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Are you ready for higher interest rates?

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That seems like a really weird question as rates continue to drop.

But over at the Vancouver Sun, Barbara Yaffe says ‘Prepare now for interest rate shock‘.

On top of the Bank of Canada recent surprise .25% rate cut there are a number of people predicting another cut coming this year, so why worry about interest rates at all?

The size of the average mortgage on a dwelling in Greater Vancouver is $400,000, reports Jeff Johnson, mortgage broker at Cloverdale-based Dominion Lending Centres Canadian Mortgage Experts, with offices in B.C. and Alberta.

That jumbo figure is based on the average 2014 value of a Vancouver property, $801,000, and a Canadian Association of Mortgage Professionals survey last year showing the average equity position assumed by borrowers is 50 per cent.

Johnson notes that if interest rates rise in 2015 by even just half a percentage point, monthly payments on a typical variable rate $400,000 mortgage could increase by $100 to $1,872.

“And this is the best case scenario, as rates could continue to slowly increase (thereafter).”

Elyea points out such increases would be coming on top of 2015 hikes imposed on B.C. residents for MSP premiums, car insurance and BC Hydro.

And it is worth remembering British Columbians have more modest employment earnings than elsewhere in Canada. The B.C. average weekly wage last year was about $890, compared to $940 across Canada.

Ok, sure. But we know all that already. How long have we been hearing the warnings about ‘being ready’ for rate increases while they just stay down at record lows or continue to drop?

It’s like that old story ‘The Boy who cried Wolf’.  Eventually the villagers get sick of hearing all the false warnings, learn to ignore them and live happily ever after.

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Industries

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[…] kills Yaletown land swap -Labour participation drops -Oil crash bad for BC labourers -Condo cancelations in Toronto -Toronto and Montreal best cities? […]

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Shut It Down Already

“I cashed out of my condo 3.5 years ago and put the whole 6 figures in the stock market.”

You got lucky. Congratulations. Still a dumb move, though. You transferred all your eggs from one basket to another. Sounds like it was a lower-end condo, though, otherwise you’d not have felt the need to wield the term “6 figures” ($100k+) as if it were a big deal.

Also interesting that on the point about racists you chose to attack space889 rather than take you pick of any of those who use the word “locusts”. Perhaps it’s because they’re bearish?

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left already

#78 , yes that seems to be in vogue right now, lower currency is big for the economy. What about all the things we import from the US, wont there be massive inflation if CAD goes to 50 – 60 cents range?

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@32

“This is what the bears refuse/can’t comprehend: We live in a global environment where $1 Million is nothing.” Actually a recent study showed you need $798K US total clear assets to be in the top 1% in the world. More than 99% of the world population could not come up with $1 million if they liquidated all assets. Almost 40% of that 1% live in the US (18 million people). Only 1.6 million live in China and 1.6 million in Canada. Of course almost all of those in both China and Canada that have $798K have most of it tied up in real estate and could not access the $798K to buy more real estate. For that fraction of 1 percent in the world that could come up with $1 million most have ties to other countries which is where… Read more »

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Whistler or bust?

#76 – The BOC wants a lower dollar. There is a currency war going on and its a race to the bottom. The Euro, the Aussie $, the C$ are all trying to juice their exports and economy by actively depreciating their dollar. The big losers are the Swiss and the US$ and other strong economies. (Before you say the US is not a strong economy they created 3 million jobs last year and anyone who wants to work can) The BOC will not be intervening and if they do it will be with foreign currency reserves not with rates. We are in for low rates for a very long time. Everyone needs to prepare for the new normal. That said, each cut has less and less of an effect and the RE market has been juiced as much as… Read more »

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history

Thanks Skook for the Wakefield news. This is huge development. Will see which contractor steps up. Or if not, and the building pace goes on a diet, seems more likely

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left already

If CAD continues to fall, will BoC increase interest rates to defend the currency?
At what point does it intervene? 50 Cents?

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Whistler or bust?

“ – hate to break it to you girl but when real market panic comes, everything go down together, just like 08 and it might not come up again so quickly.”

Yes space889 she can also hit sell and have her cash in 3 days anytime she likes.

If she has been investing since 2008 she will have a lot of profits to spend unlike anyone who has owned a condo since 2008.

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patriotz

@73: ” If CAD falls and continue to fall, our housing will be attractive again to those waiting to buy. ”

If the Vancouver RE market were driven to any signicant extent by buyers using foreign currency valuation (e.g. in USD), the USD price would see less variation than the CAD price. Historically the reverse has been true – for example the early 1980’s bust saw a bigger decline in USD than in CAD. Also the recent 2008/9 decline.

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space889

– how do you know the rate wouldn’t crash into 1.5% or lower for 5yr fixed. Japan has 10yr at 1.1% as posted by GT.

US has one of the highest government bond interest rates among developed countries. If you bothered to open your eyes and actually look around the world, a lot of EU countries have negative rate on government bonds out to 5/7/10+ year maturity. Rates can go a LOT lower than people expect and a 1.5% fix rate could light a fire under the housing market.

As for weak currency bailing out housing, why not? If CAD falls and continue to fall, our housing will be attractive again to those waiting to buy. The ones who already bought don’t matter as much as the new buyers.

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space889

@Mortgageslave – wow….so bears have been predicting a house price crash since 2008 which has softened to a soft landing, to well it doesn’t matter if price don’t fall cuz renting is superior and cheaper, and you still claim you weren’t wrong and things are going as you predicted?? Seriously?? OMG, the self-delusion is incredible. Dave has the best prediction from 2008, better than any bear. Even the stupidest bull had more accurate predictions, those are the facts. At least I’m man enough to admit that bear predictions for the last few years have been wrong and likely continue to be wrong. Do I think price will go up? I don’t know but I do know you can’t discount the possible entirely, and I wouldn’t be shocked if it doesn’t go down after 5 years, and people here on this… Read more »

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space889

@Mortgageslave – well yeah, that’s the whole point. If someone else posted that same stmt except replaced white with Chinese or Richmond Driver (aka Chinese drivers), it is upvoted like crazy. I would be called a Chinese locust ass kisser for trying to point it out as a racist comment. People will say it is not racist because it is true. But when the tables are turned and I posted my own personal observation that all the drivers that speed up to cut off a lane change are white, wow, now that’s a blanket blantant racist remark!! Down with racism! You like to think you are some high above cloud moral superior person when in reality, your reflection in the mirror shows an ugly, hypocritical racist jerk. That’s the simple truth. On this blog, racism against Chinese is good and… Read more »

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Mortgageslave

that should read -.15% 3% to 2.85%.

I think this is a last ditch effort by our government to try and reverse the trend that looks to be inevitable.

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Mortgageslave

@space889 don’t sugar coat your comment about white drivers. Everybody can see through “observation/theory”. It was a BS blanket statement, own it. whites, chinese, blacks, they all have bad drivers. comment 65 – You make a “comment” about a scenario where a low dollar can rescue the housing market now. Let me guess, just another way to say “the foreign buyers are coming”. I thought we went over this. You just keep posting the same fairytale BS. Lastly, who says the bears have been wrong? As far as I can see, everything is lining up as predicted. HPI trend has been dropping for the past year and is now negative (VAN -.35%) That means houses are dropping in value, I see now reason that this won’t accelerate. +.15% lending rate won’t do anything. Please tell me how “you think” this… Read more »

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paulb

New Listings 203
Price Changes 50
Sold Listings 108
TI:11669

http://www.paulboenisch.com

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Skook

@55

Thanks VMD for posting the Wakefield story update from BIV. Finally, some local reaction!

I’ve been keeping an eye on Sunshine Coast media for any follow-up and so far nada.

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kabloona

“Canadian workforce at lowest level in 14 years in 2014: 121,000 Canadians joined workforce as key labour participation rate dropped to 65.7%, StatsCan says CBC News Posted: Jan 28, 2015 9:44 AM ET Last Updated: Jan 28, 2015 2:23 PM ET http://www.cbc.ca/news/business/canadian-workforce-at-lowest-level-in-14-years-in-2014-1.2934616 Just 121,000 more Canadians found jobs in 2014 and the number of people in the workforce has fallen to the lowest level in 14 years, according to Statistics Canada. That’s because the growth in the number of Canadians of working age, which rose 1.1 per cent, outstripped the growth of jobs in the economy, which grew by 0.7 per cent. The labour participation rate, a key measure of whether Canadians are working or looking for work, fell 0.6 percentage points to 65.7 per cent in December 2014 — the lowest since 2000…. …Statistics Canada also revised its estimate… Read more »

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space889

– I make no advise about buying anything. I merely stated that some people might buy with the same logic and outcome expectations as buying US housing 5 years ago.

Learn to make a difference between a statement about an observation/theory vs an advise. Geez…what’s with the low reading comprehension among bears on this blog.

As well, I’m no perma bull. Again, I merely stated the simply inconvenient fact to bears that housing prices haven’t dropped despite the repeated calls of such a drop in the last 5 years+. Saying that such trend can continue given past history and one should consider that outcome isn’t necessary being a bull. But I guess the perma-bears on here can’t stand someone pointing out how wrong they were?

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space889

– *gasp* You mean I’m only allowed to say all Chinese drivers are bad and can’t drive?!?! But I can’t make the kind of blanket stmt about white drivers??!?!

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space889

– hate to break it to you girl but when real market panic comes, everything go down together, just like 08 and it might not come up again so quickly.

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space889

@Macro – lot of people were saying the same thing about US housing market 5 years back.

We were talking about the big one in Van housing market just around the corner 5 years ago and look where we are now, no big one or even a small one. Maybe the dropping the CAD$ is just what the doctor ordered to sustain it for another 5 years. Who knows.

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Mortgageslave

@shut it down already “Mortgageslave, I’d argue that the bullish posts here are more on-topic than the racist ones. Yet only one of those groups gets downvoted.” Are you kidding me??? You have @space889 here (the perma bull) making racist comments about all the drivers cutting him off are white! Then he’s telling us the now is a great time buy here beacuse of our low CAD (just like the US was when our dollar was high)? The only difference was the US had just crashed 30+%. So now space889 is advising everybody to not only time the dodgy Vancouver housing market but also the foreign exchange. All the stars will line up perfectly for that flip, no risk there LMOA. If he was a financial advisor he’s be kicked so far to the curb…. Let me know when you… Read more »

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Marco

@56 @marco

Should have said house deflation to be more specific, but you got it. Not everything has deflated though, Imports from the U.S as well as automobile prices are rising. “Kook aid” good one lol

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vangrl

# 45
“so, how’s that portfolio of yours doing today? fyi, approx 29% of s&p500 has reported. of these, 44% have missed on revenues (as these are harder to doctor)”

bad market day for sure, but as Mortgageslave has previously mentioned, being well diversified (which you can’t do in real estate) helps immensely.

Reits & utilities had a great day! offset a lot of losses in Energy and financials. Also, CN rail boosted their dividend by 25% today!

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