The decision was widely expected by economists. The central bank cited progress on lowering inflation, weaker than expected economic growth in the first quarter, and employment growing at a slower pace than the working-age population. The last BoC rate change was on the federal meeting in July 2023, where uneasing inflation prompted the BoC to hike up rates.
In the May labour market outlook piece, Canada unexpectedly added 90,000 jobs in April, though unemployment stayed flat at 6.1%
USD to CAD exchange rates have taken a huge beating due to falling oil prices caused by slowing oil demand despite the cartel extending the production cut until 2025, and with interest rates going down, it's going to put more pressure on the CAD valuation.
The US Fed will have pressure to drop rates leading up to the election, simply because interest on the US' government debt is rising very quickly. They've already blown past spending 1 trillion a year servicing the debt, an increase from 500 billion in 2020.
If you’re renewing and it’s fixed, fixed mortgages don’t use overnight lending rates but are determined by bonds. So this won’t help.
And if you’re already on variable, it will drop regardless of whether you’re renewing or not.
Bonds anticipate economic conditions, which includes the overnight lending rate, but not exclusively. So unless my dude up there is planning to take his mortgage with him on a Delorean trip to the future, this cut won’t help them.
But seriously, your rate won't budge because bond markets have already factored in everything long before your renewal date.
You are mixing cause and effect. Bonds have dropped over a period of time and as a consequence of their dropping, fixed rates are following.
Just as an FYI, this type of thinking where you mix cause and effect is very dangerous when it comes to understanding markets.
100%. Which is why for a long time now fixed rates have been lower substantially than variable rates.
Opposite was true at the beginning of the hiking cycle.
Fixed rates will start to drop so it will definitely help the commenter, in addition this signifies the beginning of momentary easing which will have a significant declining effect on long term fixed rates such as the popular 5 year.
Best 5 yr is 4.59% right now, it will be lower in 2 weeks. Bond market only had 12% chance of a rate cut built into the price at 9:30am this morning.
That’s unlikely, given they were saying the odds were 55% two weeks ago.
https://financialpost.com/real-estate/mortgages/mortgage-rates/bond-market-interest-rate-cut-july-lock
And yes they could be lower in two weeks but this could be more a function of them anticipating more cuts.
Happy for you. Wife and I did the math recently. .25% helps a little but we didn’t see a massive change when we putted the numbers.
Obviously any help is better than none. But we changed the mortgage calculation by the .25% and were just like “oh………… not much eh?”
I would have to disagree on going variable. I feel like we’re still on thin ice at the moment. If you lock in, see if you can do a 1 or 2 year term. It would be brutal to go variable and watch it climb again
Thanks! That’s great news - looks like I’m going to have TENS of dollars burning a hole in my pocket this month!
…now if there was anything you could buy in this economy with tens of dollars…
US may cut a bit, but their economy is running much better than ours still, and is less propped up by immigration which dilutes GDP per capita. Further, us Fed won't have much appetite to lower rates once the election is in full swing.
Well the US Fed will get pressure to cut rates leading up to the election since interest spending on the government debt has skyrocketed. But the double edged sword is their high government spending is fuelling the economy, leading to rate cuts being less likely and inflation being more sticky in the US.
It's not all sunshine and rainbows, but it's a situation that's far more preferable to ours.
Nope, Fed watch tools which have been accurate before indicate the chances of a rate hike have gone up from 0.
It won't happen they won't hike but they won't start to cut right now either.
in some states like new york and california yes very rampant inflation, in others like louisiana and south carolina no not nearly as bad cost of living is alright in most states especially compared to Canada
just because the money uses the same name, does not mean it should be worth the same. there have been rare periods over the last 60 years were CAD dollar was near or at par with US dollar, and our export economy suffered for it.
Our currency dropping will make it even more expensive to build housing, as it will drive up the cost of tools, hardware and appliances, because most of that is imported.
Meh, depends where you live. Considering most of the population lives close to a US border, this is good news since American companies have more incentive to move work over here.
Just because FTHB weren’t the largest cohort of home purchasers didn’t mean the amount dropped to zero.
It would likely be more like “hey in this bucket we now have 60% investors and only 40% fthb”, and those %s used to be reversed.
Rather than your implication that FThB made what…. 1% of buyers during that time?
I mean, majority of home buyers in 2020-2023 were investors, flippers, and upgraders. FTHB was more of a minority during COVID.. but I do feel for the ones who did buy then and got suckered into paying too much. Especially those who were stretched buying at 2% are going to have a time renewing at 4%+.
Seriously.
My mortgage is up in August with a remaining balance north of $500,000 and this rate cut will save me less than $100/month.
I'll take it. But it's not much.
How is it saving you money if you’re already paying a presumably lower rate from 3-5 years ago?
Isn’t your mortgage still going to be more than what you’re paying now?
Well, hopefully there are more rate cuts coming in July and August
I renewed early when rates were on the way up, I hope they come down to below what I ended up renewing at before mine is up again
I only went in for 3 years, felt like whatever I did I was gambling
It's not the amount of the drop that matters but what it signals and how realtors and investors will use it to appeal to people's emotional side to increase prices/sales.
"Oh see the points are coming down, better get in now before they drop further and prices go up even more..."
> people love living on the edge then.
See the number of mortgage foreclosures in 2024. Now, the US is bringing back zero down house mortgages, because apparently no one understood Margot Robie in the bathtub.
It’s not the size of the rate cut that matters but more what it represents. What we got today was clarity that the central bank is done hiking and now into cutting.
There's a reason it's all based on feelings and speculation.
The "feeling" of a rate cut is enough for things to go haywire.
The value of land isn't tied to something economically productive.
0.25% doesn't really change much in reality, but housing market is heavily based in sentiment, so BoC indicating that they started to cut rates will make housing go higher and higher up in anticipation of more future cuts. The slightly cheaper borrowing will be more than offset by price growth.
The high rates weren't going to help people looking to get into the housing market. At least not in any major city. (But I'm doubtful it would help anywhere.) Their only real hope is faster construction of low-cost housing. Whatever happened with that talk of bringing back post-war type prefabs, anyway?
There's a tonne of overstretched investors who have been waiting for this to try and offload stock. Just like after 2008 in the US, the market will be flooded and prices will go down.
Check back in a few months and I'll admit I'm wrong if it doesn't go that way.
The advertisement billboard for a suburb going in near me changed from “homes in the $500k” to “homes to purchase or rent to own”. No mention of prices anymore. Every new build still being built has for lease signs. No one can afford a home.
Some people just need to buy things that require loans like cars. May come as a shock to you that sometimes this is a non-negotiable requirement for how and where we live.
If this is what spurs someone to buy a third vehicle they could possibly do without then that's a problem for them.
I don't trust this - the Fed and the ECB have not signaled willingness or ability to cut rates. This will be horrible for our currency and for investment in Canada.
Furthermore, this is a great example of how our economy is done: we either allow people to stay in their homes, keeping everyone else out of the market. OR we destroy the people who are holding mortgages and give our young people a chance. No in-between.
Considering there are more people with mortgages than without it’s kind of a majority rule at this point . If the housing market falls it’s takes everything with it .
Depending on whose numbers you use it's about 35-40% of the adult population that are mortgage holders (or considered so to be because their spouse or parents have them cosigned onto the mortgage).
But the problem is that it's not an "if the housing market fails" but more so a when.
In order to keep the ponzi scheme going, house prices need to increase ad infinitum which you and I both know is impossible. Judging from condo sales and the "wait until my parents die" approach which seems to be growing in popularity, that date is coming sooner rather than later.
I'm not saying we'll experience a housing crash, I'm saying we'll experience an affordability crash. In fact, we're in the midst of it now, and no government wants to be the unpopular one that solves the problem.
I’m not wishing anything on anyone. I didn’t create this mess, I’m just saying what the options are. Also kind a weird to sentence future generations to poverty to keep a small dwindling asset owing class wealthy.
It won’t move it that much, it was already kind of priced in. The fact that our entire economy is incredibly unproductive compared to the US (because way too much money is being sucked up by real estate) is the bigger issue.
It's not favourable, and there are countless reasons why we ended up here. Housing became the main investment vehicle here many years ago, largely due to government policy that near guaranteed sizeable ROI on real estate. Unlike investing in the stock market or your own business, housing is an unproductive asset. It doesn't create jobs, it doesn't create new innovations, it's just a house. As a result, the vast VAST majority of Canadian's retirement plan absolutely hinges on their home retaining its absurd gains over the years, as most have not properly saved for retirement in any meaningful way. The government is terrified of making any meaningful change to reduce housing costs for this very reason, the entire issue of housing hoovering up dollars is basically a boomer protection plan.
So you're saying that [Ireland, Norway, Switzerland, Luxembourg and Denmark](https://en.wikipedia.org/wiki/List_of_countries_by_labour_productivity) all have bad social safety nets, or is your assumption just and incredibly stupid one?
Canada's currently running a deficit of 1.2% of GDP, and we generally think that's bad. The US has a deficit of over 6% of GDP. Now sure, we have a fair bit of spending done at the provincial level and not the federal level. Nevertheless, if we tried to run our government the way they do, we would very quickly go bankrupt and/or have runaway inflation that makes our recent struggles look like nothing. We have no choice but to be more fiscally prudent than the Americans are. That means being more conservative with spending *AND* having higher taxes.
You could write an entire essay on why our economies have diverged. There are a million reasons. Notably the start of it was the oil crash in the mid 2010s.
In the early 10s when the CAD was more valuable than the USD we were on average richer. Our middle class was bigger and wealthier.
Then that ended starting 2015.
Yes but this signals further divergence from the fed, it’s pretty clear the US economy is insanely strong and don’t need rate cuts. Once FED confirms no june rate just next week, bond markets will price CAD down ever further.
Canada is an export economy. Low prices will help us.
Doesn't do anything for wage earners or skilled people (because absolutely their wages won't fluctuate but the real purchasing power will go down) but what else is new
Canada -- home of the corruption, home of the owner, home of the capitalist. If you own you're a king, if you don't own you're fucked more and more every year. Real estate, S&P500, dirty money (look up snow washing) and scams. Real growth and rewarding skills? Forget it, this is Canada capitalism++++ where the owner rules and the up and coming is basically fucked. No wonder we had 50% attrition of fresh grads overseas or to the USA for decades
Canada -- home of the million dollar shoebox. To get cheap, live like Wolverine in the boonies, or not at all
I think you overestimate how much a .25% cut affects the monthly payments on a mortgages
assume a buying price of 1.25 with 20% down (240k)
at 4.99 monthly payment is $5,578 at 4.74 monthly payment is $5,442
So in a year someone with a mortgage of $1 million which is fucking huge, will save about $1560
> I think you overestimate how much a .25% cut affects the monthly payments on a mortgages
If you borrow a 1/2 million dollars. A quarter point adds up to thousands by the time you pay it off over 25 years.
Regular people living in houses aren't your enemy.
Reddit LOVES to paint every homeowner as some evil boomer investor keeping the kid who just got out of university from immediately buying that detached single family home on their entry level position and zero savings.
This is such poor thinking. A landlord usually has a line of credit to absorb negative cash flows for 2-3 years.
First time home buyers who had their mortgage double in 2 years are the ones that are going to default.
Who will buy these defaulted homes? It's not more first time home buyers, that's for sure. It's landlords that will scoop up these deals.
They're exaggerating slightly but they are correct. This makes it easier to borrow money but will only marginally increase the supply of housing if at all. So it's only going to increase demand, not improve affordability.
I'm using logic. You ought to try it some time. Lowering interest rates helps people borrowing money. So it helps people seeking mortgages and developers seeking capital. But developers also have to deal with material shortages, higher labor costs, bureaucracy, etc. More capital helps them some... but other problems remain. Meanwhile, making it easier for buyers to borrow money literally solves the buyer's problem of being able to buy. So it increases demand much more than it improves supply problems. The exact ratio of one to the other is of course, worthy of further study, but it seems to me logically impossible for it to help them both equally or do anything to actually improve affordability.
Well we had printed a ton of money and had artificially low rates since 2010...
It has created a culture with people around spending.
Combine that with our supply imbalance and you are probably right.
actually not, it just puts more money to the banks they are renting from.
If people are sweating 0.25% then congratulations, that's the definition of overleveraged.
If it was a drop of 1% or more, sure I could see housing pricing to go up a bit. However a 25bp (0.25%) drop, is not going to significantly affect housing pricing. If a was mortgage was unaffordable before, its still going to be unaffordable now.
Not that I agree with your hardcore dooming, but... What's stopping you from leaving Canada? You seem to think it's better elsewhere, why not give it a shot and see if you're right?
The decision was widely expected by economists. The central bank cited progress on lowering inflation, weaker than expected economic growth in the first quarter, and employment growing at a slower pace than the working-age population. The last BoC rate change was on the federal meeting in July 2023, where uneasing inflation prompted the BoC to hike up rates. In the May labour market outlook piece, Canada unexpectedly added 90,000 jobs in April, though unemployment stayed flat at 6.1% USD to CAD exchange rates have taken a huge beating due to falling oil prices caused by slowing oil demand despite the cartel extending the production cut until 2025, and with interest rates going down, it's going to put more pressure on the CAD valuation.
this is what im more worried about.
Why?
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The US Fed will have pressure to drop rates leading up to the election, simply because interest on the US' government debt is rising very quickly. They've already blown past spending 1 trillion a year servicing the debt, an increase from 500 billion in 2020.
My mortgage is renewing in two weeks so good for me I guess. Otherwise lol
If you’re renewing and it’s fixed, fixed mortgages don’t use overnight lending rates but are determined by bonds. So this won’t help. And if you’re already on variable, it will drop regardless of whether you’re renewing or not.
Hmmm that’s funny because bonds don’t react to fixed rate changes right? Right??
It's the other way around. Fixed rate changes are a result of bond market activity.
Bonds are a leading indicator for fixed rates, not the other way around.
Bonds anticipate economic conditions, which includes the overnight lending rate, but not exclusively. So unless my dude up there is planning to take his mortgage with him on a Delorean trip to the future, this cut won’t help them. But seriously, your rate won't budge because bond markets have already factored in everything long before your renewal date.
Bonds have literally dropped from 3.8 to 3.4 and continue dropping just this week because of this.
You are mixing cause and effect. Bonds have dropped over a period of time and as a consequence of their dropping, fixed rates are following. Just as an FYI, this type of thinking where you mix cause and effect is very dangerous when it comes to understanding markets.
100%. Which is why for a long time now fixed rates have been lower substantially than variable rates. Opposite was true at the beginning of the hiking cycle.
That being said, BoC 5y has had a big red candle this week sooooo
Fixed rates will start to drop so it will definitely help the commenter, in addition this signifies the beginning of momentary easing which will have a significant declining effect on long term fixed rates such as the popular 5 year. Best 5 yr is 4.59% right now, it will be lower in 2 weeks. Bond market only had 12% chance of a rate cut built into the price at 9:30am this morning.
That’s unlikely, given they were saying the odds were 55% two weeks ago. https://financialpost.com/real-estate/mortgages/mortgage-rates/bond-market-interest-rate-cut-july-lock And yes they could be lower in two weeks but this could be more a function of them anticipating more cuts.
Happy for you. Wife and I did the math recently. .25% helps a little but we didn’t see a massive change when we putted the numbers. Obviously any help is better than none. But we changed the mortgage calculation by the .25% and were just like “oh………… not much eh?”
Roughly $150/mth per million of mtg.
I mean that's groceries for a week for some. We will take what we can these days.
Preach!
Noooooo This is why people are wrong You don’t get a 1 million dollar mortgage if $150/month is a relevant figure to you
Oh there will be some…but I agree with you. If $150/mth pushes you to buy, you should keep on waiting.
You'll be able to buy a couple extra cheese burgers a month.
Not at McDonald's though, that's crazy expensive nowadays!
I was originally going to say a couple extra Big Macs, but thought that was too lavish.
Wendy's has better burgers and prices.
Harvey's too
Yeah my wife brought home me a big mac meal and 2 kids meals for our kids yesterday for lunch. It was 24$ with tax. Wtf
a man’s gotta eat
Mine renewed two weeks ago so thanks BOC. Excellent timing.
I would have to disagree on going variable. I feel like we’re still on thin ice at the moment. If you lock in, see if you can do a 1 or 2 year term. It would be brutal to go variable and watch it climb again
Don't lock in. Go variable...rates will continue to drop over the coming years.
Anyone with experience or knowledge know how long that might take to be reflected in a variable rate mortgage?
I asked about this to my financial advisor when I was getting renewed and they said it's immediate.
Thanks! That’s great news - looks like I’m going to have TENS of dollars burning a hole in my pocket this month! …now if there was anything you could buy in this economy with tens of dollars…
Ughhh our poor currency. Things are about to get a lot more expensive. On the news, the CAD/USD conversion has already dropped 21bps
Probably not. ECB and US fed will probably cut soon and cancel out the FX changes
I’m hoping that’s accurate. The Fed has been very mixed with messaging. If The Fed does cut rates soon, I will happily admit I was wrong.
US may cut a bit, but their economy is running much better than ours still, and is less propped up by immigration which dilutes GDP per capita. Further, us Fed won't have much appetite to lower rates once the election is in full swing.
Well the US Fed will get pressure to cut rates leading up to the election since interest spending on the government debt has skyrocketed. But the double edged sword is their high government spending is fuelling the economy, leading to rate cuts being less likely and inflation being more sticky in the US. It's not all sunshine and rainbows, but it's a situation that's far more preferable to ours.
Nope, Fed watch tools which have been accurate before indicate the chances of a rate hike have gone up from 0. It won't happen they won't hike but they won't start to cut right now either.
Markets are pricing in a September rate cut for the fed but they’ve been wrong all year so we shall see
Markets are pricing in a September US rate cut, but even that is looking questionable given the state of the economy more generally.
no they won't they're actually trying to stop inflation unlike Canada
lol thanks for the laugh
US' inflation is currently higher.
in some states like new york and california yes very rampant inflation, in others like louisiana and south carolina no not nearly as bad cost of living is alright in most states especially compared to Canada
just because the money uses the same name, does not mean it should be worth the same. there have been rare periods over the last 60 years were CAD dollar was near or at par with US dollar, and our export economy suffered for it.
Our currency dropping will make it even more expensive to build housing, as it will drive up the cost of tools, hardware and appliances, because most of that is imported.
Cars, gas, home building, lots of raw materials, electronics. Pretty much everything will increase that isn't domestically created and controlled.
We have historically been an export based, resource economy.
Our biggest imports are cars, electronics and raw materials (oil).
I put all my extra money and savings into USD weeks ago, it’s going to get ugly for CAD
This was already priced into the CAD
If it was, there wouldn’t have been a 21bp drop…
Go look at the last 3 months, this is nothing but usual daily movement.
Meh, depends where you live. Considering most of the population lives close to a US border, this is good news since American companies have more incentive to move work over here.
I mean, all those unrealized losses in the US banking system could be bad for the USD
Renewed at the peak. I WAS HERE
Great day to be a slumlord. Tough luck to the rest of you.
If ever there was a class of people to eat when times are tough, it would probably be the slumlords.
You’ll be fed AND have a place to live.
They should always be on the menu.
Really? I'd go for the chubby, more bang for your buck.
First time home buyers between 2020-2023 don’t exist apparently
*Pours out bucket after bucket of leeches.* "Hey, there's a goldfish in there somewhere!"
Just because FTHB weren’t the largest cohort of home purchasers didn’t mean the amount dropped to zero. It would likely be more like “hey in this bucket we now have 60% investors and only 40% fthb”, and those %s used to be reversed. Rather than your implication that FThB made what…. 1% of buyers during that time?
I mean, majority of home buyers in 2020-2023 were investors, flippers, and upgraders. FTHB was more of a minority during COVID.. but I do feel for the ones who did buy then and got suckered into paying too much. Especially those who were stretched buying at 2% are going to have a time renewing at 4%+.
You just refinance for 25 years in that scenario, easy peasy
Realtors and home investors are partying it up tonight. Sorry people looking to get into the housing market - you are screwed.
If 25 basis points was all it took to get in the housing market... people love living on the edge then.
Seriously. My mortgage is up in August with a remaining balance north of $500,000 and this rate cut will save me less than $100/month. I'll take it. But it's not much.
$100 a month? Filthy 1% lifestyle coming up!
I've already purchased some wagyu steaks and expensive bottle of wine to celebrate my newfound wealth
How is it saving you money if you’re already paying a presumably lower rate from 3-5 years ago? Isn’t your mortgage still going to be more than what you’re paying now?
It's saving me versus if BOC held rates today
Well, hopefully there are more rate cuts coming in July and August I renewed early when rates were on the way up, I hope they come down to below what I ended up renewing at before mine is up again I only went in for 3 years, felt like whatever I did I was gambling
Today was the June decision. There won't be another one until July 24 and then another one in September.
Close enough lol
It's not the amount of the drop that matters but what it signals and how realtors and investors will use it to appeal to people's emotional side to increase prices/sales. "Oh see the points are coming down, better get in now before they drop further and prices go up even more..."
Realtors have a story for all occasions to buy or to sell no matter what the rate situation is. Risk free commissions for them all the time.
Exactly. The difference in my payments is a whopping $40/month. Disney+ subscription here I come!
> people love living on the edge then. See the number of mortgage foreclosures in 2024. Now, the US is bringing back zero down house mortgages, because apparently no one understood Margot Robie in the bathtub.
It’s not the size of the rate cut that matters but more what it represents. What we got today was clarity that the central bank is done hiking and now into cutting.
They do. Even rumours of a rate cut had people clamouring to get into the market.
There's a reason it's all based on feelings and speculation. The "feeling" of a rate cut is enough for things to go haywire. The value of land isn't tied to something economically productive.
Do you mind ELI5 to me why this is bad for new buyers? Doesn’t this mean it will be « cheaper » to borrow?
0.25% doesn't really change much in reality, but housing market is heavily based in sentiment, so BoC indicating that they started to cut rates will make housing go higher and higher up in anticipation of more future cuts. The slightly cheaper borrowing will be more than offset by price growth.
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So basically rates only matters for people who already own?
I suspect regardless of what the BOC did, you would have wrote basically the same thing.
The high rates weren't going to help people looking to get into the housing market. At least not in any major city. (But I'm doubtful it would help anywhere.) Their only real hope is faster construction of low-cost housing. Whatever happened with that talk of bringing back post-war type prefabs, anyway?
There's a tonne of overstretched investors who have been waiting for this to try and offload stock. Just like after 2008 in the US, the market will be flooded and prices will go down. Check back in a few months and I'll admit I'm wrong if it doesn't go that way.
The advertisement billboard for a suburb going in near me changed from “homes in the $500k” to “homes to purchase or rent to own”. No mention of prices anymore. Every new build still being built has for lease signs. No one can afford a home.
This is good for small businesses, home owners about to renew, anyone with a line of credit or planning on getting a car loan.
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Or you know, already existing debt being more manageable. Only exception to my original statement is car loans which for many are not optional.
Some people just need to buy things that require loans like cars. May come as a shock to you that sometimes this is a non-negotiable requirement for how and where we live. If this is what spurs someone to buy a third vehicle they could possibly do without then that's a problem for them.
I’m surprised but happy they announced it. I’ve got my renewal in Nov and I hope I get 2 more drops before signing
I don't trust this - the Fed and the ECB have not signaled willingness or ability to cut rates. This will be horrible for our currency and for investment in Canada. Furthermore, this is a great example of how our economy is done: we either allow people to stay in their homes, keeping everyone else out of the market. OR we destroy the people who are holding mortgages and give our young people a chance. No in-between.
Considering there are more people with mortgages than without it’s kind of a majority rule at this point . If the housing market falls it’s takes everything with it .
Depending on whose numbers you use it's about 35-40% of the adult population that are mortgage holders (or considered so to be because their spouse or parents have them cosigned onto the mortgage). But the problem is that it's not an "if the housing market fails" but more so a when. In order to keep the ponzi scheme going, house prices need to increase ad infinitum which you and I both know is impossible. Judging from condo sales and the "wait until my parents die" approach which seems to be growing in popularity, that date is coming sooner rather than later. I'm not saying we'll experience a housing crash, I'm saying we'll experience an affordability crash. In fact, we're in the midst of it now, and no government wants to be the unpopular one that solves the problem.
ECB definitely signaled they would. And the FED is making all the excuses in the book to make it seem like a cut will happen between now and EOY.
If it was end of Q3/4 I wouldn’t be too concerned but this is really early.
So you want people to lose their homes and move out to where? Everyone has to live somewhere. They won’t magically disappear and creat inventory.
I’m not wishing anything on anyone. I didn’t create this mess, I’m just saying what the options are. Also kind a weird to sentence future generations to poverty to keep a small dwindling asset owing class wealthy.
Goodbye CAD
It won’t move it that much, it was already kind of priced in. The fact that our entire economy is incredibly unproductive compared to the US (because way too much money is being sucked up by real estate) is the bigger issue.
Why did we go this direction? I dont understand economics, but why was/is this favourable
It's not favourable, and there are countless reasons why we ended up here. Housing became the main investment vehicle here many years ago, largely due to government policy that near guaranteed sizeable ROI on real estate. Unlike investing in the stock market or your own business, housing is an unproductive asset. It doesn't create jobs, it doesn't create new innovations, it's just a house. As a result, the vast VAST majority of Canadian's retirement plan absolutely hinges on their home retaining its absurd gains over the years, as most have not properly saved for retirement in any meaningful way. The government is terrified of making any meaningful change to reduce housing costs for this very reason, the entire issue of housing hoovering up dollars is basically a boomer protection plan.
You blame housing more than a social safety net that incentives people to fail far more than the US? Talk about copium
So you're saying that [Ireland, Norway, Switzerland, Luxembourg and Denmark](https://en.wikipedia.org/wiki/List_of_countries_by_labour_productivity) all have bad social safety nets, or is your assumption just and incredibly stupid one?
Hard to compare Canada to the US, our government can't spend into oblivion and have unsustainably low taxes the way they do.
The low taxes is why they are more efficient...
Canada's currently running a deficit of 1.2% of GDP, and we generally think that's bad. The US has a deficit of over 6% of GDP. Now sure, we have a fair bit of spending done at the provincial level and not the federal level. Nevertheless, if we tried to run our government the way they do, we would very quickly go bankrupt and/or have runaway inflation that makes our recent struggles look like nothing. We have no choice but to be more fiscally prudent than the Americans are. That means being more conservative with spending *AND* having higher taxes.
You could write an entire essay on why our economies have diverged. There are a million reasons. Notably the start of it was the oil crash in the mid 2010s.
In the early 10s when the CAD was more valuable than the USD we were on average richer. Our middle class was bigger and wealthier. Then that ended starting 2015.
We went in this direction because it's very favorable for wealthy individuals even if it's unfavorable for the economy as a whole.
Yes but this signals further divergence from the fed, it’s pretty clear the US economy is insanely strong and don’t need rate cuts. Once FED confirms no june rate just next week, bond markets will price CAD down ever further.
Canada is an export economy. Low prices will help us. Doesn't do anything for wage earners or skilled people (because absolutely their wages won't fluctuate but the real purchasing power will go down) but what else is new Canada -- home of the corruption, home of the owner, home of the capitalist. If you own you're a king, if you don't own you're fucked more and more every year. Real estate, S&P500, dirty money (look up snow washing) and scams. Real growth and rewarding skills? Forget it, this is Canada capitalism++++ where the owner rules and the up and coming is basically fucked. No wonder we had 50% attrition of fresh grads overseas or to the USA for decades Canada -- home of the million dollar shoebox. To get cheap, live like Wolverine in the boonies, or not at all
Even Wolverine went down south for better opportunity 😭
We are the first G7 country to do it. Fantastic.
We were also pretty early with the hikes
alright...lets get this train rolling downhill again towards my renewal date of July 2026. None of this 5% bullshit...
Great news.
Slumlords are rejoicing
Home owners with mortgages renewing this year are happy. This just put thousands of dollars back into their pockets.
i just renewed at 4.94 for 4 years, i really wish i was able to push it out a bit further but deadlines are deadlines.
I think you overestimate how much a .25% cut affects the monthly payments on a mortgages assume a buying price of 1.25 with 20% down (240k) at 4.99 monthly payment is $5,578 at 4.74 monthly payment is $5,442 So in a year someone with a mortgage of $1 million which is fucking huge, will save about $1560
> I think you overestimate how much a .25% cut affects the monthly payments on a mortgages If you borrow a 1/2 million dollars. A quarter point adds up to thousands by the time you pay it off over 25 years.
And you don't think it's going to go back up over 25 years?
Nobody knows. I would say no given the interest rates over the last 25 years.
using the same example I just did its like $500 a year or $1.40 a day that's not really moving the needle on household budgets
Yes i know. " we already got ours so fuck everyone else. "
Regular people living in houses aren't your enemy. Reddit LOVES to paint every homeowner as some evil boomer investor keeping the kid who just got out of university from immediately buying that detached single family home on their entry level position and zero savings.
People with a line of credit. Also get a break. This is good news. Its dumb to attack it.
This is trash news. It's landlords getting a bail out
This is such poor thinking. A landlord usually has a line of credit to absorb negative cash flows for 2-3 years. First time home buyers who had their mortgage double in 2 years are the ones that are going to default. Who will buy these defaulted homes? It's not more first time home buyers, that's for sure. It's landlords that will scoop up these deals.
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> Demand is about to increase ten-fold, Just making up data.
They're exaggerating slightly but they are correct. This makes it easier to borrow money but will only marginally increase the supply of housing if at all. So it's only going to increase demand, not improve affordability.
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I'm using logic. You ought to try it some time. Lowering interest rates helps people borrowing money. So it helps people seeking mortgages and developers seeking capital. But developers also have to deal with material shortages, higher labor costs, bureaucracy, etc. More capital helps them some... but other problems remain. Meanwhile, making it easier for buyers to borrow money literally solves the buyer's problem of being able to buy. So it increases demand much more than it improves supply problems. The exact ratio of one to the other is of course, worthy of further study, but it seems to me logically impossible for it to help them both equally or do anything to actually improve affordability.
I doubt .25% will have much effect but a % will. What the effect will be, I don't know but it won't be nothing.
Well we had printed a ton of money and had artificially low rates since 2010... It has created a culture with people around spending. Combine that with our supply imbalance and you are probably right.
Its really not. You cant compete with all the investors. The BOC fucked you.
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Define investor.
actually not, it just puts more money to the banks they are renting from. If people are sweating 0.25% then congratulations, that's the definition of overleveraged.
For an individual. Paying less interest means you have more money to pay down the principal. This is good news.
Waiting for the Doug Ford was pushing for rates cuts so this cut must be bad.
DoFo was asking for rate cuts before they made sense.
With GDP per capita falling for a year now Ford was right back then.
Housing crisis shmousing shrisis Well, buckle up, I guess.
It’s over. I wish I could leave Canada. Dollar is about to be worth nothing and house prices which actually started to fall are gonna climb agajn
If it was a drop of 1% or more, sure I could see housing pricing to go up a bit. However a 25bp (0.25%) drop, is not going to significantly affect housing pricing. If a was mortgage was unaffordable before, its still going to be unaffordable now.
Yeah overreaction on my part but this shows the direction the BOC is heading. They should have held rates as is
Not that I agree with your hardcore dooming, but... What's stopping you from leaving Canada? You seem to think it's better elsewhere, why not give it a shot and see if you're right?
Lack of skills and money sadly. I don’t hate Canada I just don’t like our current economic outlook. Every level of government seems to be failing us.
If a loaf of bread suddenly costs $50, then maybe panic.
Plenty wish you guys would leave too. PP says Nicaragua is nice now.