Update: As of June 29, 2022 – this post did not age well

Interest Rates are now at or above 5% (the 5 year fixed rate as a basis). This article was written in 2019 and our follow up was done in the same time frame. In a relatively short period of time (3 years) we have seen rates rise to these levels. Now, they didn’t continue to rise – as we saw they actually came down – to record low levels.

The argument can be made that these rates were necessary due to the COVID-19 pandemic, to provide liquidity to the economy. What is up for debate however, is that the rates were kept low for far too long, thus causing the platform for rising costs and inflation.

Many people took the Bank of Canada’s head – Tiff Macklem – at face value when he ensured Canadians that rates would remain low until at least 2023. Rates, of course started to increase sharply at the start of 2022.

1. Inflation is definitely existent and we are seeing it and feeling it, first hand.
2. The pain CAN be catastrophic, since many Canadians, during the height of the pandemic, reported that they would experience financial trouble should their payments increase by more than $250 dollars per month, for anything. Gas, groceries and mortgage payments have likely risen FAR past this $250 dollars per month threshold for the average household.
3. The Mortgage rules, if you have net worth, they can be circumvented in the form of “exceptions”.

The housing market – it is being widely reported across the country’s two biggest markets, Vancouver and Toronto, has seen a reduction in activity as well as falling in prices.

We have not seen a huge influx of supply all of a sudden – and this is the major reason for the price increases according to many experts.

The narrative is starting to shift to low interest rates being a driver for demand and prices now, however experts are still saying that due to the lack of supply – and demand outweighing supply, a “crash” is not immanent.

Narratives seem to drive the masses, and they can shift pretty quickly, so it will be very interesting to see how things pan out the next few months.

The article in the link below is worth a read if you are concerned about interest rates. I personally agree with two of three points the author makes. #2….not so much, there definitely is some debate over this one.

In summary

1. Inflation is virtually non-existent in today’s marketplace
2. The pain would NOT be catastrophic (As explained in past posts)
3. New Mortgage Rules are the ‘New Rates’ – (also explained in this post by a colleague)

Long Version

Click below for the full story

3 Reasons Canadian Mortgage Rates Will Never Hit 5%

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