How high will interest rates go ? (Canadian housing crash)
- Thread starter kalcoma
- Start date
Everyone keeps saying it is record-setting inflation, so why not just assume they are going back to 20% interest rates?
The 20% rates were in response to 8 consecutive years of inflation over 7.5% which, unlike today, wasn't brought about in a low interest rate environment. It's highly unlikely that we'll need 20% rates now, or even anything approaching two figures. I suspect we'll end up in the 3.5 - 4.0% area, and would be surprised to see 5.0%. Keep in mind that even 3.5% should severely dampen the housing market. We've already seen evidence of this, with sale prices decreasing 13% across Canada, and that's with the central bank rate only at 1.5%.
To be quite frank, Canada's housing has needed a correction for a painful length of time. A lot of young people suffered during this run-up, while a lot of older, well-off people profited. Time for a 40%+ correction to bring us back to sanity. I only feel bad for the people who bought in above their comfort level so late in the cycle.
At least throw some click-baity lines in there.
"This couple bought a house they could barely afford at the peak of the market. You won't believe what happened next!"
It's already 5% discounted rate on 5 year fixed. It's crazy how it almost doubled so fast. I'm considering selling because I think renting might be cheaper now. Or crash at different women's house to save on rent but I'd still need a fixed address for ID and mail. I wouldn't know what to do about that.
I think we will see 7% 5yr closed mortgages within the next 18 months before things start to slide back to perhaps 4-5% for a few years after that.
2% mortgages are a rather recent anomaly that, because we are just leaving them, everyone believes it has always been that way.
2% mortgages are a rather recent anomaly that, because we are just leaving them, everyone believes it has always been that way.
Agreed. I think we're definitely headed into 6.x% territory for a while followed by a gradual decline. For people that bought during the pandemic, we'll see if they're able to hang on. For the last decade people talked about becoming real estate agents but I've always said the consistent money is in residential property appraisals. Property value spiking? Banks want an independent appraisal. Interest rates spiking? People refinance to manage their cash flow requiring an independent appraisal.
The majority of them are done "from the curb" which means that they pull up and confirm there's actually a house on the lot and then copy and paste the majority of their report.
Source: friends with multiple appraisers, including 2 that own their own businesses doing it and employing others. They offered me to get in a decade ago and I turned it down. I wish I hadn't, even on a part-time basis.
Maybe someone can chime in. I was told that with my degree it was just a few online courses. I never pursued it so I can't speak to how hard/long the path would be to get credentials. It was pointed out (when I asked) that it was fairly recession-proof due to refinances.
i agree with this assessment, but i think 6%. itll all depend on whether the fed can tame the inflation back in the 3 percent area. i am hoping sooner rather than later.
What are we talking here, Central Bank overnight interest rate of 6%?
If so, I believe it will not get anywhere near there.
4%-4.5%, with a 5% absolute worse case scenario.
Look, they're not realistically looking to get the inflation rate down below 3% with these rate hikes in the short to near intermediate term.
sorry, should have been clear. i think the banks prime rate will go to 6%. my rate from BMO just jumped to 4.75% this past week and i think its going up more.
Yeah, I'm talking central bank rate, not prime rate. So we're expecting pretty much the same thing.
In order to bring inflation to 2% target, they need to raise the fed funds rate above the overnight rate.Do you know something we don't?
My prediction is 7.5%
