21% interest rates in the early eighties. Lots of people couldn't keep up the payments because of job loss (unemployment became super high for a while). Housing prices jumped too at the period. My friend's grandparents sold their home for double the price they would have got a year earlier.
The Decline of Vancouver.
We bought in 1991 & were paying 11.75 %, I guess that wasn't too bad compared to the eighties. Terrible rate compared to now, though.
Posted by: Stuminator
We bought in 1991 & were paying 11.75 %, I guess that wasn't too bad compared to the eighties. Terrible rate compared to now, though.
Yeah it's a bit odd how a lot of people think rates around 5% are high.
And the monthly cost was???
A notable part of the reason we are in this mess is that we had cheap money for way too long due to artificially low interest rates. It made it way too easy to borrow money for mortgages which helped housing prices go skyward.
Posted by: syncro
Posted by: Stuminator
We bought in 1991 & were paying 11.75 %, I guess that wasn't too bad compared to the eighties. Terrible rate compared to now, though.
Yeah it's a bit odd how a lot of people think rates around 5% are high.
But house prices have increased exponentially relative to wages since then.
I'd be happy to pay 12% on a 150k mortgage making half what I make now. 5% on a million is not so fun.
The comparisons aren't quite apples and oranges.
In the early 80s minimum wage was $3 and hour. Now it's $15 an hour. Income tax rates were higher.
Posted by: Kenny
Posted by: syncro
Posted by: Stuminator
We bought in 1991 & were paying 11.75 %, I guess that wasn't too bad compared to the eighties. Terrible rate compared to now, though.
Yeah it's a bit odd how a lot of people think rates around 5% are high.
But house prices have increased exponentially relative to wages since then.
I'd be happy to pay 12% on a 150k mortgage making half what I make now. 5% on a million is not so fun.
The comparisons aren't quite apples and oranges.
Yup, and part of the reason for that I mentioned in my next post...
A notable part of the reason we are in this mess is that we had cheap money for way too long due to artificially low interest rates. It made it way too easy to borrow money for mortgages which helped housing prices go skyward.
You said it was odd people think 5% is high.
Point is, it's not odd, it's perfectly understandable.
It's still always the right time to buy a primary residence tho right....right?
Posted by: Kenny
You said it was odd people think 5% is high.
Point is, it's not odd, it's perfectly understandable.
Typically rates have been much higher than what we had a few years ago and the recent rates reflect a return to more typical rates. If someone has only experienced mortgage rates like what has existed over the past 5-10 years then yeah, it might seem like 5% is high, but that's not the norm. There's been plenty of media/news chatter over the past few years of how rates are low compared to historical norms and not to expect rates to stay so low. In the context of a standard 25yr amortization on a mortgage, it seems unreasonable to expect that rates will stay really low over that 25yr period. If we take the opposite view, depending on how long someone has had a mortgage 5% could even seem low, and not high. I definitely don't think 5% seems high even though I was happy as hell when rates were low as with my variable discount my bank rate was less than 1% for a while - it was almost like free money.
There's been a notable number of stories of people getting into trouble with the rise in rates where they can no longer afford their mortgage payments. Some of them are in the unenviable position that if they sell not only is all their equity gone, but they still owe their lender money because their home is worth less than the mortgage. I've seen more than a few discussions on the topic of personal responsibility with people maxing out their mortgage amounts while we had low rates and not having a lot of breathing room if rates go up. People had to have some idea that BoC rates weren't going to stay down around 1% forever and would eventually rise. The potential for enough people getting into serious trouble with their mortgages that it will affect the national housing market is starting to get very real. A combo of the right factors could see enough homes coming onto the market that prices really drop and anyone who's purchased in the past 10yrs could be facing some financial hardship. Canadian banks have space to help stave off some defaults, but not a lot of defaults. TD recently reported that 25% of their mortgages have amortizations over 35yrs - that's really high for Canada where 25yr mortgages have been the norm. Not all the info necessary to make a solid call on where we'll end up is available - especially in BC, but there is a fair bit of info available that we're in a difficult period and it could potentially get ugly in a hurry if rates continue to rise and the economy starts to falter. You might remember Pedro2005? This discussion of Vancouver housing being over priced has been going on here for at least a decade, closer to 15yrs I think. Back then he was calling for a crash. It sort of happened in 2008, but govt's stepped in to prop up the banks and print mo money! Same thing happened 2 years ago with the pandemic and eventually all that quantitative easing is going to have to be dealt with.
So yeah, this expectation of interest rates down around 2 or 3% is odd. I understand if people are unhappy with the rise in rates, I am, but it's definitely not odd if you're taking in the info that's available. But hey, you don't have to take my word for it, feel free to take a look around and see what info is out there.
https://www.theglobeandmail.com/business/article-variable-rate-mortgages-amortization-periods/
https://financialpost.com/real-estate/mortgages/banks-mortgage-interest-rates-workarounds
https://globalnews.ca/news/9297311/trigger-rate-mortgages-bank-of-canada/
Meh my mortgage is less than 15 years and around 180k i dgaf about rates.
Posted by: Fast-Orange
It's still always the right time to buy a primary residence tho right....right?
I know you're saying this facetiously, but depending on ones' situation and how long they plan to stay in one place in may almost always be an okay time to buy. I think anyone who's a first time buyer had been taking on a huge amount of risk getting into the market in the past 5yrs though. The thing is that there are so many different variables to consider that it makes it difficult to put the choice of buying a home into a simple one or two factor equation. Kinda like buying your first mountain bike. The real wrench for Canadians has been the population increase - most of that immigration - and everyone needs somewhere to live. We really haven't kept up with creating enough accommodation for everyone and/or making sure that the housing that is here is being made available for use.
You could move to small town Nova Scotia and buy a great house on a few acres with an ocean view for peanuts compared to what it would cost to buy a clapped out studio apartment in Vancouver.
Check this out:
https://www.realtor.ca/real-estate/25393136/3623-highway-1-st-bernard-st-bernard
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