The majority of Canadian mortgage holders are comfortable with their debt levels.
According to Canadian Association of Accredited Mortgage Professionals’ (CAAMP) fall 2013 survey, 68 per cent of Canadians feel mortgage debt is “good debt” and that confidence in Canada’s housing market remains strong.
This level of comfort may be due to the fact Canadians believe they are in control of their mortgages: taking aggressive actions to pay them down, leveraging their equity to consolidate debt or make new investments, taking advantage of low interest rates and increasingly turning to mortgage brokers rather than major banks for their mortgage needs.
“Consumer confidence in the mortgage market remains high, especially among people who have owned homes for a longer period. Consumers are paying off their mortgages faster, selecting five-year fixed term rates and agreeing real estate is a good longterm investment,” said Jim Murphy, AMP, President and CEO of CAAMP.
With 57 per cent of home purchases in 2013 coming from first time buyers, Canadians have continued to demonstrate confidence in the Canadian housing market.
Other findings in the survey showed mortgage brokers are gaining share in the overall mortgage market compared to traditional financial institutions: among all new mortgages obtained this year, 40 per cent were obtained through a mortgage broker and 42 per cent from a bank; overall the broker share in the industry has increased from 25 per cent to 28 per cent since last year.
The report also covered the role housing has played in Canada’s recovery from the 2008/2009 recession. While it paints a generally healthy picture of the mortgage market, CAAMP Chief Economist Will Dunning said the current sluggish economy is related to what he sees as a weakening housing market, brought on, at least in part, by the tightening of mortgage insurance rules in summer 2012.
“The economic impacts have not been fully felt,” said Dunning. “Resale market activity has been reduced but the adjustment to housing starts has barely begun.”
Dunning projects that by 2014 we could see a 12 to 17 per cent reduction in starts compared to 2010 to 2012, well below Canada Mortgage and Housing Corporation predictions.
The survey indicated recent purchasers (those who purchased a home as recently as the 1990s) were more likely to take steps to shorten amortization periods than those who purchased a home earlier. In the past year, 38 per cent of Canadians took actions to help accelerate their repayments, including making lump sum payments, increasing the frequency of repayment or increasing the amount of each payment.
Among mortgages that have been repaid over the past two decades, actual repayment periods were 30 per cent shorter than original contracted periods.
The report, Annual State of the Residential Mortgage Market in Canada, is a semi-annual review of the Canadian mortgage market authored by Dunning. The report is based on information gathered by Maritz Research Canada in a survey of more than 2,000 Canadian consumers in October 2013.