The first bit JD has said here is mostly factual stuff or logical extrapolations, so I don't really have anything to say about that.
For the 3rd part of what he has said though -- I remember multiple economists from the Big 5 banks have been saying for some time that according to their data, most home owners still have the capacity to reduce discretionary spending and divert it towards servicing their mortgages instead. While I certainly wouldn't count myself among one of those people, when multiple big bank economists are saying similar stuff, then I think the likelihood of it being true is much higher.
Then you add the fact that according to some other analysts that I've read before, people (home owners) would generally be willing to go to great lengths to make sure they can stay in their homes instead of defaulting on their mortgage payments or having their homes foreclosed, and I'd tend to agree with that as well.
So IMO, it seems more likely that as the low fixed rate mortgages become due for renewal, we're gonna see an economic slow down as people divert discretionary spendings to service their mortgage debts.
Quote:
Originally Posted by JDął
Add in the fact that everyone who's been on five-year fixed rate mortgages at historic rate lows and have been avoiding the financial pain all the variables have been feeling are starting to come up for renewal. This is where it's going to get even uglier. Fixed-rate holders are going to see their rates more than double and the sticker shock is going to have huge implications. In order to service mortgage debts tens of billions of dollars is about to be pulled out of the general economy to pay banks (there's a bit over 2T in mortgage debt nation-wide). So naturally home owners and renters are going to have to increase rent amounts to help their costs and on and on it goes with housing driven inflation. Canada has now bolted itself between a rock and a hard place with a highly inflated housing market and grossly excessive immigration leading to population increase and housing demand.
Friends who are realtors have told me the number of people who get accepted offers (buying or selling) and then the financing gets denied are through the roof. People can't get past the up to 9% stress test, so houses are sitting on the market longer and longer with needy buyers unable to get a mortgage. A million dollars requires the 20% deposit the average person doesn't have.
The fuse on the bomb keeps getting shorter, and Q4 2024 is when it's really going to start accelerating. 2025 and 2026 are when the bulk of the low fixed-rate mortgages turn over. Foreclosures, auto repossessions, and personal CC debts are all increasing already.
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