Ironically, now is the perfect time to take a variable rate mortgage: expert
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- Опубликовано: 4 дек 2023
- Dennis Mitchell, CEO and chief investment officer at Starlight Capital, joins BNN Bloomberg to discuss his expectations for the BoC's upcoming rate decision. Mitchell also discusses housing supply issues, mortgage renewals and the Canadian economy.
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Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market
The stock market is no different, to maintain profit, you need to have some in-depth knowledge on the market
True, I mostly just buy and hold stocks, but my portfolio has been mostly in the red for quite awhile now. Unfortunately to be able to make good gains, you’ll need to be consistent and restructure your portfolio frequently.
in my opinion, it was much easier investing back in the 60s but it’s a lot trickier now, those making consistent profit in these times are professionals reason I’ve been using an advisor for the past 5 years to consistently build my portfolio in preparations for retirement.
my partner’s been considering going the same route, could you share more info please on the advisor that guides you.
My CFA ’Margaret Johnson Arndt’ , a renowned figure in her line of work. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
Yes exactly right. It only make sense. I have held onto my variable rate for 20 years. Even now I am below the average rates, so I am still ahead of anyone getting a new mortgage. Anyone who gets a fixed rate mortgage will be paying significantly more in the next few years than those with a variable rate. So they will need to break their mortgage to get a reduction in rate, and that will cost them also even though they will likely save in the long run. Variable rates are always better if you can keep you costs in line.
Not necessarily, that's only been the case over the past 20 years.
In the 70's and 80's a fixed rate would have been better economically, as rates didn't start declining until the 90's. Even parents who are 60yo have really only known a low-rate environment.
Now of course, a 7% rate now is much more in dollars (even accounting for inflation) than a 14% rate in the 80's due to average home price.
That's what makes variable rates dangerous in this environment. a 2% increase is a significant monthly jump when it's on am 800k home instead of 80k.
Agreed.
Pay the home seller or pay the bank. Right now we pay both.
Either home owners are loosing some equity, or we are all dealing with inflation (wage-price spiral), or some combination of both (stagflation), there are no other ways around to fix affordability.
This is the mistake people made, they buy high, sell low. They take variable rates at record low rates and then don't lock in when it's rising and then they freak out and lock in at high rates for payment certainty. It's the folly of so many people who have spent more time shopping than learning about money and the sword of leverage.
Whatever the financial experts told you just do the opposite
CPI & inflation arent the only measures for the rates. We have the highest housing bubble in G7, and cutting rates prior to 2025 mortgage renewal will only accelerate the bubble at this point because loans will be cheaper and people need housing desperately atm. Also, lower rates at this point mean that the gap between CAD and USD will continue to grow, as we all know the likelihood of FED raising rates are not dead under water yet. How is further weakening CAD at this point compared to our biggest trading partner down south going to benefit Canadians? I know our government & BOC are incompetent, but lowering rates at this point is a horrible idea.
BOC won't cut rates yet, but they will eventually have to, in my opinion. It's not only the housing market; interest rates also significantly impact business spending. Yes, cutting rates now will likely fuel the inflation and housing prices, but this view is based on the CURRENT macro perspective. In next 6 months, household consumption will likely continue to go down. Small and Medium-sized businesses aren't going to borrow much at this high rates. Suddenly the macroeconomic focus will shift from inflation/housing to slow growth/unemployment next year. What will BOC do then? They also have mandate to keep unemployment under control. Inflation won't be discussed as much as it is now, but the narrative will be more around the slow GDP growth and rising unemployment. At that point, BOC's hands will be tied once again, they will pivot and cut rates eventually.
@@JJ-yu6hf we have to form a basis that this government won't decelerate government spending nor will increase housing supplies. It will continue to be a main driver in the source of inflation, so will CAD value decline by default.
Canadian CPI is already coming down fast (6.9 to 3.1 YoY as of October 2023). The concern about the "growth/unemployment" as you said is already declining fast. The best thing BOC can do independent to the government (which i doubt will ever happen) is to bring down housing sector, so disposable income after paying out the rent will increase, thus we can expect CPI will bounce back & CAD will slowly catch up with USD, so GDP will increase.
But first and foremost, cutting rates at this point will accelerate widening gap of CAD to USD -> more high-income canadians will leave the country, meaning CPI will decelerate even faster towards 0.
@@michaelkim8134 100% agree with the stated basis. I have zero faith in Canadian government and I also believe that they will not decelerate spending nor will increase the housing supply. But you seem to forget about one factor in this economy right now, which is immigration. Sure, you can believe all you want that BOC could bring down the housing market by holding the interest rates, but the hard truth is that as long as the immigration keeps flowing in, the housing demand will remain elevated. These new comers need places to live, whether the rates are high or low. Like you said in the "basis", housing supply won't increase in the next few years (due to government incapability and various red tapes; whether it's led by Liberal OR Conservative, Gvt' is incapable of executing major push in housing supply, I believe Canada is the slowest among G20 when it comes to approving housing constructions). It will take more than a decade for Canada to catch up and balance the housing supply and demand. In the meantime, mortgage renewals will come into play next year (and 2025) and there will be more stress on household consumption. The slowdown that we are seeing today in the housing market is only a temporary distress due to the high interest rates and the fundamental imbalance in supply and demand will eventually dominate the housing market for years to come. Monetary policy won't go far in the background of this massive imbalance. High interest rates will bite consumers and businesses MORE than it would harm the housing sector. Keep in mind, builders won't build much at these high rates either, so we are also suppressing the housing supply in a way. Less consumption and less business spending will lead to broader economic slowdown/rising unemployment, which will become BOC's primary concern. BOC won't be able to hold the rates at the current level, even if they want to.
You talk about currency - to be honest, currency is only a byproduct in my view. You are concerned about the gap between CAD and USD. But keep in mind that Canadian economy relies on export trades. Weak CAD against USD may not help with inflation number (because Canada imports a lot from USA) but on the other hand, weak CAD is a plus for Canadian exporters. Canada exports A LOT to USA. Weak CAD means that Canadian goods are cheaper and makes Canadian products more competitive in price
I don't think there's as much of a supply crisis as they claim when you talk to people you know, 30% of them own 2+ properties and rent them airbnb style, bragging about the write offs and printing of money.
I only know one person who's taken a loss on their house in the last 15 years only due to being fed up with renters ruining it.
Is they fixed it and held a year, they would have profited.
Lots of vacant houses in Canada, some just held by international people for land investment.
@@mr2_mike In 2022, 219,942 units are completed in Canada, but from July 1 2022 to July 1 2023, immigrants increased by 468,817 excluding 697,701 non-permanent residents (mostly students). That is, 1,166,518 additional housing demand far greater than approximately 220k housing supply.
Meaning, rate of demand is about 5 times greater than rate of supply. I'm not sure anecdotal experiences from your perspective quite matches the macroeconomic data by Statistics Canada.
If you have a low rate ask for a blended rate
The price you buy the house ain't variable tho :(. Wait.
There is always more room to increase rates.
Keep raising them now and shake out the speculators and over leveraged.
Or be forced to raise them higher than you want in the months following a cut.
Blah blah blah... just tell it straight up to Canadians, especially Toronto/GTA folks who have been drunk on cheap debt for 15 years and find themselves seriously overlevered. Cut what debts you can now, especially if you have a stupid mortgage or five. Just walk or drive around anywhere and see 'for sale' signs popping up all over the place in Autumn - which never happens. So many houses and condos going zero bid. Stay hopeful and you'll get crushed.
can you bring Dennis on more often
Too young to have experienced 1989-1991. Let us hope those circumstances do not return.
It's definitely setting up to be a repeat.
wow, leading people to the slaughter
Wait… didn’t financial experts get us into this absolute mess?
No, buyers did when they purchased without doing the math. THey could have rented.
Why would anyone want to take out a mortgage know it is crazy
Hi
Why do they have the guy from Underworld and Never back down on the show?
Fool me once, shame on you. Fool me twice, shame on me.
Dude, but you didn’t explain “why”. Or maybe I’m too stupid to understand. How is it the best time now?
U need to be told to go for variable rate , Duh
Yes, i bet he wants you to sign up for a variable rate...
Does he finance mortgages?
What? shocking!
😂
stop giving wrong advice. Mortagges and investments are decision s for future lot of thoughts go into making this decision. Only BoC rate unchanged rate can not dictate what kind of MTG people should take