Geez, Paul. This is in B.C.? Or does it vary from province to province? Bank to bank?
And I thought the prime here (5.5% Fed discount currently) was bad. But the Fed in the States adjusts sporadically. The BoC does it 8 times a year? Is the consumer warned in advance which way they'll go?
Each bank sets their own lending rate. And they can and do change rates based on the location of the mortgaged property. 7% seems to be an average today. (they were as low as 1.5% as recently as last January for some good credit worthy home buyers).
I'm sure the US mortgages are similar, in that the interest payments over a long period of time add up to far more than the price of the house. A big difference in Canada from the states is that our mortgages are usually for a 5 year term. Then they have to be re-negotiated with the banks, and now re-qualified. A lot of people bought homes in the past 3 or 4 years, and are freaking out because their payments are going up by hundreds and sometimes thousands of dollars a month. And they just can't handle the increased payments.
The banks don't want to take the houses back (foreclosures), so they are extending the amortization time on the mortgages while also raising the interest rates. So after the 5 year term is up on a 30 year mortgage, the bank is extending the 30 years to 35 years to keep the payments a bit more manageable. People are never going to be able to pay their home's mortgage off in their future. Sad, eh?
There are many pundits that predict correctly a bit more than half the time on the direction of the hikes.
Deposits continued to be the primary source of mortgage funding for the big six banks (66%) and credit unions (77%).
Covered bonds made up 17% of total mortgage funding for Canada's big six banks at the end of the first quarter of 2020, representing an increase of 4% from 2019.
Are there a lot of different types of home loans available in Canada? Here, we have three basic types: fixed-rate, conventional, and standard adjustable rate. All have different benefits and shortcomings that assist various homebuyer profiles.
But there are options depending on your status. There are VA loans available to military veterans and families and are backed by the US Department of Veterans' Affairs. The best of the rest are FHA loans backed by federally qualified lenders. Ideal for first-time homebuyers who can't afford a large down payment and are flexible.
Conventional loans are not backed by the government, but are subject to the Fed limits. Best really for re-financing (that is, if you've maintained good credit).
I have sympathy for young people. It is almost impossible right now for young couples looking to buy a home in a ridiculously tight market.
We have 2 types. Variable and Fixed rate. Variable rates changed as interest rates changed. Most people had Variable when rates were going down, but go caught in a serious cashflow problem when they started going up - with inflation starting last January. Most people now take Fixed rate, as they know what their payments will be. Here is a good article about what happened: https://financialpost.com/real-estate/mortgages/canadian-homeowners-flee-variable-mortgages-interest-rates-rise
Geez, Paul. This is in B.C.? Or does it vary from province to province? Bank to bank?
And I thought the prime here (5.5% Fed discount currently) was bad. But the Fed in the States adjusts sporadically. The BoC does it 8 times a year? Is the consumer warned in advance which way they'll go?
Each bank sets their own lending rate. And they can and do change rates based on the location of the mortgaged property. 7% seems to be an average today. (they were as low as 1.5% as recently as last January for some good credit worthy home buyers).
I'm sure the US mortgages are similar, in that the interest payments over a long period of time add up to far more than the price of the house. A big difference in Canada from the states is that our mortgages are usually for a 5 year term. Then they have to be re-negotiated with the banks, and now re-qualified. A lot of people bought homes in the past 3 or 4 years, and are freaking out because their payments are going up by hundreds and sometimes thousands of dollars a month. And they just can't handle the increased payments.
The banks don't want to take the houses back (foreclosures), so they are extending the amortization time on the mortgages while also raising the interest rates. So after the 5 year term is up on a 30 year mortgage, the bank is extending the 30 years to 35 years to keep the payments a bit more manageable. People are never going to be able to pay their home's mortgage off in their future. Sad, eh?
There are many pundits that predict correctly a bit more than half the time on the direction of the hikes.
Deposits continued to be the primary source of mortgage funding for the big six banks (66%) and credit unions (77%).
Covered bonds made up 17% of total mortgage funding for Canada's big six banks at the end of the first quarter of 2020, representing an increase of 4% from 2019.
Are there a lot of different types of home loans available in Canada? Here, we have three basic types: fixed-rate, conventional, and standard adjustable rate. All have different benefits and shortcomings that assist various homebuyer profiles.
But there are options depending on your status. There are VA loans available to military veterans and families and are backed by the US Department of Veterans' Affairs. The best of the rest are FHA loans backed by federally qualified lenders. Ideal for first-time homebuyers who can't afford a large down payment and are flexible.
Conventional loans are not backed by the government, but are subject to the Fed limits. Best really for re-financing (that is, if you've maintained good credit).
I have sympathy for young people. It is almost impossible right now for young couples looking to buy a home in a ridiculously tight market.
We have 2 types. Variable and Fixed rate. Variable rates changed as interest rates changed. Most people had Variable when rates were going down, but go caught in a serious cashflow problem when they started going up - with inflation starting last January. Most people now take Fixed rate, as they know what their payments will be. Here is a good article about what happened: https://financialpost.com/real-estate/mortgages/canadian-homeowners-flee-variable-mortgages-interest-rates-rise
Great article, Paul!! And a great discussion by both of you!
Thank you!
There are so many layers to the housing crisis in BC and the images you added to your article sum it up perfectly!
There sure are lots of ideas around real estate here. Thanks for the comment, Donna!
UPDATE
An Infinity length mortgage = https://www.ctvnews.ca/business/is-an-infinity-mortgage-really-infinite-experts-say-probably-not-but-it-s-not-good-1.6523934#:~:text=%22When%20the%20interest%20is%20more,amortization%20periods%20stretch%20this%20year.