The Era of Very Low Inflation and Interest Rates May Be Near an End

Re:The Era of Very Low Inflation and Interest Rates May Be N... by smnrchrds on Thursday April 26, 2018 @04:14PM (#16935251)

> as the gov't is trying to slow down the real estate market

This is not the reason for mortgage stress test, just one of its effects. The main reason for the regulation is to avoid a tsunami of bankruptcies when interest rates eventually increase.

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Re:The Era of Very Low Inflation and Interest Rates May Be N... by encoderer on Thursday April 26, 2018 @04:33PM (#16935447)

These are not fixed rate loans?

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Re:The Era of Very Low Inflation and Interest Rates May Be N... by winthrowe on Thursday April 26, 2018 @04:38PM (#16935512)

You can't really get a rate fixed over the entire amortization period in Canada, our 'fixed rate' mortgages are a 5 year lockin typically.

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Re:The Era of Very Low Inflation and Interest Rates May Be N... by kylemuir on Thursday April 26, 2018 @04:39PM (#16935523)

When those fixed rates end and they have to refix a ton of overleveraged people will force mortgagee sales.

In Auckland there's been talk of that for at least 5-6 years. For example, people I personally know only earn $80-90k/yr and yet own a $500k house (absolute entry level livable house in Auckland). They also got in under our old rules which meant they only needed 5% deposit instead of the 20% required now.

They're only being propped up by their record low interest rates. If those interest rates went up 2-3% they'd be in serious trouble.

EDIT: for more context the average fixed period for any home loan in NZ is roughly 2-3 yrs. The term is a 30 year term typically.

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Re:The Era of Very Low Inflation and Interest Rates May Be N... by encoderer on Friday April 27, 2018 @05:05PM (#16944318)

In USA it’s common for loans to be fixed rate for life of loan.

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