this post was submitted on 09 Jul 2023
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Making your mortgage more expensive to “lower inflation”
I mean yeah. Once other "financial assets" become more attractive (bonds at 5.5%?) maybe less parasitical activity will happen in the housing market. The whole thing started going off the rails when rates dropped to essentially nothing.
If you think current home owners have it bad, imagine anyone trying to get in the market now. Not only are mortgages 3X the price, but the houses are 2X the price they were before. The entire thing is completely unsustainable, and yet the Feds have done fuck all. Well no, actually they have made it worse every single step of the way (see the first time home buyers savings account for the latest idiotic idea).
I am imagining anyone trying to get in the market. They are in a similar position as those who need to renew. Raising rates will not help either of them. I know that the low rates created a problem but raising them isn’t going to solve it because the problem is that we do not tax the rich adequately, which contributes to inflation. We give them tools to avoid taxes. The more they spend on things like housing, the less tax they pay.
We need to fix that or else nothing will improve for regular people if we just leave it to the BoC to fix it, which is how this problem was created in the first place with the low rates. We left the BoC to lower rates during economic slowdowns, instead of taxing the rich
Making mortgages unaffordable for the people buying and sitting on multiple investment properties, because the government refuses to do anything about it.
Yes, just forget about all the regular people who bought homes to live in. They can all fuck off too, because you’re mad at greedy landlords. The issue is more complicated than you think. Most recent homeowners are regular, fiscally response people who decided to buy a home they need to live in, and did so by passing a very stringent stress test, which was how you are supposed to approach buying a home. Now because the government does nothing about inflation, it’s up to the BoC to raise rates because that’s literally the only thing they can do.
And people like you cheering from the sidelines as regular people get thrown under the bus, because you hate greedy property investors
You think higher rates are going to hurt wealthy investors while completely ignoring the fact that they will hurt regular homeowners who live in their homes a LOT more.
I mean, really, all I want is a home to live in, and if that means all the people who overleveraged mortgages to buy up the entire market with no intention of living in them have to put these homes back into the market, I'm game.
It doesn’t work that way. The higher rates are going to negatively affect regular people who did NOT over leverage themselves, and bought homes to live in much more than it will affect wealthy investors.
It will also make it harder for you to buy a home. If prices drop slightly that’s great, but if it’s because interest rates are higher, then it will be just as unaffordable for you since you will still need to borrow most of the money for the home, and the cost of borrowing just doubled, meaning your far less likely to even qualify for a mortgage.
Higher interest rates don’t only affect greedy over leveraged investors.
Regular people are seeing their monthly mortgage payments increase by up to ~40%.
I get it. You’re probably so frustrated at never getting to own a home that you’re fine with seeing this nightmare unfold because all you have to do is cover your eyes to the parts you don’t want to see.
You will never afford a home if rates keep rising either.
Prices need to drop more than slightly to make buying a home feasable, and my partner and I combined make six figures. Rates have been incredibly low over the past decade and it's led to wealthy speculators and companies buying everything up, and it's completely unsustainable. This is correcting things to be closer to where they were historically when housing was affordable.
Yes I understand all of that. My point is that this “correction” isn’t actually going to make it more affordable for you. So far the market is holding quite steadily even as rates have doubled recently.
Unless you’re paying in cash, any price drop due to higher interest rates won’t make it easier for you because you’ll have to pay those higher borrowing rates.
Maybe as millions of regular people come up for renewal over the course of the next few years, and the higher rates force some to sell, you will somehow be able to snap up your dream home in cash, beating out the wealthy who have more than enough cash to compete with you.
Repeat after me: higher rates will not make it more affordable for you. The rich will still have more cash than you and will be far less affected by higher rates, and they will be buying up property in even higher proportions now. Because those of us who aren’t rich still need to borrow, and borrowing rates are much higher now.
I understand how the problem was created and I share your frustration but simply raising rates at this speed is not going to solve the issue of affordability .
Housing is unaffordable along with many other essentials because our governments refuse to adequately tax the rich, leaving them more than enough capital to seize markets and in fact giving them financial tools to avoid taxes which drive up prices.
The greedy landlords can just crank up the rent, which is why an average 1 bedroom in Ontario is now $2k/month.
That’s more than my mortgage payment and home insurance, and I bought during the pandemic.
Is there any evidence that landlords are colliding on prices? That usually doesn't happen in a market with a sufficient (non-ologopoly) number of sellers.
They don’t need to collude, if you own a mortgage on a home and you’re renting it, a rate hike has just increased your costs and so you need to increase your price.
It’s pretty well established that there’s a housing shortage.
I'm just a little confused by your "greedy landlords" descriptor. The price is dictated by the market, not any particular party. After all as you say, there's a housing shortage, so prices are up.
The price is determined by the market but real estate in Canada is not an efficient market.
Maybe greedy is not needed, but it’s my belief that landlords do not create a significant market force for additional housing in our market, which is the argument for their existence.
They should increase property taxes back to where they were 20 years ago.