The Canadian Association Of Accredited Mortgage Professionals (CAAMP) does a great semi-annual survey where they interview 2,000 Canadians to get a deeper understanding of the Canadian residential mortgage market. The survey is anticipated by our industry to get a snapshot of the market and attitudes of mortgage borrowers.
There were both positives and negatives to take away from the survey.
Canadians indicate that those holding mortgages are comfortable with their debt and a majority plan to pay off their mortgage in less than 25 years. More than 1/3 are taking advantage of current low interest rates to accelerate payments.
First time home buyers are finding it harder than ever to enter the market due to recent tightening of mortgage rules. The smaller number of first time buyers is already impacting the resale market, which in turn threatens to dampen economic activity across the board.
Here are some more highlights from the report:
- Since the most recent round of mortgage tightening came into effect in July 2012, there has been a drop in Canadian housing resale activity: between August and October, sales were 8 per cent lower than in the year prior to the announcement
- Approximately 17 per cent of high ratio mortgages funded in 2010 could not have been funded today, including 11% of prospective high ratio homebuyers who can’t qualify under the new 25 year amortization rule
- Regardless of whether Canadians initially selected a 20, 30, or even 40 year amortization period, survey findings continue to indicate that actual repayment periods have generally been only two-thirds of the contracted periods
- It is not only first time buyers who are affected: reduced activity at entry levels means that move-up activity will also be gradually impacted, because potential move-up buyers will find it more difficult to sell their current homes
- Canadians have continued to show prudence when it comes to mortgage repayment: one-third of borrowers made additional payments or accelerated payments on their mortgages; 87 per cent of homeowners have at least 25 per cent equity in their homes; 61 per cent of people who renewed in the past year saw a reduction in their interest rates
- Among borrowers who took out a new mortgage in 2012, a record 47 per cent obtained it from a mortgage broker (my favorite stat by far!)
The report confirms that tightened mortgage rules are having an effect on Canadian real estate prices but at the same time the report also shows that Canadians might be more responsible with their mortgage and consumer debt than the government might have thought. There is a clear trend showing that Canadians have been listening to the rhetoric to eliminate debt which is very positive.
The report, Annual State of the Residential Mortgage Market in Canada(download), 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 2012.