Be bold

bold1

With mortgage rates spiked, how will people borrow?

Easy answer – most of them will lock up. Blame the recency effect. Humans tend to believe that whatever just happened (rising rates, dropping condos, Miley Cyrus) will go on forever. For the past couple of years, with the feds warning of higher interest, folks have rushed to cement their loans. Now a massive 85% of borrowers have mortgages of five years or longer.

Just what the banks want. That’s how they make bales of money – as was in evidence Tuesday morning.

In fact, coming off a week when everyone was yakking about higher rates to come, TD published a consumer advisory which asked the question, “Should I go variable or fixed?”. You will never guess what the answer was:

Based on the possible course of short-term interest rates as projected by TD Economics, we might be at a point of inflection where locking into a fixed 5-year rate could actually provide interest cost savings relative to a VIRM over the next 5 years. Locking in at today’s special 5-year rate at 3.8% would compare with an average VIRM base rate of 4.1% through 2017. Again, this is just an illustration of what the average interest rate on a five year mortgage rate could be given our interest rate outlook.

Really? This projection is based on a Bank of Canada increase of a full 1%, which will happen, but not starting (thanks to a crappy economy) until a year or so from now. When they come, the hikes will be in careful, bite-size, digestible chunks – which means the current 3% prime might not hit 4% until 2014. After that, all bets are off.

So, what’s the best way to borrow? A VRM can be yours at the moment for as low as 2.4% at some no-name mortgage company which also manufactures muffler hangers. At the major banks, it’s 3%. This compares with a five-year fixed rate of 3.79%.

Running those numbers, there’s absolutely no contest which is the better deal. Locking in a 3.79% will result in a monthly of $2,058 and interest costs over five years of $70,452. At the end of the term you’d have repaid $53,075 and still owe $346,724. With a variable mortgage at 3% the monthly would be almost two hundred less, at $1,896 and the total interest bill end up being $55,827. You’d repay $57,983 in principal, and end up owing $342,016.

In other words the variable rate (at 3%) costs less a month, reduces interest payable by almost $16,000 and repays the mortgage faster – by over $4,000. Not only that, but studies have consistently shown that a VRM, over multiple decades, is the cheapest way to finance.

The danger in this? Variable-rate loans are just that – variable. When banks raise their prime rates, up go VRM charges as well. And even though your monthly payment doesn’t fluctuate, the amount of interest being generated does. So as the cost of money increases, more of your payment goes to interest, and less to principal. For example, if rates popped 1%, then that VRM on a $400,000 loan would spawn about as much interest as the fixed-rate mortgage.

Is it worth the risk?

You bet, since most lenders will let you convert a variable into a fixed with a phone call. That means you can finance at 3% or less (if you need a muffler) for at least a year, then flip over to fixed if the economy improves enough to prompt central bank rate hikes. And remember – just because the Bank of Canada ups its benchmark rate does not mean long-term mortgages will move in lockstep. For that you have to look to the bond market – where prices are rising (as stock markets wobble) before the missiles start flying over Syria.

The bottom line is predictable. If you use your turn signal in parking garages and always put the seat down, then lock in. Otherwise, be variable. You only live once, baby.

143 comments ↓

#1 TO and GTA Sales and Stats 2013-08-27 on 08.27.13 at 8:56 pm

Increased activity in the more expensive areas of Toronto. This will skew the stats again.TO and GTA Stats and Sales 2013/08/27
GTACondos: http://bit.ly/17kqka9
905SFH: http://bit.ly/17kqi1Z
416SFH: http://bit.ly/17kqkah

#2 Jimmy on 08.27.13 at 8:57 pm

First for the best blog in Canada !!!

#3 OttawaMike on 08.27.13 at 8:57 pm

Firstly, the first rule of First Club is don’t talk about first club.

#4 TurnerNation on 08.27.13 at 8:59 pm

Greetings from the Least Coast.

Bonds got TurnerNation’d today – that is, they went up. Smoking man also called it – Batman on yields.

#5 Quebec is Great on 08.27.13 at 9:04 pm

@ #3 – OttawaMike

:)
http://i.imgur.com/SgHXY.jpg

#6 To the "firsters" on 08.27.13 at 9:05 pm

Just give up and grow up!
From now on you have no chance, just so you know.
Rather than having your “Firsttt” garbage posted in pole position I think that everybody agrees that we should rather have some useful information at the top of the comments section.

Guys, with Garth’s consent, if you would like to have some other type of data included every day in the first couple of posts (2-3) let me know (ex: current bond yields or TSX or anything else)
I am sick of this childish “first”s …and I guess I not the only one.

#7 Jimmy on 08.27.13 at 9:06 pm

OK, OK. It is out of my system.
From now on serious talk from one of the richest neighborhoods in this whole country – Springbank.
Don’t bother trying to rent out here.

#8 Sebee on 08.27.13 at 9:06 pm

Carney is being “warned” that UK housing bubble is brewing. They have gone up to 4.4:1 price to earnings ratio. Apparently they went as high as 5.4:1 before the crash, as article states.

http://www.telegraph.co.uk/finance/comment/kamal-ahmed/10235529/I-warn-you-Mr-Carney-a-housing-bubble-is-coming.html

Someone remind me where Canada is at in this ratio please? Thanks.

#9 kc on 08.27.13 at 9:09 pm

Lets all buy haliburton stocks… looks like we are set again for following the war mongers back into another blood bath. only stocks to buy are the ones who make those bombs…. GO KILL….

Canada has no rights to follow them into this… let Syria figure it out on their own.

#10 RayofLight on 08.27.13 at 9:17 pm

In mid June , you were advising to go long with a 10 year, now you are advising to go for the variable.
Was there something I missed ?

Yeah, 10 years for the price of 5. — Garth

#11 Wall E.Coyote on 08.27.13 at 9:20 pm

The Endgame is near,Get prepared.
http://www.businessinsider.com/global-qe-exit-crisis-2013-8#non-pundits

#12 Ret on 08.27.13 at 9:21 pm

More info needed in a future column as to why a borrower would go to a major bank and pay the top buck rate and not to the muffler place for the low buck rate?

The reward, or interest rate difference, is obvious, but what are the potential risks and downsides of going with the smaller lending institutions?

#13 Taxc on 08.27.13 at 9:22 pm

Who wants to buy a condo in Montreal presently?!:

“This has already begun in Quebec where the condo market is feeling the impact of collapsing prices and single family homes have managed to stay in positive territory.

Hélène Bégin, senior economist with Desjardins Group, says it comes down to a supply issue which is being felt most acutely in Montreal where 30% of existing home sales come from high-rise condominiums.

“I wouldn’t say there’s been a crash as much as an adjustment of 5% to 10% that will happen in the next year. We are just seeing the beginning of it,” said Ms. Bégin.”

http://business.financialpost.com/2013/08/20/condominium-prices-falling-while-low-rise-homes-continue-to-soar/

#14 Smoking Man on 08.27.13 at 9:23 pm

Your worried about Banksters and loan suggestions.

Look what happened on Planet Zioscope last week.

One of the few remaining rebel leaders of the tribe Mozzos, Brazier Alaverysad wakes up and decides he’s tired of this world; he wants to know what it’s like to have a cruse missile shot up his pull my finger weapon.

So he comes up with a plan.

I will nerve gas my own people, especially the kids, images and photos will be all over Googatube. I will do it in a town that supports and loves me just before I’m ready to sit down with the Nemginkoms, and make a deal and end the suffering.

I will do it while the congress is on vacation. Giving Grand Master of the clan Nemginkoms, known to the right handed slaves as O bummer a green light to put a red laser on the little bulge of my designer paints.

Now back on earth.

As we all know shit happens, we all know wee lies happen, you can pick up sign and go to city hall and chant something. Will get you on the shit list of Nemginkoms database if you’re not cheering for the white and blue. (leafs). I’m very high up on that DB. KeysMe, did me in. Notice it’s not up on the web anymore.

Was watching our own CBC on Saturday afternoon using a Newsfomercial dude with a British accent every 5 minutes looping the story. We must to something, do, something, do something.
Do they think British voices are more believable, probably? I know they’re full of shit, only because I’m full of more shit.

So let’s get some popcorn and beer and watch the light show, the bombs bursting in air, and during commercials we can talk about Miley Cyrus amazing performance…NFL around the corner.

Or blog dog’s you can Buy Oil Futures is all I’m saying :)

Will make you a happier kinder protester, hell even fluoride no longer required to keep you happy widoo wabbit. 

Bought my contracts on Monday morning. Thank you CBC for the heads up.

Now if only I’m around long enough to enjoy the fruits of my bet.

Back on Planet Zioscope.
Alaverysad has a strong friend, who’s bank accounts and accounts of his best friends was cleaned out in the little Island called Ball In, Engineered by the Nemginkoms who didn’t like his friends.

Roomer has it, due to a midlife crisis he’s been loading up on steroids that make you stupid aggressive. The Fat lady all you bubble heads are waiting for to make a grand entrance might end up just a wee shadow on the pavement.

Talk about a supper fast diet.

#15 Izzo on 08.27.13 at 9:25 pm

I am truly becoming very disappointed in you Garth. I was a full on supporter of what you are preaching but it seems like you change your mind by the day. For the last month or two you have been preaching that the interest rate is going up and everyone should lock in, now you are preaching the variable route??

At least if you have a change of heart, do say so and move on but lets call it what it is that you were wrong and based on the new situation that is the best route.

No one expects you to be god and be right all the time but please drop the whole I told you so routine.

You missed the locking-in days when the yield curve was your friend. Don’t blame me. — Garth

#16 jaguar on 08.27.13 at 9:25 pm

I would agree with you, Garth. Variable is generally the way to go. Statistics support this. But I don’t think it’s going to save those unfortunate people who are living beyond their means, with debt invested in depreciating assets or in a housing market that ‘won’t end well’.
Of course most of the discussion on this most appreciated blog is centered on ‘finances, interest rates, etc’, but the real solution is all about an attitude adjustment. How does one wake up the ‘herd mentality’?. Buy, buy, buy. Spend, spend, spend. Never stopping to notice that the world is moving so fast it is passing them all by…..
Enough said. Some people cannot and be saved. They invite calamity into their lives.
This relentless pursuit of ‘stuff’ doesn’t end well. But most people figure it all out so late…
Enjoy life, luxury, extragance…..but stop putting on a “show”. Your currency as a person isn’t tied to that.
Take inventory, make choices. Intelligent ones that are personally important to you……
Not meant to be a sermon.

#17 Devore on 08.27.13 at 9:25 pm

#136 Babblemaster

Please reread my post. I was quoting from the article in Globe article, but since you ask, Garth is one of them.

The post where you say “this guy has a good point”, so I assume you agree it has merit? If the point was “many experts predicting condo doom for 15 years, wrong all this time”, then I assume you can actually name at least one of these supposed experts who have been so wrong for 15 years.

And no, Garth has not been predicting condo doom for 15 years. What a ludicrous thing to say. Maybe it is YOU who should read your own post.

You should also take a look at a long term real estate price chart, and try to figure out what happened to condos 15 years ago.

Less angry and angsty next time, and more logic. You might even make a good point.

#18 shanks on 08.27.13 at 9:25 pm

#6 To the “firsters” on 08.27.13 at 9:05 pm

Maybe you should grow down and dye your greys and stop being such a crotchety grumpa for a minute and let other people have some fun, there are a lot of other places on the weeb where you can find current bond yields, Mr Anonymous.

#19 Dus10 on 08.27.13 at 9:28 pm

Professional and educated advice for free!
Thanks, Garth. I live on the edge. Always have. And haven’t regretted it.
Variable baby!

#20 Devore on 08.27.13 at 9:30 pm

TD published a consumer advisory which asked the question, “Should I go variable or fixed?”.

Oh, did they? My barber advises I get a haircut, and my mechanic thinks my engine should be rebuilt.

#21 RayofLight on 08.27.13 at 9:40 pm

I advised my son to lock in on a ten year in mid June , mainly from advice from this blog. He got 10 @ 3.8%. I explained the first three years he may have for givings, but the last seven he would feel like a genius.

#22 Devore on 08.27.13 at 9:41 pm

#10 RayofLight

Was there something I missed ?

You missed change. Things changed. When things change, you have to change your approach. Being liquid helps. Can’t afford to be dogmatic about this stuff.

#23 arthur lang on 08.27.13 at 10:04 pm

People will lock in their mortgage rates and ride out the economic storm. No news people, nothing to see, move one. No hard/soft landing. Business as usual. Don’t buy into Garth’s et al fear mongering.

#24 Industrial Guy on 08.27.13 at 10:05 pm

2403 Properties listed for sale in Windsor. 516 are priced under $100,000

3212 Properties listed for sale in London
The great housing tsunami is well underway in SW Ontario.

#25 not 1st on 08.27.13 at 10:06 pm

Just what the banks want. That’s how they make bales of money – as was in evidence Tuesday morning.

Yet the ETF tracking the big banks has done nothing in the past few days and is in fact down on the year. What gives?

#26 Berniebee on 08.27.13 at 10:08 pm

And speaking of variable mortgages: (First, I think?)

My wife and I “gambled” on VRMs all the way down, from about 10% in the early 1990’s to about 4% in 2002. While we also threw every spare dollar and bonus at the mortgage, going VRM allowed us to be mortgage free pretty quickly.

HOWEVER, with interest rates today trending up, I think VRMs might be risky. It’s will be hard to time a lock in, because no matter how high VRMs go, the fixed rates will always be a bit higher. And with typical mortgages these days being 2 or 3 times the size of what we had, it’s a big gamble.

But we wouldn’t have bought at today’s prices anyway.

#27 Sparky55 on 08.27.13 at 10:12 pm

Anyone see the house pumping on CTV tonight?

#28 Donald Trump on 08.27.13 at 10:14 pm

Very sentimental blog photo Garth

Italian Kindergarten student…..school starts next week..sniff sniff…oh the memories

#29 Cici on 08.27.13 at 10:16 pm

#6 To the “firsters”

I do remember, when I first started reading this blog some three years ago, that the firsters did drive me nuts. Mostly I was aghast because I had never come across such unbelievably immature, stupid and boring comments on a blog before.

But a few days or a week or so later, I just got used to them. They’re so blasée most of us just skip over them without any thought, and get on with the business of reading the good comments.

PS – The thing I like about the “first” comments (apart from the element of competition), is that most of the “first” morons are trying to discredit the blog, but instead, they actually to it justice by attracting attention to it, and boosting it’s click-through and comments ratings. As such, the firsters come off looking like even bigger idiots than they actually are, which always puts a big smile on my face :-)

So, be happy and get used to it!

#30 mortgagebrokeron on 08.27.13 at 10:32 pm

variable rate is the way to go.

3 months interest to break vs huuuuuuuuuuge ird penalty, reason big banks want you in fixed is so they will have you handcuffed to them when you break your mortgage.

most people are told by [email protected] to get a 5 yr fixed, and that variables are risky.

why not get a variable at 2.5% and make higher payments as if you had it at 4%… that way if rates don’t increase you pay off more principle. and if they do increase you won’t have payment shock

#31 Cici on 08.27.13 at 10:32 pm

#14 Smoking Man

“I’m very high up on that DB. KeysMe, did me in. Notice it’s not up on the web anymore.”

News for you: Your site is up and running fine, but it’s about 5% complete. The “machine” doesn’t seem too bothered by it. Which means you have got more work to do!

So, stop drinking and wondering about when you are going to die. Apparently you’ve been making some good “batman” and “camel toe” calls, and the blog dogs have been asking for a “greater fool” style blog about investing with a similar open comments section. Put down the vino and get on it.

#32 mortgagebrokeron on 08.27.13 at 10:33 pm

one more thing… the average mortgage is broken approximately 3.2 yrs. so why would you lock in for 5 yrs. its not flexible

#33 TheCatFoodLady on 08.27.13 at 10:36 pm

#16 Joshua – you nailed it. It’s all about attitude. I’ve learned to stop being defensive about being on one of the bottom rungs of the socioeconomic ladder. It is what it is & to me, it doesn’t matter nearly as much as it used to.

I value what I have but it doesn’t own me, nor do any banks own me through anything I’ve purchased.

There are family members & ‘friends’ who enjoy looking down their nose at me because I’m not ‘important’ in the grand scheme of things. Improtance is overrated. A positive balance sheet – never.

Screw chasing the dream – I’m too busy living it.

#34 Shea on 08.27.13 at 10:40 pm

I’ll have to remember to check out the auto part section next time I’m at the Steinbach Credit Union. 2.5% variable was too tempting for me. (Plus my regular bank -TD wanted an appraisal and new home warranty…how 1990’s!)

#35 Smoking Man on 08.27.13 at 10:43 pm

To people that are pissed by firsts.

Might I suggest therapy for yourselves, how can that bother you.

What underling issues are we dealing with.
Did you never qualify for the spelling bee.
Never made it to first line playing hockey.
Where bullied at school.

Allways have a boss, never to taste the magic of self employment.

or where you kid that brought the apple to the teachers only to barley pass.

Seriously something wrong with you if it pisses you off.

Talk to me, I can help

#36 Cici on 08.27.13 at 10:44 pm

#15 Izzo

Garth told you to lock in when the fixed rate was at an all-time historical low (in May I believe), which made perfectly good sense at the time.

If you had listed, you would have reaped the rewards. The fixed rate subsequently jumped, along with bond yields, as he also predicted. The fixed rate is now considerably higher than the variable rate, and slated to move higher (if not this year, probably sometime in 2014).
So you see, THE SITUATION CHANGED, and based on those changes, he’s now telling us what our best options are. Variable is now considerably lower than the new higher fixed, so the latest piece of advice is to ride it out variable and switch to fixed when it makes sense to do so.

Please, for the love of God (or whomever else) do not start reaming him out the next time the situation changes and he tries to give us all good, FREE advice.

#37 Smoking Man on 08.27.13 at 10:48 pm

#31 Cici on 08.27.13 at 10:32 pm
#14 Smoking Man

“I’m very high up on that DB. KeysMe, did me in. Notice it’s not up on the web anymore.”

News for you: Your site is up and running fine, but it’s about 5% complete. The “machine” doesn’t seem too bothered by it. Which means you have got more work to do!

So, stop drinking and wondering about when you are going to die. Apparently you’ve been making some good “batman” and “camel toe” calls, and the blog dogs have been asking for a “greater fool” style blog about investing with a similar open comments section. Put down the vino and get on it.
……………………………..

Not a chance, I like this blog…..I like Garth even though he talks in girly voice.

I don’t have the discipline, it would be job, I don’t like working.

If I’m the mood I say shit, when I’m not, I chill.

Works for me here. but thanks

#38 Cici on 08.27.13 at 10:51 pm

#21 Ray of Light

That was good advice, he got a great 10-year rate. Now stop worrying.

#39 Greg on 08.27.13 at 10:55 pm

Hi #14 SM, I missed living through the Cuban missile crises, but not by much. This Syria thing seems to be adding up to be worse. I hope there is still the odd sane person in TPTB gang that loves there family too? So you can collect on your oil contracts of course and not leave a permanent shadow on the pavement. LOL

#40 Cici on 08.27.13 at 10:58 pm

#37 Smoking Man

Girly voice? To us girls, it sounds “youthful.” Well, he’s got Dorothy and a groupie of Amazons, so it’s obviously working for him!

#41 FATHER on 08.27.13 at 11:00 pm

I think the furst guys add character especially with garth’s comment’s below their’s

#42 James Bond in Gold Finger on 08.27.13 at 11:01 pm

With the drums of war beating you can bet gold will explode to the upside.
That and the rising interest rates putting pressure on the derivatives system will take us to the next phase of the super gold bull.
As for Canadian real estate, I don’t see any sharp correction coming until at least 2016. Sucks for basement dwellers – time to move back in with the folks – hey they do it in Europe all the time.

-Gold Finger

#43 Be bold — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate | The Affluent Boomer™ on 08.27.13 at 11:23 pm

[…] via Be bold — Greater Fool – Authored by Garth Turner – The Troubled Future of Real Estate. […]

#44 M on 08.27.13 at 11:25 pm

Bottom line is predictable indeed: Stockton USA.

Our banks are so much safer than the ones in US. A massive bond move in yields down south of course will not affect Canada that is soooo special :)

“za people” in their innocent view of the world are tapped out no matter the station in life or the income so a 2% mortgage increase no matter the timeline will wipe most out. 20%+ of the phony economy is drywall and roofs. Loose one paycheque in the house and is welcome to the streets.

Relax , is only getting better

Things are different in Canada :)

#45 Rob Rice on 08.27.13 at 11:39 pm

#42 Gold Finger,

What’s going to happen in 2016 to warrant a “sharp correction”? What does your crystal ball tell you? Do enlighten us please…

#46 Nemesis on 08.27.13 at 11:52 pm

I’m shocked. Simply shocked! That no one has yet thought to congratulate GT for finally sharing with us a treasured family memento of his formative years…

So jovial, too! Especially when you allow that the photographer had to confiscate his MolsonsStubby to get the shot.

#47 Shank1848 on 08.28.13 at 12:04 am

Great advice as always Garth. Thank you for addressing VRM’s.
My question for you ( or smarter dogs) than me: VRM is based on the Prime Rate ( I believe I have that part correct), what makes Prime move? Bank of Canada sets its overnight rate then a spread is added (around 2%) which equals the Prime Rate. Correct? Economy would be improving for the B of C to raise the overnight rate currently at 1%. Or they would do it to defend a falling currency? Neither seem like a likely scenario. Does the spread fluctuate wildly?
What am I missing? Theoretically ( although im guessing unlikely) overnight rate could fall to 0 % like the US.

#48 Carpe Diem on 08.28.13 at 12:13 am

#36 Cici … Thanks I had nothing to say after that post but it’s all about timing!

#49 Mark on 08.28.13 at 12:24 am

BoC rate rising in the next year? Not a chance, especially with the housing deceleration. Rate decreases are far more likely.

#50 Obvious Truth on 08.28.13 at 12:38 am

Just heard two souls on bnn with all their money in real estate and reits. They want to know what to do. The advice was sell but you can tell they won’t.

This is waaaaay worse than anyone is willing to contemplate. Capitulation is a long way from da Nile.

Garth will take the bulk of the anger in between.

#51 bob on 08.28.13 at 12:58 am

For those of you who complain Garth said lock in a few months ago, this was also the time that Garth ‘called the bottom’ in interest rates. So locking in at the lowest possible rate for 10 years may make sense, and he called it then. Now, he is telling you that variable for 5 years, when rates are no longer at the bottom, it might not make sense to lock in.

Regardless, all you readers should do your own math.

After all, studies show variable wins about ~85% of the time. He told you when the other 15% of the time was, some 2 months ago. If you missed it or didn’t understand, that’s your fault.

#52 Nono on 08.28.13 at 1:10 am

#18 shanks:

No, he’s right. Firsters are garbage. It’s really annoying.

#53 Fiendish Thingy on 08.28.13 at 1:13 am

I guess VRMs work differently in Canada than the US. Instead of shifting the principal/interest balance, an increase in interest rates raises your monthly payment. This was one of the triggers of the collapse of housing in the US, when thousands of loans started on super low teaser rates reset, often several per cent higher.

In this way, I guess it really is different here.

#54 Infused with Opiates on 08.28.13 at 1:43 am

30 mortgagebrokeron

According to the RBC standard terms, the penalty for early payment is 3 mo interest.

http://www.rbcroyalbank.com/RBC:SZjr5awWAA8ANSB8Kfo/legalforms/download/3995(03-17-2006).pdf

Wouldnt the IRD penalty only apply if the new rate was lower than the rate you were currently paying? Doesnt seem like that will be the situation going forward. And isnt the trick with variables that the bank will not offer you the best rate should you want to lock in?

#55 Dean Mason on 08.28.13 at 1:59 am

Greenspan said the same thing about variable rate mortgages and we all what happened in 2007 to 2008.Canadian banks can raise their prime rates without the Bank of Canada .These Variable rate mortgages are tied to the Bank’s own prime rate.

If Royal Bank and all the other banks decide on a 3.50% prime tomorrow they can do it.They raised their variable rate mortgages in 2012 without Carney actually raising rates.

#56 Donald Trump on 08.28.13 at 2:25 am

To those that have never been a firstur:

No problem…it’s dark in the basement suite…moreso after the 3rd generation.

When SHTF …..you guys can be on the front lines.

#57 Munch on 08.28.13 at 2:27 am

Hello Garth

Long time no see. I am a BIG fan.

BUT!

When people (quite earnestly and openly) ask why you change your mind on fixed versus variable, you fob them off with a flippant answer.

I don’t like that. It’s out of kilter with the spirit of the forum.

Just saying …

When I called the long-term rate bottom, locking in made sense. Now, it doesn’t. Don’t blame me if people can’t handle change. — Garth

#58 Buy? Curious? on 08.28.13 at 2:32 am

Selfie?

#59 Bailing in BC on 08.28.13 at 3:15 am

#3 OttawaMike

Best first ever (even if it was 3rd) and I would know as I have read every blog post since day one. Don’t listen to the nay sayers, they got nothing but whinge.

#60 Westcdn on 08.28.13 at 3:21 am

I wrote some several days ago that I was going to do an early renewal of my mortgage with RBC. I thought someone might be interested in what actually transpired. At my writing, I decided a 7 year fixed at 4% I was my best option as I wanted to lock down some cheap money for a long time – personal reasons. I booked an appointment for August 22. RBC raised their rates by 20 bp the night before – ticked me off. A rate of 4% for 7 years was the line in the sand for me and I could not get them to give the 20 bp back on any of their offered terms.
The problem was not the extra payment but the increased risk from mortgage break fees. My take is that 5 year fixed 3.5% money will become available again with the next recession (2017?) and should not go above 4.75% because there is no inflation yet until energy prices rise much higher. Plus I think 5 year fixed money over 4.5% puts too much downward pressure on real estate under current economic conditions. These were the personal perceptions I mainly used.
I chose a 3 year fixed @ 3.3% mortgage term and shortened my amortization period. That allows me to stop making mortgage prepayments. I intend to direct the mortgage interest savings and prepayments to my TFSA. Maybe a variable mortgage in 3 years’ time will look more attractive to me.
I found an example of alternative housing – great for an apocalypse, a holdout against a zombie attack or even destitute boomer housing. You could even string several together and live like a hamster or create a hotel in your backyard. http://www.nahbmonday.com/consumer/editor_images/sewer_hotel_06.jpg
I have extra time on my hands….

#61 Phil Indablanque on 08.28.13 at 3:24 am

Smokie and CiCi
Sittin in a tree
Smokie’s blog talk’s
Scarin me

#62 Realtor on 08.28.13 at 3:30 am

By saying going variable you are telling us that the BoC
Will not be raising their rates more than 1.5% over the next five years. I guess rates have risen and are now going to slow down

#63 The real Kip on 08.28.13 at 6:02 am

I need a muffler. What’s the name of that cut rate finance company again?

#64 Nimoucha on 08.28.13 at 6:27 am

#17 Devore (and Grantmi and a few others)

How you do those cool quotes with the indented red vertical line and quotes in grey above your comments? Thanks!

#65 Micah on 08.28.13 at 7:06 am

Question relating to Winnipeg, with advertised rates on 5 year fixed rates still advertised under 3% at some Credit Unions (2.94% Crosstown) for one and the rest ranging in the 3.39% fixed range (Assiniboine etc), still the same recommendation?

#66 Nimoucha on 08.28.13 at 7:53 am

Garth often wrote that there are 9 million boomers in Canada who are starting to retire and will continue to do so in the coming years. Where can I find information on the distribution of different generations among the Canadian population? i.e. how many boomers vs gen X vs gen Y, etc.

#67 Rob aka Captian and Mrs Slow on 08.28.13 at 7:57 am

Hey Garth part of an email blast I sent to the family

He (Garth) may come across as rather arrogant at times and it seems at other times he’s talking only in Vulcan but there is a very good reason why his blog was the nr 1 PF blog out there, and it’s because he’s one of the most astute investors I know. Regular readers will know that he drops occasional hints of what today. In the last two days he’s dropped two very clear hints, one on investing and one mortgages, since we all live busy lives I’d thought I’d do you the benefit finding the best parts…….

And

So now you know what to sell and buy. Investing is such fun.

So Garth many many thanks for your blog, I may never comment but I follow your blog faithfully!!!!!

Vulcan? — Garth

#68 Berniebee on 08.28.13 at 8:01 am

33 Thecatfood lady

“There are family members & ‘friends’ who enjoy looking down their nose at me because I’m not ‘important’ in the grand scheme of things.”

If they get their jollies from looking down at you, (or anyone else) then you must know how small their lives are. Pity them.

#69 Steven on 08.28.13 at 8:18 am

You only live once, baby.
Only if you are rich Garth otherwise you have to pretend. Employers pretend to pay a living wage and employees pretend to live. It really is a waste of time unless one can find a way of getting rich. Thanks to the real estate market and the labor market it is an all or nothing world.

#70 Grantmi on 08.28.13 at 8:20 am

Google blockquote

Sample

blah blah.

Remove the ~

#71 maxx on 08.28.13 at 8:21 am

#11 Wall E.Coyote on 08.27.13 at 9:20 pm

Interesting read. Thanks for sharing.
Short-term, wet dream, dumb, bubble-head fixes end up making things far worse.

#72 Grantmi on 08.28.13 at 8:25 am

Oops. Sample did not work.

Just google “

“. It explains

#73 TurnerNation on 08.28.13 at 8:33 am

Ps. all this handwringing over alleged stuff in Syria…from the Top 6 corporate controlled US media outlets (synchronized tweeting). If you seek some truth check Youtube for an un-embedded reporter’s recent footage of phosphorous raining down upon Iraq towns. Gaza’s, too.
Ask yourself: the WMD and bio warfare (phosphorous, depleted uranium, agent orange, vaccinations even), are the elites trying to save Joe 6pack and Raul RefugeeCamp? Or undergo a usual campaign of invasive take-overs?

Brining this back to business, I filter all newz though the lens of the Top 4 world businesses:
1. Oil, 2. Weapons trade. 3. Human trafficking, 4. Drug trade. It all makes sense now.

Laughable: the Top 10 richest countries, continually bombing the bottom 20 poorest. We know he has WMD!
Remember: 2nd and 3rd World countries get bombed; we in the 1sts get economically bombed.

#74 Austin Powers in Gold Member on 08.28.13 at 8:34 am

#42 James Bond in Gold Finger

“With the drums of war beating you can bet gold will explode to the upside. That and the rising interest rates putting pressure on the derivatives system will take us to the next phase of the super gold bull.”

Smashing baby! I’m ready for some swinging upside explosions. But that super groovy bull is more your thing, not mine. To each his own – Yeah! Just be sure to give your undercarriage a bit of a ‘how’s your father’ before proceeding.

#75 Julia on 08.28.13 at 8:38 am

Increasing numbers of young American adults still at home with parents
http://online.wsj.com/article/SB10001424127887324906304579039313087064716.html?mod=e2tw

#76 The Man From Nantucket on 08.28.13 at 8:39 am

#54 Infused with Opiates on 08.28.13 at 1:43 am

…….

Wouldnt the IRD penalty only apply if the new rate was lower than the rate you were currently paying? Doesnt seem like that will be the situation going forward. And isnt the trick with variables that the bank will not offer you the best rate should you want to lock in?

I would have thought the same thing, but, it may depend which ‘rate’ you’re talking about. They all have ‘posted rates’, and ‘discounted rates’.

The discounted rates seem to be the ones they use to sign up customers. The posted rates would then be the ones that they use to screw the customers that they signed up.

Let’s say I’m now partway through a five year closed at around 4%.

If I go to break, the arsehole at the bank might point to the “posted” rate, 4.99% and claim IRD, even though the special rate, which most (all?) customers will get is lower than 4%.

#77 The Man From Nantucket on 08.28.13 at 8:42 am

Also, when I was cherrypicking numbers for the last post, I noted that the red bank has 2 year fixed at 1% below 5 year fixed.

Dealing in shorter term fixed probably plays out like a slightly different version of the variable game. Over most periods, you’re going to beat the 5 year plan.

The only drawback I can see is that you have to deal with banks’ loan officers more often……

#78 Pounding sand in Peachland on 08.28.13 at 8:46 am

Where is springbank

#79 TurnerNation on 08.28.13 at 8:53 am

Kids are taught the Golden Rule. And don’t even think of playing a game of Cowpersons and Indegeneous people in school. Instant suspension. We have a Zero Tolerance policy on violence, wink wink. Now let the missles fly!
Oh how the elites are laughing at us.
He who has the most ‘gold’, rules…

#80 Julia on 08.28.13 at 8:54 am

I don’t inderstand why people are saying Garth changed his advice. Did he ever recommend locking in at 5%? I only recall one blog when the 10 year rate was particularly low he said jump on it, which of course made sense. I do however agree that recent posts and ongoing consistent messages about rising rates might lead people to think that he’s recommending locking in, so maybe it would help if he explained that a little. I think it’s likely mortgage math that befuddles people. Of course no one has a crystal ball so it’s all a bit of a gamble either way I would expect. I think the real message is if you have to own, don’t have a mortgage that you can’t afford at 6% and you’ll be ok either way.

#81 Carlos Danger on 08.28.13 at 9:14 am

As you can see Garth, there is no reason to worry about rising rates. FP always has the answers to lifes problems….

http://business.financialpost.com/2013/08/26/rising-mortgage-rates-no-reason-to-panic/

No debt, no worries. — Garth

#82 Canadian Watchdog on 08.28.13 at 9:55 am

Genworth: No Boom, No Bust as Condo Market Remains Stable Across the Country

The condominium market, particularly in Toronto, but also in Montréal and Vancouver, has been a source of particular concern. Vancouver’s market is well into a slowdown. Markets in Toronto and Montréal are cooling, but we think they will avoid major downturns, partly because, on the demand side, demographic requirements remain decent. Also, the banks will continue to require builders to have healthy pre-sale levels before advancing construction financing, keeping supply somewhat in check.

Ok everybody go back to flipping. Nothing to see here other then some condo insurance company (who was secretly bailed out by F using taxpayer funds) trying not to panic.

#83 Infused with opiates on 08.28.13 at 10:06 am

76 Man from Nantucket – yes the bank will certainly use whatever rate best works for them, but in your example,
the new rate of 4.99 is higher than the old rate of 4.0, so
IRD is negative, so 3 mo interest would apply. Or have I misunderstood your example?

#84 Vamanos Pest on 08.28.13 at 10:19 am

Wow, I can’t really believe Garth is getting accused of a flip-flop here. Interest rates bottomed, he called for locking in, then interest rates increased dramatically (like a 30% increase in 2 months!) and he let us know that locking in was not an advantage on a mathematical basis anymore(may still make sense on a peace-of-mind basis).

If you were PAYING him for advice, wouldn’t you expect his advice to change based on changing parameters?

If your doctor told you you had high blood pressure and put you on blood pressure pills, then you lost 50 pounds, and your doctor said your blood pressure wasn’t high anymore and you no longer need the pills, would you accuse him of a flip-flop?

please, please, please get a clue people.

#85 Dean on 08.28.13 at 10:39 am

You can save interest by increasing your mortgage payment frequency. When you select an accelerated weekly or bi-weekly payment option, you are essentially making the equivalent of one additional monthly payment each year which will help pay off your mortgage faster.

monthly: you pay $186,204 interest in 25 years
http://mortgagepaymentcalc.ca/#p;300000,50000,5,5,12,25,3000,1000

accelerated bi-weekly: you pay $155,984 interest, pay off in 22 years
http://mortgagepaymentcalc.ca/#p;300000,50000,5,5,ab,25,3000,1000

you save $30,220 interest payment.

#86 overskooled1 on 08.28.13 at 10:42 am

Hi Garth,

ING Direct is showing a 7-year fixed mortgage at 3.89% (only 10 bps higher than their posted 5-year rate). What do you think of the 7-year as an option vs. a 5-year variable?

#87 gladiator on 08.28.13 at 10:53 am

Fellows, please stop speculating on Syria and why the US is going to invade and destroy it, like it did with many others. Watch this short video – it is all part of a plan that was put together long time ago. Unfortunately, too many so-called “conspiracies” turn up to be true…
http://www.youtube.com/watch?feature=player_embedded&v=9RC1Mepk_Sw

#88 thomasv on 08.28.13 at 10:59 am

Your call on gold is about to be proven wrong. You are right about the housing market..albeit I think the crash will be worse here in Canada than you think. But when it comes to the US economy..commodities..you are clearly wrong. Gold is on its way back to new highs..its pretty clear that gold has bottomed..its clear that the US economy even with massive injections of money printing is weak and will get weaker. The US housing market is on its way down now that interest rates have shot up..good luck when US interest rates are back to historical norms of 6-8 percent. I think you should stick to what you know..the canadian real estate market..you are out of your league otherwise.

A typical metlhead comment. Everyone who does not hold your view must be incompetent. So tedious. — Garth

#89 James Bond in Gold Finger on 08.28.13 at 11:29 am

#45 Rob Rice on 08.27.13 at 11:39 pm
#42 Gold Finger,

What’s going to happen in 2016 to warrant a “sharp correction”? What does your crystal ball tell you? Do enlighten us please…
———————————————————-
Another market melt down like in 2008, basically happens every 8 years. In addition, Canadian RE will be really tapped out by then due to increased interest rates and more fixed renewals at higher rates. It’s already in motion, as Garth tirelessly preaches, but these things are still time senstive. Just my humble opinion.

#90 DreamingInTechniColour on 08.28.13 at 11:33 am

All the cheap money locked in at 5-7+ years to keep people in their homes longer is really only good for the banks, not the home’s occupants. Remember the real estate market is similar to a casino, most of the time the odds are stacked against you. When house prices fall at alarming rates as rates climb – the occupants will end up paying through the nose just to keep a house key in their hand.

#91 Dupcheck on 08.28.13 at 11:38 am

1%-s richer then ever before…yey

http://www.motherjones.com/mojo/2013/08/income-inequality-goes-3d-interactive

#92 Shawn on 08.28.13 at 11:38 am

INTEREST RATE DIFFERENTIAL

Man from Nantucket at 76 said:

If I go to break, the arsehole at the bank might point to the “posted” rate, 4.99% and claim IRD, even though the special rate, which most (all?) customers will get is lower than 4%.

***********************
It works the other way the lower the current rate the bigger the IRD.

As revealed on this blog a few weeks ago, what happens is if you have 2 years left on a five at 4%, they say okay today’s 2 year rate is 2% so that is where the big IRs come from. You contracted for 4% for next two years and now if you go 2 year the bank gets 2%, the bank wants the other 2%. You contracted for 4%, so fair enough.

All’s fair in competitive markets.

#93 Rational Optimist on 08.28.13 at 11:39 am

VRM beats fixed-rate 90% of the time, according to the famous Milevsky study. Those are good odds.

It’s not because of how interest rates move, though. The reason is that most Canadians are nervous nellies who quiver in their boots at all the bad stuff that they think is going to happen. When they opt for a fixed rate, the bank gives it to them, but a higher rate than the yield curve would dictate. The banks are really offering them insurance against rising interest rates in the form of higher fixed rates, and Canadians pay the insurance premium. It’s not because they’re too dumb to understand and predict the yield curve (though sometimes they are, as when this blog reported that it was probably an uncommonly good time to lock in). Even if they did have a good idea about what yields were going to do, they’d still pay a premium every time they lock in for a longer term.

Everyone should go variable, and pay less interest. Having less interest cost is good. The only exception to this might be if the interest is tax-deductible, and the government is thus helping to pay for some of your rate-protection premium.

#94 [email protected] on 08.28.13 at 12:05 pm

“Now a massive 85% of borrowers have mortgages of five years or longer.” – Garth

That’s a huge jump from what, 61% with 5 year terms and another 9% making up the rest of the term mortgage holders for what, 70% or so just a short few years ago? 85% is a high number. The 15% or so left on variables are likely to be shorter than 5 years. This lessens the effect of higher interest rates on current mortgage holders in a big way in the short term but all bets are off if rates climb significantly higher when it comes time for renewal.

Certainly, higher rates out of the bond markets (5, 10 year U.S. government bonds) will still impact the cost to borrow for house shoppers and buyers are the one’s who dictate values as RE is for the most part, driven on credit, a combo of regs, rates and income but we all know this just as we all know central bank rates are the next thing to watch in terms of affordability for current mortgage holders.

Just didn’t realize 85% of current mortgage holders are holding 5 year terms or longer until you brought it up, Garth. This would, in my mind, negate the possibility of a housing crash as higher rates from bond markets don’t initially hurt income spending in the short term. Correction coming, sure, because the market is still built on credit but crash? Depends on when the lion’s share is renewing terms into higher interest rates, presumably north of 6% and that could be 2, 3, 4 years down the road before it gets real nasty, I think.

Just wanted to mention, that while the U.S. fed has invested some, what, 3.65 trillion into securities (treasuries, MBS’s) to keep rates artificially low (this spring, the U.S. fed was buying 46% of all MBS’s up for offer spending $40 billion a month, as an example) and own, for example, some 18% of all U.S. MBS’s (they now own 1.35 trillion worth of MBS’s of which there was some 7 trillion securitized in 2011), the U.S. central bank has never before wielded this kind of power and manipulation of rates over bond/housing markets in terms of rate fixing. The point I want to make is that through these trillions invested, they have achieved a measurable recovery in housing values that look like values will sustain higher rates.

To me, it appears that rates have risen in the U.S. because the U.S. fed let it happen (its not just cowboy’s selling off). The U.S. fed isn’t going to be beholden to emerging economies or Europe or Canada with their fed policy, they are looking after their own and by that, I mean that the U.S. fed only has one shot at this to get it right. U.S. housing, loose lending regs and low rates led to the GFC in the first place so why would the U.S. fed risk causing another bubble in housing through prolonged emergency rates in the face of true economic strength? Why would the U.S. fed make housing “thee driver of the economy”, diverting energies away from true industry and trade only to watch it blow up in their faces all over again?

There is only one solution to keep that from happening again and the medicine, wanted or not by the rest of the world, is higher rates or we get a GFC 2. I’m looking for a pullback of Q.E. in the range of $12 to $15 billion and higher rates going forward, possibly as much as a half a percent or more short term (they could fall a bit from there over the winter). I’m cautious about what this will do to the stock markets and equities and have lightened my position looking for a buying opportunity. I don’t think falling values will be sustained, markets will adjust quickly and life will go on. That’s how I see it playing out, my 2 cents anyhow and best of luck to investors out there.

#95 Kid in Blog Photo on 08.28.13 at 12:17 pm

To Smoking Man:

Dad ! ….is that you ?
I’m working as a bouncer at a Montessori school.

#96 Ralph Cramdown on 08.28.13 at 12:33 pm

#86 Dean — “You can save interest by increasing your mortgage payment frequency. When you select an accelerated weekly or bi-weekly payment option, you are essentially making the equivalent of one additional monthly payment each year which will help pay off your mortgage faster.”

You won’t pay any interest at all if you pay cash for the house in the first place. I’m not trying to be facetious here, but I think the banks have fooled a lot of people. The part that pays the mortgage faster isn’t switching from monthly to bi-weekly, it’s the ‘accelerated’ part — paying more every payment. Well duh! If the customer had signed up for a monthly 22 year amortization instead of 25, the effect would be virtually identical… except that he’d only have to worry about one monthly payment, would have that much more time to figure something out in case of a money emergency or what have you, etc. Many mortgages allow prepayments, so our hero — if disciplined — would have more flexibility with the old 25 year monthly, prepaying when possible.

Think about it. An insured mortgage is about the most profitable thing a bank can hold on its books, because it doesn’t have to allocate risk capital against it. Why are all the banks encouraging people to pay down their mortgages early or more often? Think they’ll still be extolling the virtues of prepayment at the top of the interest rate cycle, or if new mortgage originations decrease drastically?

#97 Old Man on 08.28.13 at 12:53 pm

It might be time to rig a few puts and calls here and there, as the clock is reading a minute to midnight, or is this redline stuff just a bluff? I have no clue.

#98 father on 08.28.13 at 1:21 pm

I think some people don’t read everyday’s blog so they think garth flip flop’s. I like this blog & some of the blog dawgs because it is funny like some dawg waiting for the new post yesterday was getting antsy because it was a little late or the furster guy’s they are funny but dedicated to be first so they are loyal readers, if people find it childish who cares it keeps the blog interesting just like smoking man, most people that don’t like what others say can skip posts so stop being so stuck up and enjoy

#99 Dean on 08.28.13 at 1:22 pm

#97 Ralph Cramdown –
If the customer had signed up for a monthly 22 year amortization instead of 25, the effect would be virtually identical…

well said.

It is the extra payment doing its work.

I can see only one point is that the ‘accelerated’ part can force no so disciplined people pay off mortgage fast

#100 Jesse Ventura Jr on 08.28.13 at 1:23 pm

Fresh spam in my inbox from first-class baldy — Brad J. Lamb.

Brad says not to believe the hype!

http://email.bradjlambmarketing.com/August2013Newsletter/FromTheDeskOfBJL_Aug2013.pdf

#101 Donald Trump on 08.28.13 at 1:29 pm

Re list of people suing COV over the Olympic Oval.

One is listed as a “Thomas Gisby”

http://www.vancouversun.com/news/gangster+Gisby+brutally+murdered+Mexico/6536360/story.html

QUOTE:

Gisby was born in the Fraser Valley, but owned property in downtown Vancouver.

He had been involved in the B.C. drug trade for more than 20 years and had connections with major crime figures from the Hells Angels to the Dhak group.

#102 anon on 08.28.13 at 1:34 pm

#14 Smoking Man on 08.27.13 at 9:23 pm

I’m very susprised this little piece of poorly shrouded anti-semitism got through your filter Garth.

Zioscope? comon.

#103 frank le skank on 08.28.13 at 1:53 pm

#67 Rob aka Captian and Mrs Slow on 08.28.13 at 7:57 am
Vulcan? — Garth

Spock is a vulcan – not a star trk fan i guess!?!?

I know that. But I’ve never heard Vulcan. — Garth

#104 Bill Still on 08.28.13 at 2:12 pm

(#89) “A typical metlhead comment. Everyone who does not hold your view must be incompetent. So tedious. — Garth”

Now, lets peel the onion a little here… personal attacks are “tedious” yet the commenter is called a “metlhead” (whatever that is but I’m thinkin’ it’s not good, and could very well be meant as a personal attack)…

#105 Donald Trump on 08.28.13 at 2:12 pm

Sorry..in post #99 meant to say “Olympic VILLAGE”, not Oval….

#106 robert james on 08.28.13 at 2:24 pm

#102 I love stories like this where the sub human vermin exterminate each other.. Saves a lot of red tape and a lot of money for us tax payers ..

#107 Old Man on 08.28.13 at 2:28 pm

#103 anon – what is the definition of a semite? It refers to a language and to be an anti-semite with an honest definition means to be against many ethnic groups in the world amounting hundreds of millions, so there you are.

#108 anexplantionoflame on 08.28.13 at 3:06 pm

OK this says it all about the state of the nation…..a woman protestor bares her breasts in outrage……..on the radio

http://news.nationalpost.com/2013/08/28/lori-welbournes-topless-interview-video-hits-2-5-million-views-on-youtube/

#109 Junkieman on 08.28.13 at 3:08 pm

“I know that. But I’ve never heard Vulcan. — Garth”

http://www.starbase-10.de/vld/

Here you go Garth, brush up on your Vulcan. I hear the ladies dig a man who knows one of the romantic languages and has motorcycles.

#110 Donald Trump on 08.28.13 at 3:11 pm

Anti Semitism?

….. is the most misunderstood and miss-used term in the Political Correct nomenclature.

#111 Bobo on 08.28.13 at 3:16 pm

“That means you can finance at 3% or less (if you need a muffler) for at least a year, then flip over to fixed if the economy improves enough to prompt central bank rate hikes.”

Garth, the yield curve will steepen further with an improving economy and as the market discouts future rate hikes. 5-year rates will already be much higher at this point. The time to lock in, in theory, was last month, not next year.

#112 Penny Henny on 08.28.13 at 3:28 pm

Garth-Now a massive 85% of borrowers have mortgages of five years or longer.
—————————————————
from the National Post-The Canadian Association of Accredited Mortgage Professionals found in its last survey that fixed rate mortgages were 85% of new origination.
http://business.financialpost.com/2013/08/26/rising-mortgage-rates-no-reason-to-panic/

85% of new origination is the key.

Playing fast and loose with numbers.

How far will you go to try to instill fear?

Shame.

Eleven months ago the percentage of fixed-rate (including combo) mortgages was 72%, according to CAAMP. Since then there has been a rush into fixed and away from variable. My number may be an estimate, but not far off. Hold the indignation. BTW, how would anyone construe the post above as ‘distilling fear’? You must scare easily. — Garth

#113 Canadian Watchdog on 08.28.13 at 3:34 pm

#101 Jesse Ventura Jr

"The fact that you can't afford to buy a home is not a reason for prices to fall" —Brad J. Lamb

I thought I've heard every idiotic notion trying to defy the laws of economics until that one. I can only imagine what kind of pre-prime borrowing scheme this guy's sales team is running with that mentality.

#114 TheCatFoodLady on 08.28.13 at 3:51 pm

It’s hot, humid & I have the headache from hell. I don’t ‘do’ heat well.

Now thanks to that ‘newsletter’ from The Shorn One, I’m close to hurling.

My brain is too pixelated right now to sort out the individual idiocies but having read through it, (okay skimmed), just once, my bullshit meter is red lining.

I better go weed the garden or something.

Boy – tonight’s column should be interesting.

#115 Dean on 08.28.13 at 3:54 pm

Even Mississauga become so unaffordable, are you going to buy this shed for $659,900 ?

http://www.realtor.ca/propertyDetails.aspx?propertyId=13445838&PidKey=-1607836317

#116 Canadian Watchdog on 08.28.13 at 3:55 pm

#112 Penny Henny

Canadian mortgages on variable rates begnning in mid-2012 to today have dropped from 2/3 to 10%. Source: Mark Carney , April 18, 2013. "It's a cliff"

#117 Donald Trump on 08.28.13 at 3:55 pm

Guy Does to Bank What Banks Usually Do to Other People

http://www.goodnewsnetwork.org/business/guy-changes-credit-agreement-and-court-upholds.html

A Russian man who decided to write his own amendments into a credit card contract has been given a thumbs-up by a court who upheld his version after the bank sued.

Ironically, after the man sent in the signed contract with numerous changes, like 0% interest, no fees and unlimited credit, the bank complained because they had certified the contract without reading the fine print.

Tinkoff Credit Systems took Dmitry Agarkov to court, but a judge agreed with the the 42-year-old, deciding that the agreement he crafted was valid.

#118 Smoking Man on 08.28.13 at 4:00 pm

#103 anon on 08.28.13 at 1:34 pm#14

Smoking Man on 08.27.13 at 9:23 pmI’m very susprised this little piece of poorly shrouded anti-semitism got through your filter Garth.Zioscope? comon

……………

You must be new here, I hate with every fiber of my being, anyone that is regardless of any faith remotely religious, somewhat religious tiny bit religious, it is tribalism.

Weak people that can’t stand on there own feet.

use labels to limit conversation and please the gang. The ones judging you.

If I have offended you, I’m happy, your part of a group category, . Your a suck up, have no respect for you.

Long live the individual…..

Antisemitic, your an idiot…..

#119 Penny Henny on 08.28.13 at 4:01 pm

Garth-Eleven months ago the percentage of fixed-rate (including combo) mortgages was 72%, according to CAAMP. My number may be an estimate, but not far off.

Ok I’ll give you that, and even your guesstimate.

But can you please explain how you came to the conclusion that 85% ARE 5 YEARS OR LONGER.

So what you are saying is that 100% of those in a fixed rate mortgage are for 5 years or longer.
OH, MY!!!

Garth-Now a massive 85% of borrowers have mortgages of five years or longer.

fear sells, I get it.

#120 45north on 08.28.13 at 4:14 pm

lorneMccuaig: The U.S. fed isn’t going to be beholden to emerging economies or Europe or Canada with their fed policy, they are looking after their own

“they are looking after their own”

makes sense to me

#121 shiny mirrors on 08.28.13 at 4:18 pm

“Condo prices will not change much in Montreal, Toronto and Vancouver.

While fears of condo overbuilding have been “of particular concern” in Montreal, Toronto and Vancouver, the outlook by the Conference Board of Canada predicts any excess supply will be absorbed through population growth and employment gains.”

http://www.montrealgazette.com/business/Condo+prices+will+change+much+Montreal+Toronto+Vancouver/8843592/story.html

well, if the paper says so it must be true. I’m getting myself a condo in Toronto!

nahh just kidding. What a gong show… but everything’s gonna be alright. ha .

#122 Penny Henny on 08.28.13 at 4:30 pm

#113 Canadian Watchdog on 08.28.13 at 3:34 pm

“The fact that you can’t afford to buy a home is not a reason for prices to fall” —Brad J. Lamb

I thought I’ve heard every idiotic notion trying to defy the laws of economics until that one. I can only imagine what kind of pre-prime borrowing scheme this guy’s sales team is running with that mentality.
——————————————————
think about the comment for a minute, just because you can’t afford it don’t mean diddley.
it’s worth what someone is willing to pay for it, and that someone don’t have to be you

#123 Name on 08.28.13 at 4:47 pm

So Garth,
Does it make sense to you to pay the minimum 5% down payment and pay the CMHC premium, even if I have the cash to put 20% or more down?
You have suggested to pay as little as possible towards your mortgage at rAtes this low and invest instead. Does this make any prudent sense?

#124 T on 08.28.13 at 5:19 pm

Perhaps we can see a chart of the Canada 5 year posted tonight?

You know, the one showing the bond falling off a cliff back to 1.84% today.

Or do we only discuss this on the way up….

Bond prices usually go up (and yields down) when equities are volatile. It’s why smart people have balanced portfolios. You are just discovering this? — Garth

#125 Harry Wilson on 08.28.13 at 5:37 pm

re #101 Jesse Ventura Jr

I can’t thank you enough for the Brad Lamb link. Gem after gem after gem. What do you call the emotion of laughing while horrified? Whatever it is, that was it.

Here’s hoping Mr. Turner will sic the dogs on that ‘newsletter’ in an upcoming blog post (or is that target just too easy?).

GRAPHIC IMAGE WARNING
If you click the link, the first thing you will see is a picture of Brad Lamb staring at you, and he looks hungry. I don’t think I’ll sleep tonight.

#126 William Herbert on 08.28.13 at 5:39 pm

Ever increasing energy prices will drive inflation in all areas dependent on fossil fuels for growth. This alone will have far more impact than rising interest rates in the short-term, not only housing prices but all consumer goods or services dependent upon energy.

Higher interest rates appear to be little more than an apparition at this point in time. This faux-threat has been touted time and time again over the past 5-7 years. Our central bankers are fiscal heroin addicts reliant on low interest rates for their next asset-value preserving fix! Our political masters are even less interested in increasing the cost of borrowing as they fear slowing economic growth that is already tepid at best. No sane individual believes any of the inflation numbers provided by the Fed or BOC. They are franken-numbers that do not tie in with unemployment rates or consumer prices most Canadians experience everyday.

#127 calgaryPhantom on 08.28.13 at 5:47 pm

@123- Name

I am no Garth, but i will tell you what i think.

Say the house costs 400 K. For that house, the 5% down is 20k 20% is 80 K . The difference is 60K. Lets say you pay 10K for CMHC insurance to save that 60K for investment.

You are paying 16.7 % of 60 K to CMHC.

So in order for you to be profitable by investing that 60K, you will need to make returns of more than 20% on that 60K , say in 5 years. Which is very much possible .

And off course, it gives you liquidity too.

#128 Mark W on 08.28.13 at 5:48 pm

http://www.news1130.com/2013/08/28/big-downturn-in-vancouvers-condo-market-unlikely-report/

Collapse of Metro Vancouver condo market unlikely: forecast
Conference Board of Canada says the market is stabilizing

#129 rosie "moving forward" in the knowledge that, "this won't end well" on 08.28.13 at 6:07 pm

#128 mark w
Always check the source and more importantly, who’s paying the source. http://filipspagnoli.files.wordpress.com/2010/08/dilbert-statistical-joke.gif
HMMMMMMMMMMMMMMMMMMM.

#130 Nosty Lucifer Loco Diablo on 08.28.13 at 6:11 pm

#73 TurnerNation — “Remember: 2nd and 3rd World countries get bombed; we in the 1sts get economically bombed.” — True enough. For example — Uno, dos, treize, quattro, cinqo cinqo. There are planty more where these came from. BTW, how is Eddy ‘Baby’ Snowden doing? Even the WH / Pentagon / US Fed hasn’t got a clue how much Snowden swiped. What a bunch of shit for brain politicos.

#131 Donald Trump on 08.28.13 at 6:46 pm

Re: Brad Lamb….

..as long as we don’t hear about Bob Rennie here in God’s gift to RE……life is good.

..otherwise….Brad should audition as a James Bond villain….”Brad does 416″..etc.

#132 Canadian Watchdog on 08.28.13 at 6:57 pm

#122 Penny Henny

"it’s worth what someone is willing to pay for it, and that someone don’t have to be you"

Please allow me to correct that for you, since Canadians don't pay for anything anymore.

"it’s worth how much someone is willing to lend to you, because you're not that someone with the money."

#133 VanPerfecto on 08.28.13 at 7:14 pm

Offshore will save Vancouver. This is the real test. Is it offshore money or debt moving Vancouver
METRO VANCOUVER (NEWS1130) – You can forget getting a smokin’ hot deal on a condo in Metro Vancouver. An outlook suggests fears of a collapse in the market are unfounded.

Robin Wiebe with the Conference Board of Canada says a condo is still an affordable alternative for a lot of people in our expensive region.

They will keep getting built and bought, he tells us, as there are a lot of first-time buyers and empty nesters out there, as well as an aging population. He points out those demographics are typically looking for cheaper housing in higher density, not only because of the price, but also because commutes tend to be shorter and amenities are often closer.

Wiebe says there may be some cooling in the condo market come the fall because of higher interest rates.

“The wild card in Vancouver for all types of real estate, not just condominiums but including condominiums, is the strength of off shore demand,” he says, adding it’s something that’s incredibly difficult to forecast.

Regardless, Wiebe says the market is on the rebound after the recession.

The study, commissioned by mortgage insurer Genworth Canada, predicts Vancouver will remain a buyer’s market this year with a price drop of half a per cent to an average of $365,000, rising 1.4 per cent next yea

#134 johnnny on 08.28.13 at 7:17 pm

Ok #2 & #7 Jimmy – I have a revelation for you.
1st of all your #2 spoke volumes about you.
Your #7 reinforced that.
The people who read GT’s blog are from all over Canada
and parts of the world.
I could probably google your neigbourhood of interest,but why bother.
So Jimmy,what do you think about Goat River,Kanaka Bar,Spuzzem,PetitRocher,Debert,TeteJaune,Barachois,MBride2 Hills,Swan Landing,River Herbert,Macaan,Norton,
Alex,Moose River,cache Creek,Belmont,St.Ignace,
Blue River….and on and on?

#135 jess on 08.28.13 at 7:23 pm

“guaranteed sale program
http://www.therecord.com/news-story/4052714-cambridge-realtor-dacosta-to-fight-to-regain-licence/

#136 World Traveller on 08.28.13 at 7:25 pm

VRM was the way to go for me, just sold a condo this summer and only got hit with the VRM penalty, actually got a good offer on our unit. If I was locked in the penalty would have really hurt. So VRM’s are good I think especially for condos or other property you are likely not going to live in for 10-20 years.

#137 Timing is Everything on 08.28.13 at 7:48 pm

#73 TurnerNation
#130 Nosty Lucifer Loco Diablo

http://tinyurl.com/nemdhzt
http://tinyurl.com/4qqueg

oil prices past $116 US

http://tinyurl.com/nkcanpn

And so it goes.

#138 World Traveller on 08.28.13 at 8:09 pm

Seriously, this impending attack on Syria is some serious bulls^&t.

The UN has not provided proof that Assad did it and it is kind of hard to pick the good guys in this conflict. I guess the defence contractors and oil tycoons are not making enough money this quarter.

#139 Infused with Opiates on 08.28.13 at 8:34 pm

Good explanation of various IRD calculation methods

http://www.paylesspenalty.com/interest-rate-differential/

#140 aprilNewwest on 08.28.13 at 8:41 pm

#133 Vanperfect…
CKNW news this morning… condo sales in Vancouver down 8% and new condos down 20% … expect further drops next yr as mortgage rates increase, it said. Didn’t have the radio on in time to get who the info came from. I was surprised to hear this news on CKNW as they frequently pump real estate.

#141 Vamanos Pest on 08.28.13 at 9:16 pm

#122 Penny Henny
The comment by Canadian Watchdog is in fact valid (although not well explained CW). The price of housing is limited by what people are able to pay. That is, what they can afford. If a person of average income in a given market (say 83,000 in Vancouver) cannot afford the average house (900,000 in Vancouver) it undermines the continued demand for that house. With undermined demand, and no corresponding influence reducing supply, price would come down.

I know there are many more complexities, but this is the basic economic principle that Mr Lamb was ignoring, and that Mr Watchdog was referring to.

#142 NoName on 08.29.13 at 6:16 pm

I wonder what will happens with BB when they lose a driving privileges as they get older that will for sure put some pressure to move closer to services and “fast” public transport. And unfortunately Toronto is anything but that, yes some service and medical centers are on or walking distance to subway. But if those tink tonks from coference board are right maybe it would be a good idea for developers to scrap for rec centers in condo buildings for favor of walk in clinic. You never know when you will need….. Cough now plz…

#143 Mike on 08.30.13 at 12:36 pm

Is that a pic of Garth when he was 18 months?