Ontario Agriculture

The network for agriculture in Ontario, Canada

Just how big a mortgage can people carry?

This is a scary reality that may hit Ontario - hard. It won't take much to double an interest payment - maybe even triple and quadruple -- and still only be at 10 percent. I know driving into London - I see many homes that I can't figure out how everyday families afford. Pretty soon they may realize they can't afford them and this economy is back in the tank.

http://www.theglobeandmail.com/blogs/jeff-rubins-smaller-world/just...

Jeff Rubin

When money is free, it’s hard not to borrow it, even if the lender keeps warning you to be vigilant against debt. That’s exactly what Bank of Canada Governor Mark Carney has been telling Canadians while at the same time keeping their cost of borrowing as low as it’s ever been.

The obvious question, of course, is, if caution is warranted in borrowing, why is the cost of money so cheap? Since no one wants to pay more for their loans, particularly mortgage-holders, it’s a question no one bothers to ask Governor Carney.

But ask you should. Because the Bank of Canada’s free-money policy may lead you to places you’d rather not go.

A financial bubble is built on an unsustainable premise. Tomorrow’s bubble in the Canadian housing market is constructed on the premise that today’s record low mortgage rates will remain in place. And that, in turn, is based on the idea that inflation will continue to dissipate in the face of a slack economy.

Neither premise should be in your financial plan.

Today’s inflation rate is no more sustainable than today’s interest rates. Both are rear-view mirrors on where the economy has been, not where it is going.

Energy prices, which were falling a year ago, are now back on the rise. Just as the inflationary impact of those prices triggered the fatal rise in interest rates which, in turn, gave us the deepest postwar global recession ever, energy prices will once again push inflation and interest rates much higher. (See my post Financial Crisis or Energy Shock? for more on this.)

And this time the inflationary fallout won’t just be in the energy component of the Consumer Price Index. The impact will be much broader, as soaring transport prices encourage higher-cost local production to replace sourcing from cheap labor markets halfway around the world.

Stress test your floating-rate mortgage three or four percentage points from today’s level and take a good, long look at the resulting increase in your monthly mortgage payment. For some homeowners, that could be as much as another $1000 per month.

Twenty years ago a similar shock to borrowing rates caused Canadian housing prices to fall by an unprecedented 25 per cent. I know because I called it.

That call was as much about where interest rates were going as it was about where housing prices were heading. Based on current borrowing rates, today’s homeowners will be facing almost as large an increase as they did back then.

So heed Governor Carney’s caution when you decide how big a mortgage you can really afford to carry.

Because once the Bank of Canada starts raising your mortgage rate, it will be a very long time before they stop.

Views: 667

▶ Reply to This

Replies to This Discussion

Permalink Reply by Dale Ketcheson on December 25, 2009 at 2:04pm
On a slight tangent, what lenders seem to be the most receptive to consolidating/refinancing farm loans at these lower interest rates? Anybody had any particularly pleasant experiences?
Permalink Reply by John Schwartzentruber on December 28, 2009 at 6:31am
Dale, I've found both FCC and BMO to be first rate for our needs. Very flexible and accommodating.

On the topic of interest rates, 20%+ didn't last that long, but long enough to kill a lot of us. And we thought it was bad.

Well, 3% - 5% interest rates will end up killing off more people than 20% did because as nice as it seems to have low interest, it will get a lot of people way too far into debt. And when the rates inevitably go back up to more normal levels . . .

Low interest rates are likely the only thing that have staved off bankruptcy for a lot of beef and pork producers.
Permalink Reply by Wayne Black on December 28, 2009 at 2:09pm
Dale, I found that FCC was very accomodating (once I got talking with the right person. It took a bit of persuading to get the person to look into my account to see what the fees would be andwhat the resulting rates would be.
At the end of the day we re-financed most of our fixed rate loans and we are saving money even after paying the fees.
This occured in February of this year.

Dale Ketcheson said:
On a slight tangent, what lenders seem to be the most receptive to consolidating/refinancing farm loans at these lower interest rates? Anybody had any particularly pleasant experiences?
Permalink Reply by Dale Ketcheson on December 28, 2009 at 3:12pm
Thanks guys.
Permalink Reply by rein minnema on December 30, 2009 at 7:02am
It is time to start looking at longterm fixed rates, you do pay a premium but there is more room for the rates to go up than down.
See it as a insurance policy/ protection for stability

Wayne Black said:
Dale, I found that FCC was very accomodating (once I got talking with the right person. It took a bit of persuading to get the person to look into my account to see what the fees would be andwhat the resulting rates would be.
At the end of the day we re-financed most of our fixed rate loans and we are saving money even after paying the fees.
This occured in February of this year.

Dale Ketcheson said:
On a slight tangent, what lenders seem to be the most receptive to consolidating/refinancing farm loans at these lower interest rates? Anybody had any particularly pleasant experiences?
Permalink Reply by Rob Gamble on January 5, 2010 at 3:17am
If you are looking for a loan calculator you can find one on the OMAFRA web site at http://www.omafra.gov.on.ca/english/busdev/download/calc_omafloan.htm. It can calculate a whole range of options. I have also attached it to this post.
Attachments:
Permalink Reply by Steve Twynstra on January 5, 2010 at 5:27am
Thanks Rob....and here I have been making up my own worksheets in Excel all these years....with less detail.

▶ Reply to Discussion

RSS

Agriculture Headlines from Farms.com Canada East News - click on title for full story

GIFS at USask is striving to be the world’s preferred partner for agriculture and food innovation

At the Global Institute for Food Security (GIFS) at the University of Saskatchewan (USask), ambition meets action. Across our diverse operations, our team has developed unique capabilities to support impactful research and development. From genomics to biomanufacturing to data analytics and more, our strengths place us among a select group of global institutions equipped to drive innovation at scale. Today, we are the only organization in Canada with the expertise, capabilities, and unique model to enable partnerships with both public- and private-sector organizations from discovery through to delivery, accelerating innovation at every stage. Based in Saskatchewan — the heart of Western Canada and the largest producer of field crops in Canada — we’re strategically positioned to collaborate with global partners and deliver scalable, impactful solutions. “Our ambition is to be the preferred partner for ag and food innovation — not just here, but globally — and we are global. We’re b

Crop Report for the Period October 7 to October 13, 2025

Producers made solid harvest progress on remaining crop acres and got plenty of other field work done last week, before rain and snowfall on the weekend halted operations in many areas. Producers are hoping to get back in the field prior to winter to harvest the few remaining crop acres and finish field work. Provincially, harvest is 98 per cent complete. Most crop is off in the west-central and northeast regions as progress sits at 99 per cent, followed by the southeast and northwest at 98 per cent and the southwest and east-central at 97 per cent. Although most producers have finished harvest, some have a small amount of oilseed, chickpea and canary seed crops remaining in the field. For oilseed crops, canola is 98 per cent harvested, mustard is 95 per cent, flax is 87 per cent and soybeans are 83 per cent harvested. For the other small acreage crops, canary seed is 92 per cent harvested and chickpeas are 88 per cent harvested. All other pulse, spring cereal and winter cereal cro

Grain deliveries by Canada's two major railways strong in Week 10: Ag Transport Coalition

Week 10 saw system performance improve slightly for a fifth consecutive week with CN and CPKC Rail combined supplying 93% of hopper cars ordered, an improvement from the 92% order fulfillment performance seen in week 9. System performance remains above the 90% threshold for the second consecutive week.  That's according to the Ag Transport Coalition. In supplying 96% of cars ordered by shippers in week 10, CN saw performance improve from the 92% order fulfillment performance in week 9.  CN performance has now been above the 90% threshold for two straight weeks having improved performance for five straight weeks.  CPKC saw performance decline slightly, with the railway supplying 91% of cars ordered by shippers, down slightly from the 93% order fulfillment performance seen in week 9.  CPKC remains above the 90% performance threshold for a second straight week.

Wheat and canola ending stocks unchanged over past month: AAFC

Updated supply/demand estimates from Agriculture and Agri-Food Canada, released Oct. 17, included only minor adjustments to the balance sheets for the country’s major grains and oilseeds. Projected 2025/26 ending stocks for wheat and canola were left unchanged from the September report, at 5.2 million and 2.5 million tonnes respectively.  That would compare with wheat ending stocks in 2024/25 of 4.112 million and canola carryout of 1.597 million tonnes. The projected usage numbers for canola were left unchanged, with exports forecast at 7 million tonnes and domestic usage at 12.226 million tonnes.  If realized, exports would be down by 25 per cent from 2024/25, while domestic usage would increase by 4.8 per cent. Projected wheat exports were raised to 27.4 million tonnes, from 27 million in September.  However, that would still be down by 6.2 per cent from 2024/25.  Wheat domestic usage was down by 400,000 tonnes from September, at 8.241 million tonnes.  That compares with 7.96

Alberta harvest all but complete: crop report

Alberta’s crop harvest is virtually complete, but crop quality is a concern as the growing season comes to a close. The province’s agriculture department reported 99.4 per cent of Alberta’s major crops were combined as of Oct. 14, 3.1 points more than in the previous week, compared to the five-year average of 97 per cent and the 10-year average of 83 per cent.  The northwest region’s harvest was 100 per cent complete, while the central region was at 98.9 per cent.  All other regions were within one point of finishing operations. The harvests for all major crops were either completion or less than a point away from completion, except for canola at 98.5 per cent. Despite recent rain and snowfall in some areas, the added moisture wasn’t enough to improve fall-seeded crop quality province-wide. 

© 2025   Created by Darren Marsland.   Powered by

Badges  |  Report an Issue  |  Terms of Service