph, I respectfully suggest that you read the full comment before trashing it. Was it the comment that invoked your irritation, or was it just the identity of the author?

My fairly obvious point was not that we may soon be invaded by Russia :roll: my point was that black swan events can easily undermine currencies and drive up interest rates in a spectacular fashion.

You are probably too young to remember when people like me were facing renewing huge 8% (5-year) mortgages at 22%. It's something I don't easily forget. That's why I feel so nervous about people who stretch to take on huge mortgages at today's rates, it's potentially financial suicide.

If mortgage rates can go up by an extra 14% over just 5 years in the past, why can it never happen again? How would today's buyers handle renewals at around 20% in five years time?
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
Geyser
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 12:41 pm

Those kind of rates aren't here forever - but I don't think we'll ever see double digit rates in my lifetime.
It could be another 10 years before we see a 5 year fixed above 5 or 6%. Think about it...rates would have to double to get to 6%!!!!!
If you've been paying attention to the clues this shouldn't be surprising news
Ignoring history like that can be dangerous, very dangerous!

Here's a little refresher for you on our mortgage rates:

1972 - 6%

1977 - 8.25%

1981 - 21.5% (rates went up over 250% in less 5 years!)

More importantly, they had gone up by 13.5% on top of the 1977 rate!

http://www.ratehub.ca/prime-mortgage-rate-history

It's extreme folly to assume that it can't happen again. I can assure you that when I was carrying multiple large mortgages at around 12% I was terrified as rates skyrocketed into the 20% range. Fortunately I had fixed rates so I was able to narrowly avoid bankruptcy. It was a lesson I've never forgotten.
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
eyesthebye2
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 1:45 pm

the last time we saw a five year fixed rate over 10% was briefly in 1995 - that's 20 years ago.
Since then the average is 5%.
I think the chances of an avg rate higher than 5-6% in the next ten year is pretty remote.
Of course, if you want to try to paralyse others with fear you can continue to post this garbage
on this site - I for one didn't buy it then, and won't buy it now
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Geyser
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 2:53 pm

the last time we saw a five year fixed rate over 10% was briefly in 1995 - that's 20 years ago.
Since then the average is 5%.
That's because we've had years of "emergency low interest rates" seriously skewing the average downwards.
I think the chances of an avg rate higher than 5-6% in the next ten year is pretty remote.
Of course, if you want to try to paralyse others with fear you can continue to post this garbage
on this site - I for one didn't buy it then, and won't buy it now
I'm hoping we don't go back to our historically high rates too, but the rates were over 7% between 2007 & 2009, and that's only 5 years ago, just before the current "emergency low rates" came into effect. It seems very risky to assume that we will not return to normal interest rate levels when the economy returns to normal activity levels.

So let's see what impact that would have on the increasingly common $1 million mortgage.

At today's absurdly low rate of 2.89% for a 5 year fixed, amortized over 25 years, the monthly payment is $4,863.

At the 2009 rate of 7% it would be $7,433, so no problem there. :lol:

The average rate which prevailed between 1980 - 1990 was 11.29% which would mean paying $10,647 per month.

Let's go with the midway number and assume we return to the reasonable 7% we had 5 years ago (immediately before "emergency" rates), it would be $2,570 per month more, and I expect property taxes, insurance and maintenance costs will continue to rise as well.

If we assume that most of today's buyers didn't stretch (just a bit) to take on that million dollar mortgage they may be able to absorb close to another $3K per month, and then the risk is lower. But can they? :shock:

I suspect that folks who took on CMHC mortgage insurance are probably stretched, even at the temporary emergency rates. If they raided their RRSPs for the downpayment, I'm sure they're stretched.

Still think its all rainbows and unicorns? If so, I want some of what you're smoking. :lol:
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.
 
westcoastfella
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 3:27 pm

Oh really? So Our rates could never move from 15% to 17.5% or higher? Are you sure about that?

Comparing Ukraine's rate to Canada's would have been ridiculous if I hadn't immediately followed it with the this clarification:
Yes, of course it's different there, but we did see an even more dramatic run up right here in Canada in the early 1980s. Of course, our dollar could never come under selling pressure and start dropping too much, could it?
Instead of initiating a knee-jerk response to one paragraph, I respectfully suggest that you read the full comment before trashing it. Was it the comment that invoked your irritation, or was it just the identity of the author?

My fairly obvious point was not that we may soon be invaded by Russia :roll: my point was that black swan events can easily undermine currencies and drive up interest rates in a spectacular fashion.

You are probably too young to remember when people like me were facing renewing huge 8% (5-year) mortgages at 22%. It's something I don't easily forget. That's why I feel so nervous about people who stretch to take on huge mortgages at today's rates, it's potentially financial suicide.

If mortgage rates can go up by an extra 14% over just 5 years in the past, why can it never happen again? How would today's buyers handle renewals at around 20% in five years time?
Try not to make everything about you - I find you to be a normally well-balanced contributor, and generally agree with your outlook most of the time.

There are other issues that the Ukraine faces (aside from a war) that have been mostly responsible for their current interest rate issues:
- debt levels have been too high based on economic output for a long time. The economy has been poor for a long time.
- their currency has been severely devaluing since the mid-2000's - according to your article, down 65% since 2007 vs the USD
- external debt is priced in USD, a currency which they don't have control over - which means their debt has grown as their currency has fallen, and servicing their debt is more and more expensive as their own currency continues to devalue.
- The war is just icing on the cake - according to your article, an $8B USD layer of icing.

How many of these events or pre-cursors are shared by Canada?

Sure, black swan events can happen - but by nature they are impossible to predict, and very very rarely happen. Could something catastrophic happen in Canada, causing interest rates to rise to 18% in a matter of months? Sure. Do I make financial decisions thinking that will happen? Not really. Telling people to not buy houses because interest rates may go to 18% soon, because they did once 30 years ago, is, with due respect, baseless fear mongering. I may as well start basing my decisions on the fact that WW-III is probably coming - hey, it happened twice before, it could happen again!

I would also point out that telling people to take on debt because emergency interest rates will remain for the next 10 years is similarly dis-ingenious.
 
Geyser
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Re: 2.74% 5 year fixed - craziness.

Tue Aug 26, 2014 4:29 pm

Westcoastfella wrote:
Telling people to not buy houses because interest rates may go to 18% soon, because they did once 30 years ago, is, with due respect, baseless fear mongering.
I agree, and that's why I haven't done it. I've just suggested that buyers should carefully consider the risks.

Here is what I posted last Friday:
My bottom line is that prospective first time buyers should be aware that the market can collapse when they least expect it. If they are buying a home they love and expect to occupy it for the long-term (there's that nebulous term again) and if they are comfortable with the possibility of an 8% or 12% mortgage rate on renewal I think their risks are low.
Westcoastfella:
I would also point out that telling people to take on debt because emergency interest rates will remain for the next 10 years is similarly dis-ingenious.
That's what I think, that's why I've been urging caution and criticizing people who would suggest otherwise. The reason I slowly moved from bull to bear over the last couple of years is because I think the risks are reaching dangerous proportions. We're hearing about people borrowing in excess of a million dollars for old houses in shabby neighbourhoods and I believe that many of these people will not be able to renew at higher rates without great difficulty.

I don't want to see others make the same mistake I made back in the late 1990s. I was seriously over leveraged in real estate (with multiple mortgages at around 12%) and was facing the very real possibility of having to renew at around 20%, a level which would undoubtedly forced me into bankruptcy. Currently, the trap appears to have reset, all be it at lower starting levels.

BTW, I apologize for doubting your motives, my occasionally sarcastic and/or abrasive style does attract a few haters and that may have triggered my own knee-jerk reaction.

Love and peace. :D
In fond memory of Taipan, a model of modesty, decency, dignity and tolerance. Long may we all prosper from the tremendous legacy of worldly wisdom and specialized real estate knowledge which he left in the "Arguments" thread.

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