Just released report by Will Dunning, the Chief Economist of Canadian Association of Accredited Mortgage Professionals (CAAMP), sheds light on the state of the mortgage business in 2011. Titled “Confidence in the Canadian Mortgage Market” the report takes a relatively detailed approach and offers statistics and interpretations on various facets of the mortgage industry in relation to the consumer.
Some of the findings are:
- There is currently $994 billion in mortgages on primary residences and $161 billion in Home Equity Lines of Credit (HELOCs).
- 83% of Canadians have at least 25% equity in their home. The average amount of equity is estimated at $214,000.
- Among all mortgage holders, 65% have fixed rate mortgages, 29% have variable rate mortgages and 7% have a combination of both.
- 23% of mortgage holders have increased their monthly payments in the last year. 19% have made a lump sum contribution to their mortgage.
- Among borrowers who took out a new mortgage during 2011, 31% obtained the mortgage from a mortgage broker. For current mortgages, regardless of when they were obtained, 26% were obtained from a mortgage broker.
- The average mortgage rate in 2011 is 3.64%, down from 4.04% a year earlier. For mortgages on homes purchased recently, the average rate is 3.48%.
In addition to the hard numbers provided by various financial institutions, Will Dunning has also analyzed the result of an online survey with 2,000 Canadians, done by Maritz Research Canada.
What grabbed my attention was that aspect of the poll that deals with renters. If mortgage rates are so low then what is keeping renters from buying? Here is what they list as the major obstacle to become a homeowner:
- The cost of home-ownership is prohibitive – 33%
- I don’t want the responsibility of owning – 18%
- I have not yet saved the money I need to purchase a home (e.g. down payment, fees, taxes, etc.) – 52%
- I prefer renting – 14%
- I like my current place – 19%
- I believe home-ownership is not a good investment at this time – 13%
52% of the renters don’t have enough savings for down payment. The question that makes me scratch my head is “How then do you grow home-ownership share in the future”? Potentially higher mortgage rates in the future will only increase that portion of renters (now 33%), for whom the cost of ownership is prohibitive. One can only imagine one outcome – decline of the housing affordability, which may cause a ripple effect on the broader economy.
What to expect over the next year?
According to Will Dunning’s forecast home prices will stay flat, home sales will grow slightly.
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