Interest Rate Paradox – The Real Cost of Low Interest Rates


Low interest rate debt that is easily accessible encourages and enables the masses to engage in obtaining excessive amounts of consumer debt. It creates affo…

By | 2013-08-25T11:19:23+00:00 August 25th, 2013|Mortgages Home Loans Interest Rate|15 Comments

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15 Comments

  1. tomohawk52 August 25, 2013 at 6:37 PM - Reply

    It used to be that borrowing money and not paying it back was scandalous and people were stigmatized by their failures. That’s because it’s theft. Now it just seems like some sort of strategy.

  2. Bruce Joseph August 25, 2013 at 6:12 PM - Reply

    Ironically people (not all but many) actually BRAG about the amount of low interest debt they have accumulated. Comparing costs of debt in such a way that’s competitive. Assuming they are clever in the manner they switch their credit cards back and forth to take advantage of teaser rates. It’s cultural and quite dangerous.

  3. david g August 25, 2013 at 5:20 PM - Reply

    Hey i love your videos. I’m from Vancouver b.c and i’m holding off buying a house. Instead i’m prompting to rent. Just waiting till the bubble burst and vancouver realestate goes down. Do you have any predictions when this might be?

  4. Vasi H August 25, 2013 at 4:45 PM - Reply

    Thank you Bruce for doin what you do! I have, over the past 2 years, senn this particular asset bubble inflating and have tried to warneople and almost no one believes this to be true because the news says Canada is different and our banks are fiscally responsible etc. etc. now I point people to your channel (among others) so at least I reserve the right to at least have said “don’t believe me, look it up for yourselves.”

  5. Kelly Lambert August 25, 2013 at 4:33 PM - Reply

    Bruce, just curious, what makes you think we’ll see a bump in the market this year? Is it that prices have risen? If so, I urge you to check below the surface of that stat. What you’ll find is a few really expensive houses(20 million plus)sold at a discount in a low volume month, bringing up the average price.

  6. Bruce Joseph August 25, 2013 at 4:04 PM - Reply

    Hey Kelly, based on fundamentals and rationality the market should be cooling. The belief we may see a brief spring increase in price and the key word is may is due to the desperation of mortgage lenders slitting their throats on margins and dropping rates to a point of almost no profit. Many banks and realtors have ramped up their spring market advertising on the new found low rate financing band wagon.

  7. Bruce Joseph August 25, 2013 at 3:08 PM - Reply

    This of course will not sustain any level of real growth and should run it course quickly. The data I’ve reviewed in Vancouver, Montreal, Ottawa are showing quite the rise in inventory and drop in transactions, thinning market depth tends to be a precursor to volatility. Their are brokers in our region going as low as 2.6% on a five year fixed sacrificing their commissions due high competition and low volumes. A correction can’t be far off. Thoughts?

  8. Kelly Lambert August 25, 2013 at 2:20 PM - Reply

    Ok, this is what concerns me the most Bruce. Rates are at historical lows and still the market is falling fast. Imagine what happens when market forces take hold and rates rise. Anyway, so far in 2013 we have no signs of a bump, in fact it’s getting worse.
    I’m in the Okanagan and it’s probably worse here. Glad I sold my 1.2m house in Vancouver in 2011 and downsized. I’d rather lose 20% of 300K than 15% of 1.2m.

  9. Kelly Lambert August 25, 2013 at 1:53 PM - Reply

    by the way, stick with it Bruce, your message will resonate with people once they finally realize that hope and PMA won’t make this stop. Once that happens, public sentiment will turn viciously against all the liars who misinformed people in hopes of making a sale. Guys like you will stand out from the crowd because you told the truth even when it wasn’t popular.
    Also, I plan on buying back into the Vancouver market once it bottoms out, when I do, a broker like you is what I’m looking for.

  10. Bruce Joseph August 25, 2013 at 1:42 PM - Reply

    Kelly that was a wise wise wise move. I’ve advised everyone to be humble with residential real estate. An asset pays you a return. A liability costs you per month (like a huge house). They don’t realized it yet but their speculating in the most dangerous way. I try to be soft with the message where still at a point in the game where the average person wants to shoot the messenger… in the end most people don’t act they react. Great move though I’d have made the same one.

  11. Bruce Joseph August 25, 2013 at 1:05 PM - Reply

    Thanks for the kind words Kelly. My thoughts exactly hold large cash positions on the side lines and like Buffett says be greedy when everyone is afraid and afraid when everyone is greedy. Or if you want to step it up like Rothschild says only buy when there is blood in the streets, it’s a bit excessive but it’s a real possibility. I’m also focused on Toronto Condos they will take a monster beating and make great rentals at 50+% off.

  12. sombora August 25, 2013 at 12:07 PM - Reply

    1:39
    

  13. Patrick Gunville August 25, 2013 at 11:48 AM - Reply

    Bruce, you are the only real estate agent, I have ever seen that actually gives the straight truth. And I’m not saying other agents are lying. I’m saying our industry teaches agents to SELL not actually anything about how the real estate market actually works. I’m from Vancouver, and although everybody agrees prices are insane, nobody is insane enough to admit we’re in a very dangerous bubble.

  14. Patrick Gunville August 25, 2013 at 11:48 AM - Reply

    The worst part is, I’m trying to get people to buy a conservative house, with perhaps a basement suite for extra income, just in case, because I want people to be protected. But people care way more about a fancy modern house, than being protected from the obvious crash that is guaranteed to happen in the immediate future! We have to band together to make the message more widespread.

  15. quadcatfly August 25, 2013 at 11:44 AM - Reply

    CHMC will be bailed out by the taxpayer. No biggie.

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