Thursday, October 15, 2009


Your faithful scribe attended a post-Thanksgiving turkey feast last night hosted by the youngest member of our little gabfest group we've dubbed the Rainforest Roundtable.

Being the only other member of our group in attendance, I attempted to avoid the topic of real estate with the largely thirty-something crowd.

Believe me... it was no easy task.

Here I was with a group of well employed, mid-thirties professionals who are all well into the 'Acquisition Years'.

You know the phase. That time of life when everyone seems to be gaining a husband/wife/partner, a house, a mortgage, in-laws, and maybe a baby or two.

And there I sat with my glass of pinot noir biting my tongue as a bizarre sort of group angst about mortgage rates unfolded.

They didn't talk about how big their mortgage debt is (and it's huge). They were all focused on the rate.

3.69, 3.49, 3.75... the numbers bounced around the room. Onc poor shmuck conceded he had locked in several years ago at 5.15. It elicited a group moan of sympathy, mostly from the women.

It felt eerily like some sort of AA meeting for homeowners.

All expressed concern interest rates will be going up. As such, each couple had locked into five year terms because they "don't want to deal with the stress". It seemed almost like a communal sharing of post commitment angst; all that rate sharing, boasting and moaning about locking in at higher 5 year rates as opposed to this year's low, low variable rates of 1.75 - 2.25% acting as some sort of group therapy.

And then they pressed me for my opinion.

Believe it or not, I repressed the urge.

Instead, I opted to try and focus on the positive: for while rates are on the rise from April (when they hovered at 5.25%) they are still far below the 7.25% reached in 2000.

You could have heard a pin drop.

"Holy sh*t, 7.25%!", one finally exclaimed after an awkward silence.

It appears even rates from as recent as nine years ago have become ancient history. Conversation devolved into more therapy - group rationalization that the government would never let such high rates happen to Canadians, to them.

I excused myself to go and mix a very large Crown Royal and coke.

Have I said things are going to end badly?


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  1. I'm old enough to remember rates well into double-digits - 7% at the time was damn cheap.

    When I worked in the bankruptcy division of student loans at the HRDC roughly 15 years ago we were discharging some students whose rates were were 18-22%. Some of them had trouble finding or keeping jobs and in the space of 2-3 years the principal owed had pretty much doubled.

    For me it was a very graphic lesson not to spend beyond my means and to NEVER roll over a large balance on a credit card.

    Nowadays it seems students sneer at the idea of things like shopping second hand, working in the service industry or doing without the latest gadget and don't seem to blink at OSAP debt the size of a downpayment on a house. If rates were to go back into the double-digits they won't have a clue what hit them.

  2. '...focus on the positive' indeed :) When rates start their climb again they'll likey overshoot before pulling back. I hope your friends focus on getting their mortgages paid back quickly. I learned that from my parents. As you and Garth like to say, this will not end well.

  3. In the view of the above, MSN published an interesting article on "Strategic Defaults" happening down south of us.

    Wonder of the 'kids' above would consider "this"?