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Stability in the Canadian Mortgage Market & Significant Statistics

TORONTO, Ontario, May 12, 2011 — Many Canadians are aggressively reducing their mortgages by making lump sum payments, increasing monthly payments and reducing amortization periods, revealing confidence and financial flexibility in a stable mortgage environment, according to CAAMP’s most recent survey report.

Highlights

  • 22 per cent of mortgage borrowers increased their payments during the past year; 18 per cent made a lump sum payment; 9 per cent did both and 27 per cent who renewed increased their payments;
  • For mortgages repaid in the last 20 years, one third were paid off early;
  • For the first time, CAAMP has identified that Home Equity Lines of Credit (HELOC) represent 22 per cent of all mortgages, making these lines of credit a $215 billion industry;
  • On average, Canadian homeowners have $222,000 in home equity, equal to 66 per cent of the value of their homes; 
  • During the past year, homeowners borrowed $26 billion in additional equity from their homes. 15 per cent of homeowners withdrew equity, averaging $30,000;
  • Investments (28 per cent) replaced debt consolidation (19 per cent) as the number two use of home equity takeout. Home renovations remain number one (36 per cent).

The spring survey report, entitled Stability in the Canadian Mortgage Market, is a bi-annual review of the Canadian mortgage market authored by CAAMP Chief Economist Will Dunning.  The report is based on information gathered by Maritz Research Canada in a survey of 2,000 Canadian consumers in April 2011.

“Prudent management of their mortgage debt has paid off for Canadians,” said Jim Murphy, AMP, President and CEO of CAAMP. “By taking advantage of low interest rates, we have been paying down our mortgages. As economic confidence returns in Canada, many survey respondents have told us they now feel comfortable using some of that equity to improve their homes and to invest,” said Murphy.

Home Equity, Mortgages and HELOCs
For the first time, CAAMP asked Canadians to specify how they financed their homes and withdrew equity. Of an approximate 9.45 million homeowners in Canada, an estimated 1.87 million hold a mortgage and a HELOC; approximately 770,000 have a HELOC only with no mortgage and approximately 3.83 million have a mortgage only.  Approximately 3 million Canadians have no debt on their homes.

Canadians hold $2.10 trillion in home equity and appear generally comfortable.  Quebec and Atlantic Canada lead the way in equity comfort levels (81 and 82 per cent respectively). In contrast, homeowners in Manitoba and Alberta have lower levels of comfort with their current equity positions (31 and 29 per cent respectively).

While the CAAMP spring survey report reflects a positive outlook by mortgage borrowers, Dunning cautions that the pace of the economic recovery will remain modest in 2011 and 2012. “Mortgage credit will continue to expand by about $80 billion (7.8 per cent) in 2011, down from its peak of 13 per cent in 2008, but nevertheless a healthy increase,” Dunning said.

The CAAMP survey report contains a wealth of information on the mortgage industry, including consumer choices and borrowing behaviour, regional breakdowns of responses and an outlook on residential mortgage lending.

Significant Statistics 

  • There is currently $855 billion in mortgages on principal residences and $215 billion in Home Equity Lines of Credit (HELOC)
  • Individuals with HELOCs only have an average 65 per cent equity in their homes
  • HELOC prevalence is highest among middle age homeowners
  • Equity takeouts amount to $26 billion annually, with most funds used for renovations ($9.4 billion), followed by investments ($5.0 billion)
  • The average down payment for a home purchased in the last 12 months was 30%, up from 26% for homes purchased two years ago
  • Among all borrowers, 63 per cent have fixed rate mortgages, 30 per cent have variable rate mortgages and 6 per cent have a combination of both
  • Less than a quarter (22 per cent) of all borrowers have amortization periods longer than 25 years
  • 34 per cent of those who most recently renewed or renegotiated their mortgages did so before their term expired.  The average time to pay off a mortgage is 7.4 years less than the original amortization
  • 200,000 homeowners paid off their mortgages in the last 12 months
  • The average mortgage interest rate discount is 1.44 per cent for those who chose a five year fixed rate mortgage in the last twelve months with the average mortgage rate being 4.04%
  • Of those who renewed their mortgages in the last twelve months, 65 per cent are paying lower rates than previously
  • 66 per cent of all mortgage borrowers can tolerate a monthly mortgage increase of $300 or more
  • Among borrowers who took out a new mortgage in the last 12 months, 27% obtained it from a mortgage broker.  Overall mortgage broker share stands at 23%
  • Canadian appetite for home buying has returned to pre-recession levels, following a slide over the past three surveys. Almost 60 per cent respondents thought that now was a good time to buy
  • Optimism is returning to the market with almost half (46 per cent) of those questioned saying that they expect prices to rise

News source: Canadian Association of Accredited Mortgage Professionals

 

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