How to prepare for interest rate hikes.

We should be well and deep into the ‘boy who cried wolf’ territory by now.

How long have you heard warnings that interest rates may be going up?

We’ve all become so used to hearing that it’s going to be a big surprise if they do.

The CBC has an article that says interest rates will go up this year and here are 4 ways Canadians should prepare.

#3 is ‘don’t rush to buy a home’:

Higher interest rates could also lead to a correction in the housing market.

“The big issue as far as I can see is that people panic and think they have to get into the housing market before interest rates climb. But they have to recognize the overall long-term impact of interest rates actually climbing,” says Laurie Campbell, CEO of Credit Canada Debt Solutions.

Homebuyers who rush out to purchase homes to beat a spike in rates could end up with homes dropping in value.

“I think people have to be vigilant about any big purchases they may be making in the next little while. Housing in particular,” Heath says. “If someone is considering purchasing a house, they have to really look at more normal interest rates during their budgeting.”

Read the full article here.

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VanRant
Member
VanRant

From today’s huffingtonpost

“Not only can you lose your house — your mortgage lender has the power to strip you of (almost) everything else you own, and to garnish your future earnings until such time that the original mortgage debt is repaid in full.

This is how they can put the final nail in your financial coffin; this is how they will attempt take blood from a stone. Most importantly, this is new information to a great number of Canadian borrowers.”

crikey
Guest
crikey

Regarding the discussion on the price declines for Mayne and Saturna Island properties (as written up in the VanSun), it is interesting that as prices are in decline sales volumes are up.

“Mayne Island realtor Glen McLeod said he’s seen typical real estate prices fall 30 to 40 per cent over the last five years.

But even if prices are falling, sales volumes are going up. Forty-two properties on the island sold in 2014, a seven-year record.”

So much for higher sales volume always being a solid bullish indicator. Nope.

Shut It Down Already
Guest
Shut It Down Already

I think you have your cause and effect reversed, crikey. It’s likely that sales are picking up due to the price drop.

space889
Guest
space889

@Madashell – All the more reason we need non-recourse mortgage. Recourse debt will simply choke off any economic growth in debt deflation scenario. Ireland is feeling that right now with their best and brightest young people all leaving the country, rather than staying and paying off debt.

With debt strangling you, you aren’t allowed to take risk and pursue that great idea/tech/whatever that can generate jobs & growth.

space889
Guest
space889

@Mortgageslave – I’m just practicing what I learned from Patriotz and BPOM of telling the truth like it is and reflecting a tiny 1% of their attitude back at them. Don’t like it? As BPOM would say, go f* yourself.

bullwhip29
Guest
bullwhip29

@ #3

higher volume = capitulation

finally after many years of suffering some sellers on saturna/mayne and perhaps elsewhere ie. vanc isld, whistler, squamish, okanagan etc are starting to throw the towel in.

bullwhip29
Guest
bullwhip29

articles like this always fail to touch on what I think is even more important and that is, how should existing homeowners (esp those thinking of selling) prepare for interest rate hikes?

taylor192
Member

@space888

As long as the tax payer backs mortgages, they should remain recourse mortgages.

If you want non-recourse mortgages, then the banks should take the risk and/or the consumer pay the additional interest/fees to cover the risk.

bullwhip29
Guest
bullwhip29

@ #8
exactly. the last thing we need is an environment where reckless speculators can step up to the plate and swing for the fences without fear of the repercussions if they whiff on the ball (but stand to reap all the riches if they get lucky). never gonna happen…

Ford Prefect
Guest
Ford Prefect

Given that the extreme decline in oil prices is almost certainly caused by a corresponding drop in demand for both oil and goods and services in general, an interest rate hike seems somewhat improbable. It would be odd to see interest rates climb in the face of severe deflation or, much the same thing, in the face of either a steep recession or depression.

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!
a house is to live in, not to make money. is it even possible for you to buy a detached house on the west side? what about the east side? bitching about how timing has benefited others is pointless. you need to ask why young people are in this awful situation, and what can be done to reverse it or at least prevent it from becoming worse. NOM NOM NOM Says: January 6th, 2015 at 2:14 pm 142 @Bull! Bull! Bull! Hey man, I am a 34 year old who makes lower 6 figures and have a wife who makes the same… I grew up and live on the westside… I rent because I haven’t bought. Do you think it is a good time to buy now? Or do you merely like lauding your exceptional good fortune for having purchased… Read more »
patriotz
Member

@4: “All the more reason we need non-recourse mortgage”

Well then I guess you’d be willing to invest in a mutual fund that makes non-recourse mortgages? They are perfectly legal everywhere in Canada you know, it’s just that the banks won’t make them and the government won’t guarantee them.

history
Guest
history

http://globalnews.ca/news/1755279/breaking-school-closures-central-okanagan/

Snow has closed the Kelowna school district for the first time in 23 years.

tsk, better get to the bank and re-leverage the oil field wages for a quick trip to Caribbean … uh… oh wait…. $47 WTIC now… jeeezes freezes

StupidityCheck
Guest
StupidityCheck

“you need to ask why young people are in this awful situation”

Because there’s a bubble, you idiot.

P.S. Still waiting for you to give us your bull logic, BBB.

space889
Guest
space889
@StupidityCheck – Before starting calling other people idiot, it would be useful for you to check who has been right for the past 6 years. The bulls calling for increasing housing prices, the bears calling for falling prices, or the pig who calls flatting to higher prices. So far, bulls and pigs have been right more than bears. Seems absurd to me that people who have been continually wrong, and wrong spectacularly for the 6 years to keep calling others who have been right idiots. If you wonder why you are losing credibility and maybe in danger of your wife and kids then look in the mirror. That’s where the main problem lies, not in the housing price bubble that may or may not burst or the constant moving goal post of why bears are right. The bull’s logic have… Read more »
CBC
Guest
CBC

Higher interest rates are coming hooray! Oh wait, lower prices will be offset by higher interest rates. Bears lose again

CBC
Guest
CBC

and just because someone wrote an article about rates going doesn’t mean it will happen. Turner’s been predicting a rate increase for years , yawn

patriotz
Member

@16 ” Oh wait, lower prices will be offset by higher interest rates. Bears lose again”

What about today’s buyers who will pay higher rates on today’s higher prices? Didn’t think of that? Don’t feel bad – they didn’t either.

paulb
Member
Trusted Member

New Listings 207
Price Changes 39
Sold Listings 79
TI:10292

http://www.paulboenisch.com

space889
Guest
space889
US weathered through the housing bubble with non-recourse or limited recourse mortgages, with insurances available in non-recourse states, sometimes even backed by taxpayers. Having non-recourse mortgage is not end of the world. CMHC should stick to its original mandate and behave more like an insurance company which base its pricing on a proper set of risk factors. As an analogy, to ICBC a car accident is like a mortgage in default, except it is no-recourse as it can’t go after the guilty party for the money it pays out in damages. Yet it still make tons of money. No reason why CMHC can’t be like that with limited-recourse mortgage. Full recourse mortgage/debt can simply kill any chance of economic recovery when a debt deflation and massiave default hits. It takes away the giant reset switch that allows the debt to… Read more »
history
Guest
history

http://www.theautomaticearth.com/this-oil-thing-is-the-real-deal/

Fairly mundane look at oil price changes of late, but when the posts on Process Engineering crop up, then comes the education of grasshopper. This is how you appreciate the coming rise in interest rates.

space889
Guest
space889
@patriotz – rates went from 3% to over 5% during 08-09 and most people manage to get through it and now renewing into much lower rates today. A gradual normalization of rates to 5%-8% over a couple years is unlikely to cause the massive defaults you are dreaming about. And CBC is right, at the end of the day, the total monthly cash flow for the average buyer is going to be same. You may paid lower price but you also pay more in interest, so in the end you are still pay $2K/$3K/whatever per month, only the ratio of interest to principle is different. But I guess that’s too hard for you to understand when you are so focused on nitpicking and the need to feed that ego of yours. Widen your horizon a bit and you just might… Read more »
Westside Realtor
Guest
Westside Realtor

REIN has been promoting investing in Fort St. John – next Ft. Mac they say…

Any thoughts on that city in terms of impact of declining oil AND gas prices? Any insights are appreciated…ie any thoughts on the employment market up there and if it’s being impacted how this could cascade through both the rental and resale markets. thanks.

Westside – looks like this will be a very busy listings period. The big question mark is will the HAM be there to bid. Larry thinks they will come in droves. I beg to differ. Time will tell.

Oil…this is quite an interesting time…

WSR

Bull! Bull! Bull!
Guest
Bull! Bull! Bull!

@StpidityCheck

why is there a bubble my dimwiitted friend? is it because of the CMHC?

every house for sale on the west side is more than a million dollars. the CMHC isn’t funding those purchases.

southseacompany
Member
southseacompany

Vancouver real estate falling compared to Chinese Yuan;

“How do you lose money on Vancouver real estate? Think of prices in Chinese yuan. Average house prices have fallen by 18 per cent since April 2011 – but only if denominated in RMB”, South China Morning Post.

http://www.scmp.com/comment/blogs/article/1675934/how-do-you-lose-money-vancouver-real-estate-think-prices-chinese-yuan

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