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That's why the fixed rate mortgages are dumb. Variable rate allow the market to adjust to whatever the new reality is much quicker than being a frozen quagmire every time rates go up. Canada will be fixed long before we are.
The payment stability isn't worth the list price and sales volume gyrations that fixed rates bring.
Definitely pros and cons of fixed rate vs variable rate mortgages. In my case, I'm for darn glad that I have a fixed rate 2.75% and didn't get a variable rate when I refinanced several years ago. Not the best for the economy in the long run, but great for my wallet
Well yes, I had the same thought. Fixed and variable each have their issues. If we had only variable loans in the U.S. we'd be seeing a lot of people selling or losing their homes today because they can't make the higher payments. Maybe Canada is different, in that buyers are not stretching their budget like we do here in the U.S.?? I don't know.
Most people wouldn't be losing their home, but they would be having to allocate more $$ to housing costs. And vice versa when it goes down - essentially it allows interest rates to ACTUALLY effect the economy more immediately. Canada's already slowing down quite a bit as consumers have less to spend, but there's nothing "impending", they are taking their medicine now. We get to have 6-8 years of a totally screwed up frozen housing market instead.
Quote:
Originally Posted by prospectheightsresident
Definitely pros and cons of fixed rate vs variable rate mortgages. In my case, I'm for darn glad that I have a fixed rate 2.75% and didn't get a variable rate when I refinanced several years ago. Not the best for the economy in the long run, but great for my wallet
Oh yes, there are people who got the good end of the deal but on the whole it's bad for the economy. Think about the wild swings in the relator industry, it goes from shortage to surplus depending on the interest rate whim. That's not healthy, stability is much better. Think about all the refinancing costs that could go away with variable rates. That's wasted money.
In the end, the health of the economy depends on currency being exchanged. If not, more and more people will not get paid or less being paid and less will spend. Then we should have one of the biggest market crashes since the depression.
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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Here in Sammamish WA home prices are down 4.5% from last year, but the median is still at We are still seeing homes selling for over a million in less than last year but still averaging $1,457,780, selling in 11 days, with 32.6% selling over asking price. People seem to forget that interest rates were above 10% for many years, in fact there was a boom in sales activity when it dropped to 8%. The current rates are not bad at all, many people are just spoiled by the long run of record low rates, and upset that they missed that opportunity.
Most people wouldn't be losing their home, but they would be having to allocate more $$ to housing costs.
Certainly not "most" in the sense of more than 50%, or anything close to that. There are lots of homeowners with no mortgage, and lots of homeowners who bought 10-20 years ago and never extracted equity. Very few of those people would be in any trouble.
It's the people who bought in the past few years using 30-year mortgages at 3% who might be at risk. If their rate jumped to 7.5% their P&I increases by 2/3. What percentage of homeowners are in this camp? I really don't know, but IMO most of them would be under serious financial pressure.
With all that said, it doesn't take a huge percentage to cause trouble. During the financial panic the percentage of mortgages in 90+ days of delinquency peaked at about 5%. So that was probably about 3% of all homeowners.
Certainly not "most" in the sense of more than 50%, or anything close to that. There are lots of homeowners with no mortgage, and lots of homeowners who bought 10-20 years ago and never extracted equity. Very few of those people would be in any trouble.
It's the people who bought in the past few years using 30-year mortgages at 3% who might be at risk. If their rate jumped to 7.5% their P&I increases by 2/3. What percentage of homeowners are in this camp? I really don't know, but IMO most of them would be under serious financial pressure.
With all that said, it doesn't take a huge percentage to cause trouble. During the financial panic the percentage of mortgages in 90+ days of delinquency peaked at about 5%. So that was probably about 3% of all homeowners.
Fixed-rate mortgages account for over 90% of all mortgages. ARM's are less than 10%. This is per Mortgage Bankers Association data. The people being most affected by the higher rates are those few with ARMs and of course new or relocating home buyers without a lot of equity. This is why new-builds have risen in popularity lately - because now home builders are offering significant rate buydowns as an incentive, many offering buydown to 5%.
Certainly not "most" in the sense of more than 50%, or anything close to that. There are lots of homeowners with no mortgage, and lots of homeowners who bought 10-20 years ago and never extracted equity. Very few of those people would be in any trouble.
It's the people who bought in the past few years using 30-year mortgages at 3% who might be at risk. If their rate jumped to 7.5% their P&I increases by 2/3. What percentage of homeowners are in this camp? I really don't know, but IMO most of them would be under serious financial pressure.
With all that said, it doesn't take a huge percentage to cause trouble. During the financial panic the percentage of mortgages in 90+ days of delinquency peaked at about 5%. So that was probably about 3% of all homeowners.
I mean the jist of it is the current level of home prices is way above a where they should be and without some sort of mechanism to bring down spending and prices, we just sit with high rates / inflation, protecting the lucky ones that locked in early.
I mean the jist of it is the current level of home prices is way above a where they should be and without some sort of mechanism to bring down spending and prices, we just sit with high rates / inflation, protecting the lucky ones that locked in early.
So, if you did not get in early on the stock market are you due a check? I'd like to know because I don't have the stomach for the stock market after living through two major crashes.
Location: Was Midvalley Oregon; Now Eastside Seattle area
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Quote:
Originally Posted by MKTwet
In the end, the health of the economy depends on currency being exchanged. If not, more and more people will not get paid or less being paid and less will spend. Then we should have one of the biggest market crashes since the depression.
Deflation will be terrible.
Quote:
Originally Posted by Phil P
I mean the jist of it is the current level of home prices is way above a where they should be and without some sort of mechanism to bring down spending and prices, we just sit with high rates / inflation, protecting the lucky ones that locked in early.
USA will be entering a phase where us Boomers will start dying off which will free up housing.
Quote:
Originally Posted by Wile E. Coyote
So, if you did not get in early on the stock market are you due a check? I'd like to know because I don't have the stomach for the stock market after living through two major crashes.
I disagree with the housing problem. What we lack are cheap housing in desirable areas. Plenty of home scattered all over the US that are below media home prices but the millennials and Gen Z only wants to live in desirable places. Many millennials that got their parents macmanisons are selling them to move to inner cities or trendy suburbs.
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