I’m sure there’s an argument to be made about not buying things you can’t afford, but looking at the graph in that article, people are going to get fucked on mortgage renewals. Anyone that locked in for 3/4/5 years are going to be renewing between now and the next couple of years and going from BOC rate of 0.25% to 5% or more is going to hurt.
Someone I know is looking at renewing their mortgage in the next couple of months and they’re already looking at a jump from 3% to >6%.
At the same time banks get more cautious about who they lend to. If you’re rich and a cash buyer is great as you can snap up a few houses at discount to add to your portfolio. Normal people, not so great.
All those people have to live somewhere. Or there will be a massive increase in homelessness.
With a flood of houses on the market, they will snapped up by… people with a good cash flow… like… corporations. Who will then turn around and rent them out to you and me and all those people forced out of their homes… at whatever rental rate they desire… while raking in the cash.
I assume you can’t afford a house now and couldn’t afford a house when rates were as low as 1%. Even if a house is foreclosed on and dramatically drops in price, do you think you will actually be able to pony up and pay a downpayment and manage a mortgage rate at say… 8 percent? I seriously doubt it. A $1.8 million home (at today’s valuation) isn’t going to pop onto the market at $150,000 in 2 years when the renewal hits.
The reality is that the banks will do whatever they can to keep people in their houses. I checked my bank today to estimate what my mortgage renewal will look like when it comes up and they are offering mortgage terms up to 59 years. I can afford my renewal even at the new rate because I bought a bit over at 1/3rd of what they approved me for… I knew rates would go up, and I knew what I could afford at more typical rates. I’d rather pay the lower rates of course… but…
If my family of four can live cramped inside a one bedroom apartment for years, then overleveraged folks can downsize from the large houses they bought during the pandemic. And, if nothing else, it will feel a little like justice.
That’s not the discussion here though. It was about how the sharp rise in interest rates will flood the market with foreclosed homes… somehow making it magically affordable for people who couldn’t afford a house at the low interest rates.
And now your family of four in your cramped apartment will be competing with a LOT more people for that same number of cramped spaces… supply/demand… it’s going to hurt EVERYONE not just the overleveraged. Meanwhile corporate housing companies will be playing Scrooge McDuck.
I’m sure there’s an argument to be made about not buying things you can’t afford, but looking at the graph in that article, people are going to get fucked on mortgage renewals. Anyone that locked in for 3/4/5 years are going to be renewing between now and the next couple of years and going from BOC rate of 0.25% to 5% or more is going to hurt.
Someone I know is looking at renewing their mortgage in the next couple of months and they’re already looking at a jump from 3% to >6%.
Look on the bright side. If enough people default on their loans, I might be able to buy a house one day.
That won’t go on your favour. That will go VERY badly.
Why not? Genuine question. If a bunch of people go under and their houses hit the market, supply increases, homes get cheaper.
At the same time banks get more cautious about who they lend to. If you’re rich and a cash buyer is great as you can snap up a few houses at discount to add to your portfolio. Normal people, not so great.
All those people have to live somewhere. Or there will be a massive increase in homelessness.
With a flood of houses on the market, they will snapped up by… people with a good cash flow… like… corporations. Who will then turn around and rent them out to you and me and all those people forced out of their homes… at whatever rental rate they desire… while raking in the cash.
I assume you can’t afford a house now and couldn’t afford a house when rates were as low as 1%. Even if a house is foreclosed on and dramatically drops in price, do you think you will actually be able to pony up and pay a downpayment and manage a mortgage rate at say… 8 percent? I seriously doubt it. A $1.8 million home (at today’s valuation) isn’t going to pop onto the market at $150,000 in 2 years when the renewal hits.
The reality is that the banks will do whatever they can to keep people in their houses. I checked my bank today to estimate what my mortgage renewal will look like when it comes up and they are offering mortgage terms up to 59 years. I can afford my renewal even at the new rate because I bought a bit over at 1/3rd of what they approved me for… I knew rates would go up, and I knew what I could afford at more typical rates. I’d rather pay the lower rates of course… but…
If my family of four can live cramped inside a one bedroom apartment for years, then overleveraged folks can downsize from the large houses they bought during the pandemic. And, if nothing else, it will feel a little like justice.
That’s not the discussion here though. It was about how the sharp rise in interest rates will flood the market with foreclosed homes… somehow making it magically affordable for people who couldn’t afford a house at the low interest rates.
And now your family of four in your cramped apartment will be competing with a LOT more people for that same number of cramped spaces… supply/demand… it’s going to hurt EVERYONE not just the overleveraged. Meanwhile corporate housing companies will be playing Scrooge McDuck.