REVscene - Vancouver Automotive Forum

taylor192 · 05-28-2009, 01:26 PM

US treasury yields took a dip today, yet over the last few weeks have pushed 30yr US mortgage rates from ~4.5% to ~5.5%.

Any brokers here that can comment if CND fixed-term mortgages rates are rising too? I was looking forward to renewing at < 4%.

Gt-R R34 · 05-28-2009, 02:39 PM

Shouldn't change for us here in Canada,

chinesespareribs · 05-28-2009, 03:24 PM

I'm a mortgage broker and the short answer is yes .25% might want to lock in the rate now before interest rates go up, mostly likely on Monday.

taylor192 · 05-28-2009, 03:31 PM

I contacted my broker in Ottawa, and some banks have already started raising fixed rates.

Anyone renewing in the next 4 months, lock in now! I didn't know I could lock in now for a renewal, so the paperwork has just been started! 3.7%! Yay!

InvisibleSoul · 05-28-2009, 03:34 PM

Is this only for fixed rate mortgages, not for variable rate?

The first post saying "fixed-term" confused me.

taylor192 · 05-28-2009, 10:12 PM

Quote:

Originally Posted by InvisibleSoul

Is this only for fixed rate mortgages, not for variable rate?

The first post saying "fixed-term" confused me.

Yes, yet unless you're banking on a repeat of Japan's lost decade, fixed 5yr rates are < 1% more than variable (2.85 vs 3.7) and IMHO the chances of rates raising > 1% are very good. Look at what happened with treasury yields in the US, it causes mortgage rates to go up ~1% within 2 weeks! or what happened last time the BoC raised rates, rates went up ~2% in a little over a year!

It'd be silly not to lock in a super low fixed rate, that is unless you think the recession is only going to get worse... then why the hell are you buying? (for those not refinancing).

InvisibleSoul · 05-28-2009, 10:25 PM

So I'm one of those that's on a variable rate at prime minus .75% from a year ago... and I think a little while ago, you said in a thread that it's probably worth it to risk staying on the variable for the remaining four years, since the prime rate for the next year is pretty much guaranteed to stay at 2.25%. Anything changed with that opinion now?

taylor192 · 05-29-2009, 07:05 AM

Quote:

Originally Posted by InvisibleSoul

So I'm one of those that's on a variable rate at prime minus .75% from a year ago... and I think a little while ago, you said in a thread that it's probably worth it to risk staying on the variable for the remaining four years, since the prime rate for the next year is pretty much guaranteed to stay at 2.25%. Anything changed with that opinion now?

I said its worth it if you're on variable minus X%, if you're going to take variable plus X% then the difference isn't worth it.

Brokers/lenders offering "go variable for 1 year, lock in next year at discount rate" are giving bad advice. You'll save > 1% over the next year, yet rates only have to go up 0.25% to lose 1% over the remaining 4 years... and fixed rates are going up 0.25% on Mon.

InvisibleSoul · 05-29-2009, 09:57 AM

Yep, okay... gotcha.

johny · 05-29-2009, 10:41 PM

what is a good current fixed rate? I went to my bank today and they offered me 3.75 / 5yrs (which is now locked for 120 days.)

Can brokers still beat this? I'm curious what the current broker rates are so maybe I can haggle a bit with the bank.

I'm almost tempted to get a 10 year locked in. I think it was 4.something. I figure they will skyrocket again within a few years. the people renewing 5 years from now would get a big shock.

winks · 05-30-2009, 05:39 PM

i never heard anything about rates going up on monday. where did you get this info from? also with the USA 30 year rates you are talking about have indeed gone up but are still a lot lower compared to just last year

scheng924 · 05-31-2009, 12:10 AM

hmmm... what are you guy's outlook for future market within the next couple years.. will interest rates go drastically up causing housing prices to come down?

winks · 05-31-2009, 06:56 AM

Quote:

Originally Posted by scheng924

hmmm... what are you guy's outlook for future market within the next couple years.. will interest rates go drastically up causing housing prices to come down?

no

taylor192 · 06-01-2009, 07:10 AM

Quote:

Originally Posted by scheng924

hmmm... what are you guy's outlook for future market within the next couple years.. will interest rates go drastically up causing housing prices to come down?

rates will go up 1-2%, and prices will go down slightly

I can see 5-10% more in price drops this year, and another 5-10% after the Olympics as there'll be excess inventory. The number of houses for sale increased slightly in Vancouver from 2008->2009, while the number sold decreased dramatically. The expectation was with the price drop fewer people would sell (wait out the downturn) yet instead more units were available. That says something about how over-developed Vancouver is, and there's lots of buildings not even done yet.

Look at what happened after the last bubble in Vancouver, prices leveled out for nearly 10 years! So the price you see today, might be the same price in 2019. Save your money, rent, there's no money to be made in real estate right now.

taylor192 · 06-01-2009, 08:34 AM

The mortgage market is fucked.

I was just approved to refinance my house in Ottawa (I'm renting it, I have about $110K of equity in it and wanted some of it to have a downpayment for a new place) at 80% of the current value.

Usually current value is done with an appraisal, yet the mortgage company did some research in my area and was comfortable giving me $10K less than what I guessed my house was worth (so $100K equity, not $110K).

My house could be a complete disaster, or not what I said, yet the mortgage company was willing to take it sight unseen.

This is why we're fucked.

winks · 06-01-2009, 07:53 PM

Quote:

Originally Posted by taylor192

The mortgage market is fucked.

I was just approved to refinance my house in Ottawa (I'm renting it, I have about $110K of equity in it and wanted some of it to have a downpayment for a new place) at 80% of the current value.

Usually current value is done with an appraisal, yet the mortgage company did some research in my area and was comfortable giving me $10K less than what I guessed my house was worth (so $100K equity, not $110K).

My house could be a complete disaster, or not what I said, yet the mortgage company was willing to take it sight unseen.

This is why we're fucked.

they have a system in place whereas a company (solidifi is one) that does research on behalf of all banks. it is like an appraisal and assessment without actually visiting the property. they rely on land value and other houses in your area's selling prices

blkgsr · 06-01-2009, 09:28 PM

taylor: you say you expect housing prices to drop in the next while and possibly more after the olympics

now the back are increasing the mortage rates....do you see them degreasing them again in 6-8 monts or more as housing prices continue to drop? do you think this is a short term "grab" while the market is some what active?

also you say "housing" prices will drop....is this more condo's? single family homes?

i'm looking at buying a house in east burnaby/new west/coq/port moody.....what do you forsee happening in these areas?

taylor192 · 06-02-2009, 07:02 AM

Quote:

Originally Posted by blkgsr

taylor: you say you expect housing prices to drop in the next while and possibly more after the olympics

Yes. Look at the number of buildings due for completion, then remember the lineups of people fighting to buy them a few years ago. These buildings were not bought by people wanting to move in, they were bought by investors who will be upsidedown trying to rent them.

For example:
2-bd places in Yaletown rent for $2-2.5K/mn. After property taxes and condo fees, you're looking at a $1.5-2K/mn mortgage. On a 35yr term, with rates < 4%, a $400K mortgage is ~$2K/mn.

So if the place sold for $400-450K then the investors are breaking even (actually they are losing, cause there's taxes, yet you get the point). If they sold for more, then the investors are losing. Considering 2bd Yaletown condos were going for > $600K at the height of the bubble, I think there's a lot of losers right now.

Next consider tourism will drop off after the Olympics, unemployment has already gone up, and Olympic construction will be done adding to unemployment problems. Prices will drop, they do in every Olympic city.

Quote:

Originally Posted by blkgsr

now the bank are increasing the mortage rates....do you see them degreasing them again in 6-8 monts or more as housing prices continue to drop? do you think this is a short term "grab" while the market is some what active?

This isn't a "grab", this is the market recovering and rates increasing on mortgages cause investors are fleeing mortgages (bonds) to higher yielding products.

I think its a "dead cat bounce", that the market is not really recovering (can you think of an industry leading the recovery?) its the bubble being propped up again by super low rates and people stretching themselves to get into the market (>50% of new mortgages are 35yr terms!).

Quote:

Originally Posted by blkgsr

also you say "housing" prices will drop....is this more condo's? single family homes?

Higher priced units will drop more than low prices units. Houses typically hold their value better, cause there's only so many of them. Yet houses also went up the most in price, so they have the most to fall.

There is definitely a flood of condos coming, read about Toronto's condo market bursting a few years ago due to over building.

Quote:

Originally Posted by blkgsr

i'm looking at buying a house in east burnaby/new west/coq/port moody.....what do you forsee happening in these areas?

I have no clue. I am not interested in living there so I don't research those areas.

NW, PoCo, Coq, PM, ... all suffer some lack of industry, lack of transit, traffic, and needing gentrification. With the economic downturn, further gentrification will be stalled so those neighbourhoods will not get any better (some parts of them are rough). They are commuting suburbs, where you live, not work. As prices come down in other areas, there will be less reason to live there to avoid high housing costs.

Moreso, lookup the house increases in those areas from 2004-2009:
Vancouver West (Kits, PG, ...) was up 40%
NW, PoCo, ... were up 60%!

Lots more room to fall! yikes!

Burnaby is a different story, same with Richmond and Surrey. You can live, work, play in those cities, so I don't see them suffering as much.

---

All that aside, I don't think prices will drop much more, 5-10%. People will hold onto them rather than sell and lose money.

It might be WAY cheaper to rent, yet with low rates the difference between rent and mortgage would be about equal to what you'd be paying down the mortgage. (ie $1000 rent, $1800 mortgage with $800 of that mortgage going to principal if you take a 25yr term)

So in the end you're breaking even, yet paying a LOT more per month. No thanks, I'd rather not pay more per month only to break even, yet that's your choice.

taylor192 · 06-02-2009, 07:03 AM

Quote:

Originally Posted by winks

they have a system in place whereas a company (solidifi is one) that does research on behalf of all banks. it is like an appraisal and assessment without actually visiting the property. they rely on land value and other houses in your area's selling prices

I know, FCT.

Yet my house could be awfully maintained and they'd never know.

winks · 06-02-2009, 07:33 AM

Quote:

Originally Posted by taylor192

I know, FCT.

Yet my house could be awfully maintained and they'd never know.

yes but thats the way their system works

taylor192 · 06-02-2009, 09:15 AM

Quote:

Originally Posted by winks

yes but thats the way their system works

OK, yet that's like excusing the subprime mess in the US cause it was all legal.

Trust me, I'm happy that I don't have to get an appraisal, yet find it oddly unsettling.

taylor192 · 06-03-2009, 07:34 AM

http://www.cbc.ca/consumer/story/200...age-rates.html
0.2% increase.

Nothing major, yet glad I beat it cause I don't believe its going back down.

Gt-R R34 · 06-03-2009, 09:22 AM

Raising the 5 year fixed doesn't mean the tier structure on how they are based will be different.

IMHO, you'll see a small increase maybe, but i doubt the bottom end pricing will be different as of this point

taylor192 · 06-03-2009, 10:00 AM

Quote:

Originally Posted by Gt-R R34

Raising the 5 year fixed doesn't mean the tier structure on how they are based will be different.

IMHO, you'll see a small increase maybe, but i doubt the bottom end pricing will be different as of this point

I don't agree.

The bottom end pricing is based on new buyers stretching themselves into the market with low rates and 35yr amortizations. These buyers don't qualify at the higher rates used for to qualify variable rate mortgages, so they get fixed rate mortgages. Any increase in fixed rates reduces the buying power of these new buyers, and as we can see, > 50% (my broker estimates its ~80%) need 35yr amortizations just to make the debt-income ratios.

The the bottom falling out of the USD, rates are set to increase, and monetary policy in Canada usually falls closely inline with the US as our banking industry is heavily invested there.

winks · 06-03-2009, 08:24 PM

Quote:

Originally Posted by taylor192

OK, yet that's like excusing the subprime mess in the US cause it was all legal.

Trust me, I'm happy that I don't have to get an appraisal, yet find it oddly unsettling.

i guess they think its ok as long as they are only lending up to 80% but of course the rest of the application has to make sense too. its WAY cheaper for them to use that program rather then someone out there to appraise it hoping the person will be home at that time and/or the tenant lets them in