Older millennials, adults aged 35 to 44, had debt-to-disposable income ratios around 250 per cent in 2019, while Freestone noted that metric was roughly 150 per cent for the same age group in 1999.
Can confirm we’re sitting around 250% but this is after exercising significant restraint to not take on as much mortgage as the banks would have given us. Everyone I know who bought over the last couple of years went all out and I can’t imagine them being any lower than 300-350%.
Nothing better than RBC saying how fucked we all are while having another record breaking profit quarter while laying off 1% of their staff.
The information may be correct but it’s as if an oil company started saying how fucked we are with climate change while they continue to pump it out of the ground.
Fuck RBC and their predatory practices.
Oil companies are doing exactly that right now. Talking about how green they’ll be in 2050 and asking you to take personal responsibility and please recycle. It’s a load of bull as they lobby the government for more offshore drilling. We’re so fucked.
I can’t believe I’m going to defend the big banks, but are you suggesting they should keep unneeded staff on payroll if the company is profitable?
Hey youre salaried right?
Yup
Great, we laid off 3 people and you need to work 100 hour weeks to keep things going
Do I get paid more?
You can get paid in unemployment if you keep sassing like that
Note, I have been given the line that I am expected to work 100 hour weeks. No I am not joking.
I don’t think that’s the case here:
Royal Bank’s wealth-management division bore the brunt of the reductions in the second quarter, according to filings. The unit’s headcount plummeted by almost 1,300 in the quarter, when the company sold a European asset-servicing business to a joint venture of Credit Agricole SA and Banco Santander SA. That countered a 667-person increase in Royal Bank’s capital-markets division.
Im going to upvote just because you provided a link to backup your argument. Need more of that.
Edit: Just thumbed through the report, and based on my experience my above scenerio is still likely what is happening as well. Amount of work wil remain the same, but fewer people to do it.
Maybe. It’s probably tone-deaf of me to say this, but in my experience “wealth management” advisors are glorified salespeople who funnel people into their bank’s overpriced mutual funds. Those people deserve the chance to a good livelihood, but that particular job is not great (and I would never suggest that people see a bank for investments to begin with).
No, you’re right. Business should be allowed to adjust accordingly to their needs and no one is guaranteed a job.
And I’ll add to that: executives earn every single cent of their bonuses based on record profits they make and shareholders earn their dividends for supporting executive’s decisions, let’s say in this instance to fire 1500 people. And when those folks are off the payroll the profits will increase and bonuses and dividends will reflect that.
And when the Canadian government steps in to help banks, as they did after 2008 to the tune of 114 billion, the taxpayer gets to help banks maintain their profit margins so shareholders and executives can keep their well deserved rewards for their forecasting mistakes.
Just always seems to me like the dollars and cents matter to the banks (and big business) when we’re talking about a $40,000 salary but a few extra billion to executives and shareholders, well now, why should we question any of that when it’s obviously well deserved and integral to the banks ability to function.
But hey, it’s the free market. And that means some people are free to earn millions of dollars just as some people are free to all of a sudden earn nothing.
Edit: read the linked article and yes, some of this move is lateral (selling a division) but some of it is not.
My original point stands (IMO) as the RBC is saying how the younger generation is fucked while they continue to fuck us in the ass and add a service charge for the fucking.
This has to be the most bad-faith reply I’ve gotten in a long time. Where did I say any of the things you’re ranting about?
How is it in bad faith? I agreed with your response at the beginning of my comment.
The rest was context that I added, in what I felt, would be similar to an argument that any business would posit as to why they should be allowed to reap record profits while laying people off and at the same time telling us how we’re all fucked.
My original point was that RBC is telling us that we’re fucked. Meanwhile they are contributing to the fucking of us while they take in astounding profits from their businesses practices which are designed to fuck us and to top it off they fuck over some of their own employees in the same breath. There is an overall cognitive dissonance here that I was focused on, not the minutiae of whether or not a business should be able to hire and fire who they please.
You are correct. Businesses should have the autonomy to hire/fire people as they see fit. Glad we could make sure that point of the argument is settled.
I started typing a reply to this but I don’t even know where to begin. Good luck in your future endeavours.
There is nowhere to begin. I agree with your point. Fundamentally, business should be able to make those decisions about who it employs and who it doesn’t.
But maybe, and hear me out here, they shouldn’t be telling us how fucked we are while they are fucking us - the consumer, the taxpayer and a portion of their own employees.
Good luck with yours too.
In short, yes. At the very least this would allow for better work-life balance for their employees. If that was any priority of theirs.
It isn’t just mortgages. I read just a few days ago that the average price of a new car in Canada is $66k. I’m not sure I’ve spent that much on all of my vehicles combined since I bought my first car at 17. Add in other things bought on financing – lots of our friends have travel trailers, ATVs, and such.
People where I live regularly sell trucks on FB for 60-80K, and they are used with 100,000 km on them
Bidding up used cars during covid was peak bubble behavior
Work trucks costing what a start home used to cost a decade ago
I guess with at truck you work AND live in it
Bubble or generational shortage? You couldn’t replace a truck with a new, so prices ballooned.
The 6-10 year car loan with negative equity will cause a lot of pain in the next few years.
I think new car prices will drop. The payments aren’t affordable at current rates and used cars exist. When things were 0% APR you can get a 7 year car loan on an $80k car. At 6% who’s buying these things?
I know I’m going to nurse my 12 year old car because the current car market seems hell bent on making buyers miserable.
Well generational shortages caused by under construction and foreign money resulted in the bubble…
Either way, nobody was forcing people to play stupid games because “this is the new normal”
They can goose the system whatever way they want, but only low interest rate can sustain these prices. It does not look like they can lower the benchmark rates so people swimming naked will be exposed.
I bought a 2017 tundra with 60,000k on it from a dealer for 40k this year. It’s not fancy and has few bells and whistles, but I can live with that at less than half the cost of newer ones.
I read just a few days ago that the average price of a new car in Canada is $66k.
And a good used bike is $150.
People, we need to start looking for alternatives that won’t make rich people richer. Buy a *used *car if you must have a car, but don’t keep filling the pockets of these greedy bastards by buying new.
I’m super into urbanism and love my bike, but unless there’s good bike infrastructure in your area, you’re risking your life. I know and keep riding anyways but most people aren’t willing to take that risk. What we need to do is organize to push our governments to provide safe infrastructure for all road users.
i’d settle for more sidewalks in my town
on some streets they just paint a line down the road and call it a sidewalk - one of these is on a road touching an elementary school
I understand the sentiment, but I’m willing to bet that it’s more likely that the average person will die in a car than on a bike.
Yes, there are risks, and yes cycling infrastructure can absolutely help to reduce those risks, but in the greater context I think cycling is still the better option in more ways than one.
For instance, cycling can reduce the chance of the #1 cause of death (heart disease), while cars increase that risk. That alone would make cycling better for health and longevity, even with less than perfect cycling infrastructure. 😀
The amount of stress and risk riding a bike next to 60+ km/hr traffic with 4+ foot hood heights is simply not worth it to most people. Cars are the only method of travel prioritized in most Canadian cities while pedestrians and cyclists aren’t even a third or fourth thought. We need dedicated and seperated/protected bike/ped routes so everyone can feel safe.
I agree that there are barriers to cycling that need to be addressed, and safety (or perceived risk of injury) is one of them.
We need to consider that most trips by car are very short (<5km), and if a bike can be used, then it should. Longer trips can use public transportation.
I’d say that anyone living in any Canadian city with a population over 100,000 will have “good enough” cycling infrastructure to replace a good chunk of their car trips. And that would be great.
Even in these smaller municipalities, new development seems to get cycling infrastructure baked in, so things are always improving.
If you live in a city like Toronto, Montreal, or Calgary (three largest population centers in Canada), then you already have a vast cycling infrastructure network available.
More realistic barriers to cycling are often practical things: how to deal with sweat, how to deal with bad weather, where to park the bike, etc., and those come with experience and planning.
If we keep waiting for cycling infrastructure to be perfect, it’ll never happen. One cyclist on the road = one less car, and infrastructure won’t be built unless we have more cyclists asking for it.
Those are my 2 cents as someone who has replaced the majority of my own car trips with a bike, throughout the entire year, living in a Canadian city that doesn’t have ideal cycling infrastructure, but “good enough” cycling infrastructure.
I live in a city with more than 100,000 people and do not at all feel safe biking on the major roads, which are the main option for most travel as their is poor side road connectivity.
A lot of the new developments I see have painted bicycle gutters, which is barely even infrastructure and this point an insult to cyclists. One recent development in my home town has a painted bicycle gutter along a 6 lane road and it passes directly under a bridge and in front of a highway entrance. I have literally never seen a bike on this section because it is borderline suicidal. You may be comfortable in a painted bicycle gutter, but many people are not and it is a massive barrier to cyclists and especially younger ones.
Those “more realistic barriers” like weather and sweating exist everywhere else, including Sweden and Norway which have climate similar to ours. But people in those countries are able to bike year round on safe and maintained bicycle infrastrure that is so safely seperated from cars that kids commute to school on these routes.
The quality and connectivity of good bicycle infrastructure is the biggest hurdle in the majority of Canadian cities for cyclists. Sure people could probably make their commute on their bike, but until it feels easier and more pleasant than driving we won’t see mass shifts into cycling.
I live in a city with more than 100,000 people and do not at all feel safe biking on the major roads, which are the main option for most travel as their is poor side road connectivity.
Have a look at Strava, Garmin, RidewithGPS “heatmaps” and see where other cyclists are riding. You may be surprised at the creative routes people use to avoid major roads (which I also tend to avoid completely).
A lot of the new developments I see have painted bicycle gutters
That’s a real damn shame. I live in Oshawa, and all our north development has full multi-use paths, as well as bike lanes. Whitby has been adding mutli-use paths and separated (but painted) bike lanes like crazy, which have been great to ride on. Ajax is also well ahead of the curve. All three municipalities have < 150,000 people
I’d suggest having your municipal or regional active transportation committee follow up with your city to see what the hell is going on with their planning. Sounds like nobody who’s in a position of influence is putting cycling on their priority list.
but until it feels easier and more pleasant than driving we won’t see mass shifts into cycling.
I have to reiterate that driving is still more likely to get someone killed, as is inactivity (from driving). So we have to put things into perspective. There’s often a gap between perceived barriers and actual barriers, so some of the perceived barriers disappear once someone is riding regularly. Some new barriers may pop up, especially after a negative experience, but often times cycling strengthens our resilience and ability to adapt.
I’m not suggesting that someone bike on objectively dangerous roads or piss-poor bike gutters (which probably have parked cars in them anyway), but cycling requires different route planning, and there is often good cycling infrastructure that’s unknown to the average driver, which becomes “discovered” once someone takes up cycling.
Heck, we have an intersection around here that I’d use for at least 75% of my rides because there are bike lanes in all directions, which has been completely closed off due to construction all summer. This has forced me to seek alternate routes. And while my first few detours were on less-than-ideal roads, I’ve since found alternate routes that are even more efficient (and arguably safer) than the bike routes I was taking.
I would urge anyone who’s interested in cycling to connect with a local club or group to ask what the actual experience of cycling is. I’d hate for someone to not take up cycling in their city, because they don’t *feel * it’s safe, even when it could be.
Even my bikes are like 10k now…
I’m super confused, why is everyone bringing up such ridiculous car prices? Both Canada and the US have cheaper cars too. For example a KIA Rio (5 door) is around $17-23k new in Canada. It’s $16k in the US.
Are Americans only considering massive SUVs when they talk about new car prices?
You are talking about least expensive, they were talking about average.
Where are you getting $17K from? According to Kia’s website, they start at $19,933. And that’s pretty much the cheapest new car in Canada. That’s way out of reach for many people, and the used market is insane.
Earlier this year, my 2005 Civic with 301,000km was totaled. I bought it in 2013 for $5,000 with 121,000km. From my research, if I had sold it before it was totalled, I probably could have gotten more than $5,000 for it, even with the extra decade and 180,000km.
I went on a rampage in 2019 about SUV costs, the zero miles we put on it, and the pain in the ass that thing was to wedge into my microscopic parking spot downtown at my last job, so I bought a sports car. About 3.5 microseconds after buying the sports car my wife was like I’m pregnant (and she also sucks at driving stick, but moot point). So we got her a barely used Cruze, and we got a pretty good cash deal on it. Happy wife, car actually has a ton of room and she didn’t have to wedge a kid and stroller into a sports car, and all is good. It’s been a great problem free car these past few years too, but I don’t think she’s even put 30k on it total.
So yeah, like 2.4 seconds before COVID, we bailed out of our teeny tiny DINK-dweller condo and now live in the burbs. We don’t get great snow plowing, so we usually have a few days or even a week where the cars are buried in the garage and I can’t get them out because they’ll get stuck, which means the kids are staying home. We both work from home now, and I don’t even drive my car in the winter anymore, and my wife is like I want an SUV again. Basically, I can’t bitch about having to park it downtown, and who cares about the fuel milage it gets, because we barely will drive it anywhere. We have kids plural now, and I mean, I get the appeal. Our latest compromise is a small truck, because I’m also sick of having to try and get 4x6s home from Home Depot in teeny tiny cars, and having to mount bikes, on a damn Cruze. We’ve acquired a great hatrid of roof racks for my (our) bikes, and all the noise that comes from them, so I’ve become excited about being able to have a hitch rack again, or even just filing my bikes into the back of a pickup.
But now we are in this scenario, of what do we sell the Cruze for? The comps are bananas, like they are averaging about $8-12k more than we paid, with more milage. Now I’m not necessarily expecting we are going to get that, like that’s asking, but that’s the comparables. Every time she gets an oil change, my phone literally rings off the hook for a month afterwards. The place we bought it from offered $3k more than we paid for it last month, and I wouldn’t sell it to them because they know what I paid, but that sets a theoretical floor. Basically I’m hoping for 6-8k more than we paid for it at a dealer, and if I go it alone, I’d probably ask closer to 8-10k more. It’s such a friggin bizzare situation.
Ah, from Google (and the MSRP), now it’s $20k on their site directly. See: https://blog.clutch.ca/posts/6-cheapest-new-cars-in-canada
There are cheaper options actually. My Kia Rio cost 14k€ (and that was with a deal) back in 2015. So it’s not that far off I guess. But that was actually the new price, with navigation, camera for driving backwards and so on with 7 years warranty on top.
Prices suck of course, but on the low end they are still affordable. Mid-tier is probably a lot of leasing (as you’d have to spend a big chunk of life savings on a direct buy) and high tier is only for rich assholes (or company cars).
How many Rios do you see on the road for every F-150?
I see a RAM for every 2 F-150s. 🥲
It was like 12 years ago I was looking at $10k new Kia rio.
My best bud dated this girl that drove one of those basic Kia 4 doors, I think it was the Rio. This was back probably 2003, 2004. If I remember correctly she paid like $12k for it. That thing would shake every filing you had loose. It didn’t have suspension, it had decorative struts that held the wheels on. What a piece of crap. I’ve heard people swear by them, and I know they’ve come a long ways since, but I always think of that POS when I think of Kia.
It’s getting hard to find cars period. I forget where I read this stat, it was only in the last day or two too, but the number of cars being made, and sold for under $30k, it’s like a small handful of models in total. And good luck actually finding many of said models on local lots, the factory production numbers of these cheaper models is super low.
Also you drove by a Kia lot lately? I ride by one near us fairly regularly on my road bike, and that lot is sparse. The only vehicles on it are SUVs, and there isn’t even very many of them. So yeah the internet says the Kia Rio is $17k, but can you actually get one in your hands for that?! I mean sure, maybe one or two. But remember, we are talking averages here, for the whole marketplace.
$60k average price is definitely in line with the observations I’ve been able to make, and it definitely reflects the laneways on my block. You are right, monster trucks and SUVs, but that reflects the current market. I’m the only person on my block that only has cars in their garage.
I’m from Austria, we don’t have that issue in Europe. But people here (luckily) are a lot less into monster SUVs. If I see even one of those taking up the entire lane or blocking my sight at an intersection I’m getting annoyed.
Going to the Kia website I can actually view cars in stock in the entire country. So I could immediately pick a Kia Picanto (that’s the cheapest one) up for €15,840. Or a Kia Rio for €17,440. Though I just saw on the Kia page, they discontinued the Rio (No more new cars coming).
Don’t forget the cost of insurance, maintenance, fuel, etc. According to TechAltar it costs about half a million euros to own something like a VW Golf at the low end, 1.5M euros on the higher end. It’s estimated that the average person spends 30-40% of their lifetime income on their car.
People only see the initial purchase price (which is often ignored because of various deferred payment offers that further increases the price), and the price of gas. Gas alone is starting to reach the price of renting an apartment, yet somehow people still can’t see themselves living without a car.
Insane.
Is it really that expensive to own a car outside of the U.S.? That seems absurd
It’s that expensive to own a car everywhere. In Canada, it’s projected to be >$1K/mo (CAA has a calculator if you want to project your own costs).
The craziest part, as TechAltar points out in that video, is that society as a whole subsidizes car ownership and if owners actual saw the whole cost through registration fees and gas taxes, that cost would probably be 50% higher.
Nice! My 2010 B2300 pickup comes in at $4,031.98 a year AND 75% the emissions of " the most fuel efficient [new] vehicle in the same category."
How does $1k CAD a month equate into 1.5 million euros though? $1k a month is $12k a year. $120k over 10 years. Hell if you stuck $120k CAD in a bank account making 6% for 10 years, you’d have like what, $220k? 1.5 million euros is $2.2million Canadian. Come on.
How does $1k CAD a month equate into 1.5 million euros though?
The first is the average owner’s annual costs, the second is the upper bound on the total cost to the owner and society at large over a lifetime (with €500k being the lower bound).
Expensive is relative. This means nothing in isolation. Being a capital expenditure, what is the projected return on the $1k per month spend?
10% is generally considered a good investment. Given the scenario, does spending $1k per month on the vehicle return at least $1,100 back? In other words, if, in an alternate reality, this person had no vehicle, would we find he had at least $1,100 less income each month? If so, that is not expensive at all. A total bargain compared to putting $1,000 per month in a bank collecting 0.5% interest. Now that’s expensive.
That’s just it though, and your average investment profile hasn’t likely been getting 10% overall these past few years. Even if you stuck that cash in a high interest savings account, it’s been making maybe 4-5% this last little bit, which sounds good until you consider that inflation has been about the same amount, eroding the purchasing power of it. 10% return in your RRSP’s isn’t going to drive you to work in the morning either.
Obviously in our car-centric North American cities, cars are essential to make a decent income. My point is more that it shouldn’t be that way. If it’s not a work vehicle, why is it essential to own something that costs >$12K/y when it sits unused 95% of the time?
Enjoyment? Heck I even work from home. My car is a toy, and sits unused in my garage for 95% of the time. It probably costs me $12,382,818,826 a year, and gets 20 miles to the hogshead and all of that. Do I care? Honestly not really.
My investment portfolios? Up 15% one year, down 20% the next year, up 5% the next year, then down 10%. You factor inflation in there, and it doesn’t amount to shit. So that $50k my car cost? Might be $100k this year, $50k next year, and so on. Just like my house. Worth $425k last year, now it’s suddenly worth $600k, then it’ll be worth $400 when oil shits the bed, then it’ll be worth $609k.
My point is, can’t I at least have some damn hapiness somewhere? 8 years of school, I’m a millenial (borderline), so I pretty much don’t have fuck all to work with, and never have or will. I was in debt to my eyeballs for a decade, so I could have a job afterwards, and have the things I want in life. Which means I’m a decade behind. And you only live once, or so logic leads us to believe anyways. You can’t take it with you. So live it up. And keep your hands off my car.
8 years of school
Huh. I thought attending grade 9 was legally mandatory these days.
No doubt you are way better off financially having entered the workforce full-time at 14. Compound interest is no joke. Enjoy the car it has afforded you!
When did I ever day I wanted to take away your car? I just said our society shouldn’t be as car-centric and require that almost everyone has to have a car and drives everywhere. Cars are expensive and many people are struggling to make ends meet, yet they can’t eliminate the cost of owning and driving a vehicle.
why is it essential to own something that costs >$12K/y
In what way is it is essential for the vast majority of the population? Rural dwellers, perhaps (although Canada’s Old Order Mennonite/Amish population seem to manage just fine), or those with particular disabilities, but most people?
I live in a small town and could easily go without a car. Imagine those who live in cities, which is the majority of Canadians. The whole reason they are wanting to jam themselves together so tightly is exactly so that they don’t need vehicular transportation to live life!
I do own a car, though, as the ROI on my vehicle easily exceeds 10%. I don’t like owning a car, but where else am I going to find those kind of returns?
My point is more that it shouldn’t be that way
It wouldn’t be that way if it weren’t a good investment, but it generally is (becoming much less so over the past couple of years, granted) for a lot of people. In part because of subsidies, of course, but I expect that it would still provide good ROI even if the subsidies were lifted. The early road infrastructure in Canada was built by private interests, after all.
Being capital, it is a useful tool that gets useful things done. When useful things get done, life improves for all of us. What else are you going to invest in with similar affordability, risk, and returns? In other words, which tools would most people find more useful than a car to get useful things done?
It is absurd because those numbers are nonsense. There’s a spreadsheet linked in the video description.
What numbers in that spreadsheet seems like nonsense to you? Other estimates I’ve seen agree with his numbers.
The majority of “costs” are indirect ones like noise and pollution. Tell the average Joe that ackshually his Civic is costing him $1.5M by showing him those figures, and he will say he’s never seen noise or pollution charges coming out of his bank account. It’s sophistry and not helpful to the environmentalist cause because it makes us look like we’re manipulating data to suit a narrative.
That’s totally absurd. I drive a British made car that falls apart if you even so much as look at it the wrong way in the morning, and there’s no way in hell my outlay would be that, even over 20 years, even factoring in FV and whatever else. Hell, my mortgage and total house outlay costs over a 30 year period probably wouldn’t be that. Bananas numbers.
I cant find anything to back them up either.
My RAV4 was $30k, took a loan on it for about 25k, no interest, it’s paid off. In terms of maintenance I’ve put ~$10k on it over time.
It gets 22mpg, and I drive <10k miles a year. Currently at 53k miles, that gives us ~2410 gallons of gas. I’ll be generous to account for the spikes in gas prices and say it was $4/gallon -> $9640. At 6 ish years, that’s now ~$60k It’s a Toyota so I expect it will last a while. Taxes started at $400/year and are now $150/year. That’s about a cost of $10k/year. In the unlikely scenario I keep it for 20 years, I might hit $200k over its lifetime.
If people are spending €1.5m over the lifetime of their cars, they are getting scammed
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Some people have good incomes, but cannot anymore changes houses every 5 years because it’s out of control, for the price and interest rates, so they use their income to buy cars/RV.
Also some are leasing even if it’s like 800$/month just to show their car, I know people who lease big Volvo, Porsche, etc.
Me I keep my 10yo Sonata, and if it dies/crashes, I don’t think I’ll be able to buy anything more than 15k :-/ What’s available for 15k ? a 2006 Sunfire?
True. I don’t own a car so this completely escaped me.
Oh look, things are getting worse again. I’m just numb to it at this point, it’s all I’ve ever really known.
I’m already in so much physical pain, might as well lump economic pain in there as well…
This is actually a choice. The rich have decided that millennials will suffer so they don’t have to. We outnumber them.
☝️☝️☝️☝️
(Seriously sorry for dumb question) What does that mean for us?
Depends on where you are financially. If you have a fixed rate mortgage that is getting renewed in the next year or two - you’ll see a big jump in payments if you aren’t able to extend your mortgage.
If you’re still on variable, no real change.
If you’re renting, rents will continue to climb if interest rates go up or plateau - but don’t ever expect prices to come back down, if you’re lucky they’ll stagnate for a year but that’s unlikely because landlords are greedy shits.
Businesses are cutting jobs as there’s less money in the market (all going to shelter and food plus general Greed of making less people do the same/more as a larger group), so if you’re unfortunate enough to have a mortgage that’s renewing soon and you lose your job and EI can’t cover the difference, you’ll probably have to sell or lose your home… And still be unable to afford rent.
This has been the goal of every level of government for a while, municipalities refused density, provinces refused to prioritize any public housing (Doug in Ontario is sitting on 22 Billion as education, healthcare, and housing are floundering, so he gifts developers billions in prime Greenbelt lands for single detached millionaire homes) and the Feds can’t really do much with provincial and municipal governments running interference - aside from use their own central banks to get essentially interest free loans and build federal public housing. Which they should but certainly aren’t.
Oh, and the Bank of Canada is crushing developers with interest rates so they’re cancelling or pausing projects because they’re unprofitable with these interests rates - or they’re colluding and holding us over a barrel because our government cannot successfully accomplish anything without overpaying a private business who underpay their workers to do it for them.
If you keep your job and bought a home within your means, it’ll be lean times but not impossible to overcome. Don’t be afraid to use food banks or anything to keep yourself afloat. Times are tough af and there is little relief on the horizon.
This really helps me understand the situation better. I appreciate the time and thought put into this response. It’s times like these I am thankful I didn’t overspend. I listened to my parents and bought a house that wasn’t flashy but was suitable for my situation. Most people I know did not do that, and I constantly wonder how they are making ends meet. Some of them make less than I do.
Just imagine how young people are coping in other countries without 30 year fixed mortgages. Many of them are coming up for renewal with big rates rises.
The US has 30 year fixed mortgages. We don’t. Ours are typically fixed for up to 5 years. Then you get renewed at whatever the current rate is for the remainder of the mortgage.
We actually do have 30 year mortgages too, they just arent common because they cant be insured and you need to have a larger down payment (I think its 20%). The US hands them out like bubblegum. We all know how diligent they are with their lending, but it’s not like we are really any better here either.
I’m aware we have 30 year amortization mortgages. When you say 30 years, do you mean that the term is 30 years? That is, the interest rate is kept fixed for 30 years?
We need McMansions in the greenbelt to solve housing!!! /s
If you are still on variable, no real change
Au contraire. It would blow your mind how many people are on these bullshit fixed payment variable mortgages. There’s people that unknowingly have these weird scenarios like effectively 60+ year amortizations now, due to the sharp increase of interest this past little while and the fact their payments haven’t even been covering their interest for some time, let alone the principal. The banks won’t actually spill the numbers as to how many of these types of mortgages there are, but thats all banks peddled the past decade.
I renew next year on a fixed mortgage. To be fair, I’ve also known that this has been a loooooooong time coming, and hence didn’t overspend when we bought in 2019. The pressure sure as fuck was there, the realtors like you can afford way more, the mortgage people were like spend spend spend. Even our boomer parents, who don’t live under any sort of modern economic reality, were trying to push us towards the bloated mcmansion end of the spectrum, market never goes down, maximize, blah blah blah.
Anyone with half a brain had to have known this was coming. I’m actually for real surprised it took this long. While nobody could have forseen COVID, or the super sharp inflationary spike that resulted, even as far back in 2019 I suspected inflation and higher rates were soon going to be creeping in. It wasn’t rocket science. While I didn’t exactly predict >7% interest, at the same time I honestly had 0% expectation I’d be renewing for the one point whatever our current mortgage is at.
In fact, I’m doom and gloom on our country as a whole. I think we’ve been glutenous little piggies for far too long, and the central banks have already gone way too far overboard trying to get to their imaginary little targets. I think they’ve already popped the bubble, and we just won’t know this for sure until defaults start to really spike by Q3 2024. Anyone in Toronto or Vancouver renewing on these bullshit fixed payment plans maybe is just going to walk away, it’s probably going to be too much payment and amortization to overcome in some of these overheated markets, against rapidly declining values. Toronto and Vancouver have already flattened out, which might be indicating a large correction on the horizon. Rentals are going to spike, already have in most markets, and that’s going to push all the renters out. Basically I think it’s going to be a fucking disaster. Hope I’m totally wrong, but I’m not 100% sure I am just yet.
The way I understand it, there are two main implications. First, the higher the debt load, the less people will spend in a rising interest environment. As their (our) mortgage payments go up, we’ll spend less on anything else. The larger the effect, the more significant it is for the rest of the economy. Second, the higher the load, the more people will default or sell in a rising interest environment. The consequences of this one are more varied.
Probably a good time to buy bank stocks, and also build up your emergency fund.
If you have a mortgage, make prepayments as they go straight to principal and will reduce your amortization and exposure to rate increases.
I suggest you also run through your current mortgage in a mortgage calculator and use ratehub to get a good idea of what your upkeep will be, and use that to figure out your cash flow for post-renewal.
Everyone lost their fucking minds and went on bidding spree to buy a house, now the chickens are coming home to roost. I doubt government will be bailing any of these “home owners”
They will those provide financial firms with liquidity so bag holders have someone to sell at a loss.
Kind of hard to blame the victims here when it’s not their fault successive Canadian gov’ts failed to stop illegal money coming into Canada in the 90’s – which, once washed through BC casinos, went straight into property purchases that started the housing bubble we’re in now.
If we assume people are capable of making rational decisions and participate in a free market, then they absolutely are to blame for taking on ridiculous debt loads. If we assume the opposite, then their actions were the product of the environment. We seem to want to have it both ways. We want people to be free to do whatever they want without (government) intervention when the number’s going up. For example people were really opposed to the introduction of the mortgage stess test. On the other hand we want to absolve people from responsibility and defer to the environment when the number is going down and they’re suffering post their earlier decisions. “Why didn’t someone do something about X, Y or Z which we perceive is the reason of our suffering.”
Personally I do think people’s actions are a lot more a product of the environment than anything else. If you ask me, most people shouldn’t need to participate in asset markets to have a place to live or have income during retirement. They simply can’t compete. But many fellow Canadians don’t feel this way, especially when the number goes up. And so we are where we are. 🥲
That is the failing of economics and social theories, that people will think and behave in a rational way. People don’t think or act rational all the time. I would argue that for many people, we generally act on feelings and emotions.
“We want people to be free to do whatever they want without (government) intervention when the number’s going up.”
Who is this “we” you speak of?
The Schrodinger’s “we”.
Cats don’t buy houses so they don’t count.
They did this trick in america in 2000s, Canada mostly avoided that fuxkenin
Looks like they are gonna get y’all now.
Buying into a bubble doesn’t make people a victim. Risk was taken and those who were not properly prepared will be fucked.
This is a classic FAFO situation.
With that being said, yeah, big picture all working people getting fucked.
I think the government has been whispering to banks to extend amortizations on variable mortgages. They could play with amortizations of distressed fixed mortgages too upon renewal. Keep people in their properties, paying only interest?
The banks have started doing “infinity mortgages”, in which the lendee only pays the interest and never the principle because of how the interest rats have gone. CTV News did a little primer on infinity mortgages,
When you boil an infinity mortgage down, it sounds like renting since there is no prospect of paying off the principal. Are infinity mortgages here to stay? I don’t know, I do know I won’t have shocked pickachu face when they stay a fixture of the Canadian mortgage market.
It might be the smallest of all evils. Maybe.
Maybe they will do that, maybe it will work. But if they are doing this, i doubt home prices will keep going up. They need low benchmark interest rates to justify current prices.
Agreed. I speculate there’s not much money left to keep the current prices where they are let alone to keep them going up.
I’m not sure it’s a mistake, tbh. It was a shit sandwich any way you sliced it.
Rentals are being sold out from under people often enough that renting anything privately owned is an eviction lottery.
There are no 3BR apartments available, so families mostly want houses, which are largely privately owned.
At the time, mortgages were cheaper than rent, and interest rates had been dropping fairly steadily for 40 years. We can look back with hindsight and say people should have predicted interest rates quadrupling, but I don’t think that’s fair.
Sure, people should have known rates would go up, but that’s what the extra qualification “stress test” was for, right? (Or, I image something like that was a common refrain.)
I’m house poor and overextended, personally, but I’m fortunate enough to be able to work more than full time to pay it. It sucks, but it’s still better than being forced to move my kiddos 4 times in 5 years, like my friend.
Maybe this house will be worth half what we bought it for in a few years, but we gotta live somewhere, and the stability of owning is worth quite a bit.
So 800% is bad, right? Thing is, we secured the debt at 1% over 30 years, so it’s not hard to service. Thanks to inflation we’re basically being paid to have the loan. I think mortgage debt is in a very different bucket to other kinds of debt.
Are you in Canada? If so, who lends mortgages with a 30 year term?
800% is bad, if you’re Canadian and that’s all mortgage debt, you’ll have to renew at the new rates
They’re talking debt-to-disposable income ratio, which ChatGPT tells me means “Debt over in income after tax.” I don’t think this is necessarily descriptive of someone’s financial situation. I’m over 400% debt-to-disposable income, but I could pay off my mortgage in a week if that made financial sense.
If you’ve got investments returning more than your loan rate costs you, I don’t know why you’d pay down your loan any sooner than you had to.
Do you think your situation is similar to the average Canadian household?
You are not the norm.
