A majority of mortgages are fixed rate so most will not feel any increase if rates increase.
TransUnion found that as of the end of June, the average Canadian mortgage had $198,781 left on it, a figure that has increased by almost five per cent in the previous 12 months
Source: http://www.cbc.ca/news/business/transunion-mortgages-debt-1.4256026
While there are pockets of Canada that have insane real estate prices the average person doesn't have a 800k mortgage. Anyone with an ARM that can't afford an extra 1/4% mortgage increase never should of bought a home on an ARM while rates were at historic lows. Seriously anyone that takes an ARM right now just isn't very intelligent. Buy a home you can afford or just don't purchase a home.
At that if someone has an ARM right now and isn't refinancing into a fixed rate mortgage is just asking for drastically higher payments in the future.
Interest rates will rise, period. There is zero chance of them not rising IMO.
Are you familiar with the current household debt situation in Canada ? It is bad.....
average Canadian Debt is $22,837 per person, not including mortgages
http://business.financialpost.com/personal-finance/debt/canadian-household-debt-hits-1-8t-as-report-warns-of-domestic-risk
Yes it was in the same article that I had linked to. Of that debt a huge majority is Auto Loans which are also fixed. This isn't to say that a rate increase isn't going to effect the economy, because it does. It's just not what you are picturing. 1/4% is a rounding error in most people's lives. Just wait for 6.5% first mortgages again (which is still historically low) and we will see real pain in the real estate bubbles of the US and CA.
The numbers in the US are just as bad and you can see the numbers here:
https://www.creditkarma.com/studies/i/average-debt-american-household-on-rise/
Either way both countries have a massive overspending issue. Our governments and the people both spend far more then they should. People think they deserve everything NOW and take issue with the concept of waiting until they can actually afford it.
Credit Cards are not your friend and never should be used expect for an emergency. If you can't afford to purchase something today then don't buy it, it's truly that simple. Use Cash for everything and record every single penny you spend each day. Then review that spending on a weekly and monthly basis.
This isn't something that I talk about in an abstract form. We were part of the rat race trying to keep up an image. We had new cars, nice new clothes, ate out all the time, took vacations multiple times a year, and so forth. Then one day I realized that we had a TON of debt...$22k is a joke compared to what we had racked up. It took some time and discipline, but we paid it all off and now live debt free except our 1st mortgage (we had 2 before).
I didn't take the easy way out and file bankruptcy, we earned each dollar needed to pay off our debt. So I know how people get into massive debt and understand the sacrifices needed to get out of it. And to this day we live like we are poor instead of acting like we are rich. Read the Millionaire Next Door if you haven't. We aren't done with our journey towards financial freedom, but are much closer then most do to not wasting money.
Yeah... we haven’t gone on any big vacations in years unless it’s a road trip to visit family. Luckily I have no debt and take the bus/train everywhere I go. The party will eventually come to an end and all that debt will crush many.
You are one of the smart ones. I see it with so many people and it's amazing. Know people making $100k plus for their household yet they don't have $4k in the bank when an emergency comes up. Seriously how can you not have 4% of your yearly income as a reserve when you make that kind of money. I get it if you are making just enough to get by, but when you are making good money you should be saving some of it each month.
Hope that it's clear that when I'm saying "you" I'm not talking about you directly, just generalizing. Just looked back and realized that my comment could of sounded like I made assumptions about you.
No. It’s ok. My wife and I have been saving for a very long time .... long enpugh for her to retire at 40 and stay home with the kids and now able to make art for enjoyment. We are gradually moving into crypto and hope to downsize and travel more. It has been a getting rich slowly plan... but yes we paid off all Debt many years ago.
Think we have the same mindset. My Wife has been home with the kids since she was 35 and this last year so she could be with the kids. Once we knocked down the debt and stopped trying to "keep up the the Jones" it's amazing how much less money is needed each month.
I have a 2 year goal that will semi retire me too, if it happens I will be traveling the world. I'd like to take 2-5 years and just travel, but my Wife doesn't see herself as a nomad type and wants to come home after each trip and take time to plan the next one. I'm much more willing to just go with the flow and she is the planner. We will see how it all works out, but either way I want to see the world before I get to old to enjoy it.
It's amazing when you sit down and calculate the Cost of going to work. If one parent can stay home with the kids you can save a small fortune. We got down to one car that we only use for weekend road trips, no commuting costs, less insurance, less work cloths, less restaurants, no daycare, no holiday camps, no summer camps, etc etc etc ... it takes an entire job just to pay for all these people to watch your kids.