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: 622

▶ 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

How one company is reducing agricultural waste on Earth Day

As the world celebrates Earth Day on Monday, one agriculture organization is reflecting on the work it accomplished in 2023. According to a release from CleanFarms, a non-profit group that ensures farmers actively contribute to a healthy environment, the agriculture industry used many recycling and safe disposal programs for agricultural plastics and packaging last year, and there’s certainly an appetite for more solutions in the future. One example that CleanFarms offers is AgriRÉCUP in Quebec, which operated four permanent collection programs and two pilot programs in the province that captured pesticide and fertilizer containers, plastics for hay and silage protection and seed, and pesticide and fertilizer bags. “We’re thrilled to have seen so much expansion in our programs last year,” said Barry Friesen, executive director of Cleanfarms. “Earth Day encourages us to acknowledge the important work we get to do on behalf of our members, with farmers, first sellers, ag retailers, an

More incentive for grads to consider agriculture-focused vet career

On any given day, Prince Albert, SK veterinarian Peter Surkan sees roughly 40 patients, but for every patient he sees, there are dozens more waiting. To accommodate all of the clients in the area, Surkan said there needs to be more vets, especially in smaller, rural communities. His practice in Prince Albert only has three full and part-time veterinarians, compared to 10 vets a decade ago. On Friday, the province announced $13.2 million in funding to the Western College of Veterinary Medicine (WCVM) in 2024-25, representing a $667,000 increase over last year. The money will partially subsidize 25 training seats for Saskatchewan students. “We continue to see a rising demand for veterinary services in the province and they are a key support for our growing economy,” Advanced Education Minister Gordon Wyant said in a press release. “This is a priority investment for Advanced Education that supports the continued implementation with five new seats, bringing the total now to 25 seats, t

Squeal on Pigs Manitoba receives new Sustainable Canadian Agricultural Partnership funding

Manitoba Pork, in partnership with the Government of Canada and the Province of Manitoba, and in collaboration with Manitoba’s agricultural sector, is pleased to announce that the Squeal on Pigs Manitoba initiative will receive over $2.6 million over the next four years to further the work of tracking and removing wild pigs from Manitoba’s landscape. “Wild pigs continue to thrive across Manitoba and are vectors for many diseases that have a devastating impact on both domestic pigs as well as other animals,” said Dr. Wayne Lees, project coordinator, Squeal on Pigs Manitoba. “Together with our partners in both the provincial and federal governments, as well as Manitoba’s agricultural sector and stakeholders across the province, this new funding will allow us to further our efforts to track, trap, and remove wild pigs from the landscape and protect our province.” The goal of the Squeal on Pigs campaign is to identify where wild pigs are in Manitoba, control their spread, and remove as m

Another year of guaranteed financial return for CRSB Certified beef producers from Cargill, its supply chain partners and the Canadian Roundtable for Sustainable Beef

The Canadian Roundtable for Sustainable Beef (CRSB) has once again partnered with Cargill and its customers – Centennial Food Solutions, Gordon Food Service, Intercity Packers, MacGregors Meat & Seafood, McDonald’s Canada, Metro, Recipe Unlimited and Walmart – to provide up to $400 CAD for beef producers maintaining their CRSB Certification. This credit will be provided for another year to “fill the gap” for Canadian beef producers who have made the upfront investment of becomingCRSB Certified but did not receive at least $400 CACargill Certification Credit USE D in financial return for qualifying cattle processed in 2023 as part of the existing Qualifying Cattle Credits  I would like to extend my sincere thanks to these organizations for supporting the CRSB Certified program for another year. In 2024, CRSB will prioritize identifying long-term solutions to ensure certification provides financial value and enduring benefit to producer participation,” said Ryan Beierbach, Chair of the

Competition Bureau Raises Concerns with Bunge-Viterra Merger

The Competition Bureau has thrown some cold water on the proposed Viterra-Bunge merger. 

© 2024   Created by Darren Marsland.   Powered by

Badges  |  Report an Issue  |  Terms of Service