BOC Hits 5%

[Mad Mike]

The Bank of Canada raised its key interest rate by .25% points to 5%, the highest in 22 years.

The Bank said in its statement that Canada’s economy has proven stronger than expected and the labour market remains tight with wage growth at about 4 to 5 per cent. They are saying goods price inflation is easing, but labour shortages are creating ongoing inflation of service prices. Too many jobs were created.

This should add $25/mo to a variable rate mortgage for each $100K borrowed. Will also add a bunch to LOCs, car loans...

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My feeling is this is Liberal Party of Canada nonsense. The wreckless expansion of the Federal public service is sucking 20,000 workers a year from the private sector, continuation of massive deficit spending is driving unnecessary demand and flooding the market with cash -- all gov't deeds that continue to fuel inflation.

The remedy? Quell demand by increasing the cost of borrowing. Is that working or just driving another household expense higher?

Never going to see progress with one foot on the gas and the other on the brake.

 

[mimico_polak]

BoC is trying to tame inflation, while JT spends like a drunken sailor.

How can demand lower when we're pumping in immigration at record levels to fill the void? Bring in immigrants, while we cannot support it with infrastructure, housing, or anything else for that matter. It will keep driving demand for housing that's in shortage.

They will continue down this path of JT (gas) going against the BoC (brake) until something snaps.

My mortgage just went up $60/month as of 10am this morning.

 

[ToSlow]

Be lots of housing for the new Canadians in a yr or so, People can't afford to pay for the **** they have now

 

[backmarkerducati]

The masses have to decide what they want... purchasing housing was high mostly due to the low interest rates. People complained.... higher interest rates if they stick will eventually bring prices down (and it is not immediate) now other people are getting screwed.

There is a workforce shortage (pretty much entire first world), can't get around that. Raising the rates now is wrong IMO as Canada has the second lowest inflation in the G7. I think they could have held fast for a few more months.

 

[bitzz]

The BOC rate has been artificially low for too many years, and now that the proverbial excrement has hit the fan it's gonna bite HARD, and there is lots of folks that are NOT prepared, which is going to make it worse.
The highest mortgage rate I have signed was 13.5% in 1989 or 90, and I was happy to get that. My father paid 21-22% in the early '80s, and he was on the general managers staff at RBC at the time, so he had access to realistic forecasts and cheap money.

Bank of Canada Interest Rate 1935-2024 | WOWA.ca

Check today's Bank of Canada interest rate. See how the rate has changed in the last 85 years and what caused it to change so fast in 2022-2024.

wowa.ca

Just think. all the foreclosures will drive the house prices down.
War in Europe, political unrest in America, Japanese economy tanking, the death of the oil and car industries (which our North American economy is based on)... I think it's going to get a LOT worse before it gets better.
Being old and having a paid off house is nice... retired and fixed income sucks. I am probably going to die soon, so I have that going for me. Being 30 with a BIG mortgage, a couple of kids and a crappy job would be a scary proposition today.

 

[Mad Mike]

...

My mortgage just went up $60/month as of 10am this morning.

Ouch! That finances and pays off $3500 of a motorcycle loan in 5 years!

 

[GreyGhost]

I am probably going to die soon, so I have that going for me.

Before you get to that point, can we get a tour of the collection? From the pieces we have seen, it looks awesome.

 

[bitzz]

There is a workforce shortage (pretty much entire first world)

Is there? Or is it decent job shortage. We've turned into a service economy.
Canada is in better shape than most countries, we have resources, LOTS of resources... but traditionally we rape the wilderness and sell the spoils to China (recently) or the US, then buy back the finished product. Works great if your a miner, sucks for everyone else.
We NEED to make stuff, we NEED secondary industry.

 

[bitzz]

My mortgage just went up $60/month as of 10am this morning.

My 1990 mortgage payment was about $2100, which is about $5100 today, for a crappy old house in Mississauga, that I paid $190,000 for.

 

[Mikedezo44]

I'm missing something on the (skilled) labor shortage, I was bored in march/april/may and sent out about 30 resumes ...All over the country, mining camp jobs in the middle of nowhere that very few people want to go(North BC/Alberta) oil rigs off the east coast, mechanic helper jobs in the yukon, etc etc and didn't get a word back from any of them. About 5 emails back saying not what they're looking for. One 30 minute online personality test for CP rail train conductor position, then silence. Not even qualified to hand a red seal mechanic his tools. Sad. Hear of so many other people getting flown out for interviews, moving expenses paid and what not and didn't even get as far as a zoom meeting interview. I will admit I didn't write a cover letter for each individual company but I thought if they saw enough on resume would contact me. Have also sent resume to Hydro one and other power companies about 10-15 times over the years, waste of time.

All these news articles saying companies can't find employees, makes me wonder if they even bother to check their online hiring portals.
Mechanical Engineering Technologist, oacett member. Glad I am not desperate for next paycheque and can make a living on my own.

 

[GreyGhost]

I'm missing something on the (skilled) labor shortage, I was bored in march/april/may and sent out about 30 resumes ...All over the country, mining camp jobs in the middle of nowhere that very few people want to go(North BC/Alberta) oil rigs off the east coast, mechanic helper jobs in the yukon, etc etc and didn't get a word back from any of them. About 5 emails back saying not what they're looking for. One 30 minute online personality test for CP rail train conductor position, then silence. Not even qualified to hand a red seal mechanic his tools. Sad. Hear of so many other people getting flown out for interviews, moving expenses paid and what not and didn't even get as far as a zoom meeting interview. I will admit I didn't write a cover letter for each individual company but I thought if they saw enough on resume would contact me. Have also sent resume to Hydro one and other power companies about 10-15 times over the years, waste of time.

All these news articles saying companies can't find employees, makes me wonder if they even bother to check their online hiring portals.
Mechanical Engineering Technologist, oacett member. Glad I am not desperate for next paycheque and can make a living on my own.

If I get a resume without any indication that you investigated the company (cover letter or body of email is fine), it goes to the round file. Hell, I get far too many that have cover letters that show they have absolutely zero ideas what we do and they are just shotgunning resumes. Garbage.

FWIW, I don't think I have ever gotten a job by blindly submitting resumes. Talk to a lot of people. If you seem decent, someone will help you get in. This is easier for somewhat local jobs as that's where your network is but use fb/linkedin to check up on old school acquaintances. At least one of them should be involved with a company/location that you are interested in.

 

[mimico_polak]

Ouch! That finances and pays off $3500 of a motorcycle loan in 5 years!

$60/month is nothing...add that to the $1230/bi-weekly I'm paying now...and it adds up quick.

EDIT: In all honesty...I'm ready to stop searching for a bike and wait a few months as the financial hit to a lot of people is going to start taking a bite out of their budgets. New toys / vacations / renovations / HELOC as a bank card is eventually going to catch up to more and more people.

 

[Mikedezo44]

If I get a resume without any indication that you investigated the company (cover letter or body of email is fine), it goes to the round file. Hell, I get far too many that have cover letters that show they have absolutely zero ideas what we do and they are just shotgunning resumes. Garbage.

FWIW, I don't think I have ever gotten a job by blindly submitting resumes. Talk to a lot of people. If you seem decent, someone will help you get in. This is easier for somewhat local jobs as that's where your network is but use fb/linkedin to check up on old school acquaintances. At least one of them should be involved with a company/location that you are interested in.

Fair enough, I guess when I hear and see all the talk about labor shortage I would think would get at least a little action, especially in the remote parts of the country. It's all good anyways, would be hard to go back to a 40-50 hr week working for someone else. Usually get restless (looking to make money) after not doing much all winter but then make enough in the summer to make up for it.

News articles are misleading then, should read - not enough people are friends of employee's in companies, not enough people with connections required to be hired, not enough people willing to write cover letters to show interest in said company to be a considered candidate.

 

[Mad Mike]

The masses have to decide what they want... purchasing housing was high mostly due to the low interest rates. People complained.... higher interest rates if they stick will eventually bring prices down (and it is not immediate) now other people are getting screwed.

There is a workforce shortage (pretty much entire first world), can't get around that. Raising the rates now is wrong IMO as Canada has the second lowest inflation in the G7. I think they could have held fast for a few more months.

I don't think cheap money is the cause for the runup in house prices in built-up areas as it didn't alter the demand side. GTA prices are either up or stable year. I fear wage increases in the city will offset the increased financing costs. Homes will just get smaller and pricier -- there may be no solution for demand in the built-out areas of the GTA.

Smaller cities outside the GTA that were not suffering demand issues saw prices driven as speculators juiced demand fueled by cheap and stupid money. Expensive money shuts down speculators and hits outlying areas hard. The last two times interest rates klooned speculation, house prices outside the GTA fell 5+ years straight and took nearly 10 years to recover.

I suspect nearby areas that saw speculation fuelled runups to see prices fall for a few more years. Oakville, Burlington, Orangeville, Barrie/Innisfil, Lindsay/Peterborough, Clarington/Bowmanville to be challenging for the next 5 years.

 

[Mad Mike]

The BOC rate has been artificially low for too many years, and now that the proverbial excrement has hit the fan it's gonna bite HARD, and there is lots of folks that are NOT prepared, which is going to make it worse.
The highest mortgage rate I have signed was 13.5% in 1989 or 90, and I was happy to get that. My father paid 21-22% in the early '80s, and he was on the general managers staff at RBC at the time, so he had access to realistic forecasts and cheap money.

Bank of Canada Interest Rate 1935-2024 | WOWA.ca

Check today's Bank of Canada interest rate. See how the rate has changed in the last 85 years and what caused it to change so fast in 2022-2024.

wowa.ca

Just think. all the foreclosures will drive the house prices down.
War in Europe, political unrest in America, Japanese economy tanking, the death of the oil and car industries (which our North American economy is based on)... I think it's going to get a LOT worse before it gets better.
Being old and having a paid off house is nice... retired and fixed income sucks. I am probably going to die soon, so I have that going for me. Being 30 with a BIG mortgage, a couple of kids and a crappy job would be a scary proposition today.

I have a 3 kids in the 'scary proposition zone' you speak of. They are fine, they spend way less on their rents/mortgages as a percentage of income than I did in 1986, all have a pretty good life!

I'm not planning on following you to the grave anytime soon -- but who knows. While I'm working toward my last breath, I'll help my kids when I can, then a whole bunch more when I flame out.

 

[nobbie48]

I don't think cheap money is the cause for the runup in house prices in built-up areas as it didn't alter the demand side. GTA prices are either up or stable year. I fear wage increases in the city will offset the increased financing costs. Homes will just get smaller and pricier -- there may be no solution for demand in the built-out areas of the GTA.

Smaller cities outside the GTA that were not suffering demand issues saw prices driven as speculators juiced demand fueled by cheap and stupid money. Expensive money shuts down speculators and hits outlying areas hard. The last two times interest rates klooned speculation, house prices outside the GTA fell 5+ years straight and took nearly 10 years to recover.

I suspect nearby areas that saw speculation fuelled runups to see prices fall for a few more years. Oakville, Burlington, Orangeville, Barrie/Innisfil, Lindsay/Peterborough, Clarington/Bowmanville to be challenging for the next 5 years.

There appear to be social costs in some of those places as well. Homelessness, drugs and the associated side effects aren't conducive to a pleasant lifestyle for the sufferers or those that have to dodge them on the streets.

 

[bitzz]

They are fine

Today, at 5% they're fine. A 30 year old today has never seen a true BOC interest rate. In 1993, we were bouncing back from the late '80s economic turn down, and to keep the economy going the government has falsely held the rate down to promote growth. Until the last 2-3 years a 30 year old's life has been all roses and clear skies. A 30 year old doesn't even know what a recession is.

The last global pandemic, during a European war, was followed by a stock market crash, caused by lack of governance, followed by bank failures, followed by a housing market crash (starting to sound familiar?) which was followed by the GREAT depression. (GREAT as in BIG, not "Hey we're having a GREAT time")
Do you think they're prepared for a replay? I don't, and I've never met your kids.
As I said, Canada is better equipped than most, but we don't operate in a vacuum. The American political system is in turmoil and if they lose OPEC dollars (watch out for BRIC. China has more US dollars than the US has), their dollar goes down the toilet, and they'll take the rest of us down with them... just like last time.
The Russians have been taken out of the "petro" market, at least for now, so we have that going for us

 

[Mad Mike]

There appear to be social costs in some of those places as well. Homelessness, drugs and the associated side effects aren't conducive to a pleasant lifestyle for the sufferers or those that have to dodge them on the streets.

I think that's a different issue, not directly related to BOC rates. Small centers have the services needed by those with mental health and substance abuse problems.

Those centers also have the 'compassionate supporters' hanging off the gov't teat while providing free methadone and safe injection sites. I think in many cases they are exacerbating the problem as addicts flock to these sites, then remain like bears at the dump.

I say "No" to free drugs and paraphernalia.

 

[Mad Mike]

Today, at 5% they're fine. A 30 year old today has never seen a true BOC interest rate. In 1993, we were bouncing back from the late '80s economic turn down, and to keep the economy going the government has falsely held the rate down to promote growth. Until the last 2-3 years a 30 year old's life has been all roses and clear skies. A 30 year old doesn't even know what a recession is.

Agreed. Hopefully they never do.

The last global pandemic, during a European war, was followed by a stock market crash, caused by lack of governance, followed by bank failures, followed by a housing market crash (starting to sound familiar?) which was followed by the GREAT depression. (GREAT as in BIG, not "Hey we're having a GREAT time")

You must be older than I thought!

Do you think they're prepared for a replay? I don't, and I've never met your kids.
As I said, Canada is better equipped than most, but we don't operate in a vacuum. The American political system is in turmoil and if they lose OPEC dollars (watch out for BRIC. China has more US dollars than the US has), their dollar goes down the toilet, and they'll take the rest of us down with them... just like last time.
The Russians have been taken out of the "petro" market, at least for now, so we have that going for us

I'm not as inclined to think we'll replay the past -- I prefer to think we learn from the past and become better equipped to soldier through uncertain times.

Over the last 100 years, there have been lots of serious economic storms -- each we seem to recover faster and with less damage as time goes on.

There's a chance we are getting smarter.

 

[sburns]

I'm missing something on the (skilled) labor shortage, I was bored in march/april/may and sent out about 30 resumes ...All over the country, mining camp jobs in the middle of nowhere that very few people want to go(North BC/Alberta) oil rigs off the east coast, mechanic helper jobs in the yukon, etc etc and didn't get a word back from any of them. About 5 emails back saying not what they're looking for. One 30 minute online personality test for CP rail train conductor position, then silence. Not even qualified to hand a red seal mechanic his tools. Sad. Hear of so many other people getting flown out for interviews, moving expenses paid and what not and didn't even get as far as a zoom meeting interview. I will admit I didn't write a cover letter for each individual company but I thought if they saw enough on resume would contact me. Have also sent resume to Hydro one and other power companies about 10-15 times over the years, waste of time.

All these news articles saying companies can't find employees, makes me wonder if they even bother to check their online hiring portals.
Mechanical Engineering Technologist, oacett member. Glad I am not desperate for next paycheque and can make a living on my own.

Yeah it's all probably BS, gov feeding news stories, to make them look good. Neighbour was saying the other day people can't find work and it's tough out there. Another guy was telling me he's working 2 jobs to just pay for rent and feed himself. And a lot of the nurses he works with are doing the same on off hours.
And if there is such a demand for hires, not having a cover letter shouldn't be a problem.
It's f'd.