{"id":7448,"date":"2022-08-29T14:39:00","date_gmt":"2022-08-29T21:39:00","guid":{"rendered":"https:\/\/www.stevesaretsky.com\/?p=7448"},"modified":"2022-08-29T14:39:00","modified_gmt":"2022-08-29T21:39:00","slug":"floating-rates","status":"publish","type":"post","link":"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/","title":{"rendered":"Floating Rates"},"content":{"rendered":"

Canadian banks reported quarterly earnings this past week. One thing was clear, loan loss provisions are increasing, albeit from very low levels. Banks are preparing for more\u00a0turbulence ahead, as highlighted by comments from Canada’s largest bank, RBC. The bank says interest rate hikes may trigger higher monthly payments for 80,000 customers with variable rate mortgages. The increases will average about $200 per month.<\/p>\n

Public commentary from RBC adds to what we’ve been discussing in this newsletter for several months now. An aggressive Bank of Canada is poised to send shock waves to variable rate holders across the nation. Let’s unpack this a bit further.<\/p>\n

There are two types of variable mortgage products in Canada. A floating rate variable which increases monthly mortgage payments every time the Bank of Canada raises rates. Then we have fixed payment variable mortgages which keep monthly mortgage payments the same regardless of interest rate increases. Instead, as rates rise, these mortgages will reduce the amount of principal being paid down. If interest rates rise to a point where no principal is being paid down, these mortgages get triggered, and banks will prompt you to increase your monthly payments. We are now reaching that stage.<\/p>\n

The typical trigger rate is about 300bps higher than the original contract rate, so a lot of this depends on when you originated your mortgage. Per my good friend Ben Rabidoux,\u00a0nearly 15% of total outstanding variable rate mortgages were originated between Mar 2021 and Feb 2022 at an average rate of 1.58%. If the Bank of Canada hikes rates 50-75bps as expected on September 07, you can expect quite a few borrowers will be receiving phone calls from their bank.<\/p>\n

According to National Bank, fixed payment variable accounts for 67% of all variable mortgage product outstanding. The other 33% are floating rate variables, and they’ve already been feeling the pain. Interest rates are up 225bps from the lows, which means if you’ve got a million dollar mortgage, your monthly payments are up at least $1100 so far. Now imagine you’ve got several rental properties with floating rates. This is the unfortunate situation for some.<\/p>\n

As more disposable income goes towards servicing rising interest costs, discretionary spending will pull-back. This will obviously slow the economy, which is exactly what the BoC wants. Let’s just hope they don’t go too far in the other direction this time. After missing the inflation call last year, and suggesting the housing boom was just pent-up demand, the BoC is getting a much needed shakeup.<\/p>\n

Per Bloomberg,\u00a0Governor Tiff Macklem has announced plans to reorganize the Bank of Canada\u2019s governance structure by bringing in outsiders to its main policy-making council.<\/p>\n

\u201cIn a context of increasingly complex and interconnected Canadian and global economies and financial systems, it\u2019s vital that we as an organization constantly adapt and evolve,\u201d Macklem said in a\u00a0news release. \u201cThis change provides an opportunity both to bring fresh and diverse perspectives into the Bank\u2019s consensus-based policy decision-making framework and to ensure the Bank\u2019s executive team has a balanced, streamlined and effective distribution of management responsibility.\u201d<\/p>\n

The move represents one of the biggest changes to the central bank\u2019s governing council in years.<\/p>\n

Three Things I’m Watching:<\/h3>\n

1. About 67% of all variable mortgages are fixed payment. (Source: National Bank)
\nfa6ab9e7-59cc-f9d6-3999-7dff1a4e0736-5742662<\/a><\/p>\n

2. Nearly 15% of total outstanding variable rate mortgages were originated between Mar 2021 and Feb 2022 at an average rate of 1.58%. (Source: Ben Rabidoux)
\nb2964718-4b5b-aff8-9bed-1ea758e18941-9412906<\/a><\/p>\n

3. Variable mortgages have been popular in recent years. (Source: Ben Rabidoux)
\nd6b75a67-c1b9-c2e9-8067-43c822cb9fbc-1353870<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Canadian banks reported quarterly earnings this past week. One thing was clear, loan loss provisions are increasing, albeit from very low levels. Banks are preparing for more\u00a0turbulence ahead, as highlighted by comments from Canada’s largest bank, RBC. The bank says interest rate hikes may trigger higher monthly payments for 80,000 customers with variable rate mortgages. […]<\/p>\n","protected":false},"author":1,"featured_media":7449,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[70],"tags":[],"acf":[],"yoast_head":"\nFloating Rates - Steve Saretsky<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Floating Rates - Steve Saretsky\" \/>\n<meta property=\"og:description\" content=\"Canadian banks reported quarterly earnings this past week. One thing was clear, loan loss provisions are increasing, albeit from very low levels. Banks are preparing for more\u00a0turbulence ahead, as highlighted by comments from Canada’s largest bank, RBC. The bank says interest rate hikes may trigger higher monthly payments for 80,000 customers with variable rate mortgages. […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/\" \/>\n<meta property=\"og:site_name\" content=\"Steve Saretsky\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/stephen.saretsky\" \/>\n<meta property=\"article:author\" content=\"https:\/\/www.facebook.com\/saretsky91\" \/>\n<meta property=\"article:published_time\" content=\"2022-08-29T21:39:00+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.stevesaretsky.com\/wp-content\/uploads\/2022\/08\/piggybank-PNOMtHL0lR0-unsplash-1024x575-1.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1024\" \/>\n\t<meta property=\"og:image:height\" content=\"575\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Steve Saretsky\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@https:\/\/twitter.com\/SteveSaretsky\" \/>\n<meta name=\"twitter:site\" content=\"@SteveSaretsky\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Steve Saretsky\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/\",\"url\":\"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/\",\"name\":\"Floating Rates - Steve Saretsky\",\"isPartOf\":{\"@id\":\"https:\/\/www.stevesaretsky.com\/#website\"},\"datePublished\":\"2022-08-29T21:39:00+00:00\",\"dateModified\":\"2022-08-29T21:39:00+00:00\",\"author\":{\"@id\":\"https:\/\/www.stevesaretsky.com\/#\/schema\/person\/21dcfa049c53088c3f577e61e857c1e4\"},\"breadcrumb\":{\"@id\":\"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/#breadcrumb\"},\"inLanguage\":\"en-CA\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/www.stevesaretsky.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Floating Rates\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.stevesaretsky.com\/#website\",\"url\":\"https:\/\/www.stevesaretsky.com\/\",\"name\":\"Steve Saretsky\",\"description\":\"Vancouver Real Estate Blog\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.stevesaretsky.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-CA\"},{\"@type\":\"Person\",\"@id\":\"https:\/\/www.stevesaretsky.com\/#\/schema\/person\/21dcfa049c53088c3f577e61e857c1e4\",\"name\":\"Steve Saretsky\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-CA\",\"@id\":\"https:\/\/www.stevesaretsky.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/secure.gravatar.com\/avatar\/0d45900a2542f7770ef6a15f1ad4ccdd?s=96&d=mm&r=g\",\"contentUrl\":\"https:\/\/secure.gravatar.com\/avatar\/0d45900a2542f7770ef6a15f1ad4ccdd?s=96&d=mm&r=g\",\"caption\":\"Steve Saretsky\"},\"description\":\"Born and raised in Vancouver, BC. I have a passion for Real Estate, creating a business, and connecting with people. I build my Real Estate business on human relationships not leads and numbers. I believe in advising my clients on making the best real estate decisions not on closing another commission cheque. My goal is to help people build wealth through real estate.\",\"sameAs\":[\"http:\/\/www.buyvancouvercondos.ca\",\"https:\/\/www.facebook.com\/saretsky91\",\"https:\/\/twitter.com\/https:\/\/twitter.com\/SteveSaretsky\"]}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Floating Rates - Steve Saretsky","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/","og_locale":"en_US","og_type":"article","og_title":"Floating Rates - Steve Saretsky","og_description":"Canadian banks reported quarterly earnings this past week. One thing was clear, loan loss provisions are increasing, albeit from very low levels. Banks are preparing for more\u00a0turbulence ahead, as highlighted by comments from Canada’s largest bank, RBC. The bank says interest rate hikes may trigger higher monthly payments for 80,000 customers with variable rate mortgages. […]","og_url":"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/","og_site_name":"Steve Saretsky","article_publisher":"https:\/\/www.facebook.com\/stephen.saretsky","article_author":"https:\/\/www.facebook.com\/saretsky91","article_published_time":"2022-08-29T21:39:00+00:00","og_image":[{"width":1024,"height":575,"url":"https:\/\/www.stevesaretsky.com\/wp-content\/uploads\/2022\/08\/piggybank-PNOMtHL0lR0-unsplash-1024x575-1.jpg","type":"image\/jpeg"}],"author":"Steve Saretsky","twitter_card":"summary_large_image","twitter_creator":"@https:\/\/twitter.com\/SteveSaretsky","twitter_site":"@SteveSaretsky","twitter_misc":{"Written by":"Steve Saretsky","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"WebPage","@id":"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/","url":"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/","name":"Floating Rates - Steve Saretsky","isPartOf":{"@id":"https:\/\/www.stevesaretsky.com\/#website"},"datePublished":"2022-08-29T21:39:00+00:00","dateModified":"2022-08-29T21:39:00+00:00","author":{"@id":"https:\/\/www.stevesaretsky.com\/#\/schema\/person\/21dcfa049c53088c3f577e61e857c1e4"},"breadcrumb":{"@id":"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/#breadcrumb"},"inLanguage":"en-CA","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/www.stevesaretsky.com\/2022\/08\/news\/floating-rates\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.stevesaretsky.com\/"},{"@type":"ListItem","position":2,"name":"Floating Rates"}]},{"@type":"WebSite","@id":"https:\/\/www.stevesaretsky.com\/#website","url":"https:\/\/www.stevesaretsky.com\/","name":"Steve Saretsky","description":"Vancouver Real Estate Blog","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.stevesaretsky.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-CA"},{"@type":"Person","@id":"https:\/\/www.stevesaretsky.com\/#\/schema\/person\/21dcfa049c53088c3f577e61e857c1e4","name":"Steve Saretsky","image":{"@type":"ImageObject","inLanguage":"en-CA","@id":"https:\/\/www.stevesaretsky.com\/#\/schema\/person\/image\/","url":"https:\/\/secure.gravatar.com\/avatar\/0d45900a2542f7770ef6a15f1ad4ccdd?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/0d45900a2542f7770ef6a15f1ad4ccdd?s=96&d=mm&r=g","caption":"Steve Saretsky"},"description":"Born and raised in Vancouver, BC. I have a passion for Real Estate, creating a business, and connecting with people. I build my Real Estate business on human relationships not leads and numbers. I believe in advising my clients on making the best real estate decisions not on closing another commission cheque. My goal is to help people build wealth through real estate.","sameAs":["http:\/\/www.buyvancouvercondos.ca","https:\/\/www.facebook.com\/saretsky91","https:\/\/twitter.com\/https:\/\/twitter.com\/SteveSaretsky"]}]}},"_links":{"self":[{"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/posts\/7448"}],"collection":[{"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/comments?post=7448"}],"version-history":[{"count":1,"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/posts\/7448\/revisions"}],"predecessor-version":[{"id":7450,"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/posts\/7448\/revisions\/7450"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/media\/7449"}],"wp:attachment":[{"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/media?parent=7448"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/categories?post=7448"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.stevesaretsky.com\/wp-json\/wp\/v2\/tags?post=7448"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}