A new study by Canada Mortgage and Housing Corporation (CMHC) shows that Canadians are well informed about mortgage options and intend to pay down their mortgages quickly. A recent survey polled 2500 active mortgage users in Canada and turned up some interesting results:
- 89% looked online for mortgage info
- 84% researched mortgage terms and conditions before deciding on a mortgage option
- 69% of first time buyers used a mortgage calculator and 85% said they had a good understanding of the size of mortgage they could afford before buying a home
- The average home buyer took 12 months to plan their purchase
- 81% of recent home buyers are comfortable with their current level of mortgage debt
- 68% feel there is a strong chance they will pay off their mortgage sooner than required
- 27% have already taken steps to pay down their mortgage through lump sum payments or increased regular payments
Frequently there is discussion on this blog about long amortizations, and increasing interest rates and whether Canada will see a mortgage melt down like we've witnessed in the US. Of course, our position has always been that we are in a far better position than our neighbours to the south. This survey shows me (again) that Canadians tend to be very well informed and take time to make home buying decisions. In large part it comes down to the tax system - mortgage interest is tax deductible in the US but not in Canada. I would say that Canadians see more benefit to paying off their mortgages quickly than Americans.
This study comes out the same day that RBC announced the third increase to mortgage rates in a month - further encouragement to pay off your mortgage quickly!
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Hopefully those bloggers that simply link interest rate rises with dramatic real estate price falls will quieten down. Common sense says that you don’t take out a mortgage for an amount that you can only afford on todays interest rates. This survey shows that Canadians have common sense! Thee bloggers with little faith in fellow Canadians hang your heads in shame.
Their debt to income was 142%, ours is 145%, same debt load, same result.
Spud,
Thank you for setting me straight. I will now hang my head in shame. Why didn’t I have more faith in my fellow Canadians? It’s obvious to me now. There will not be a dramatic drop in prices. Most Canadians are not in over their heads. We will be fine.
On the other hand, the 20% who are uncomfortable with their mortgage debt must be living by me in Southbrook. The for sale signs are sprouting like crazy. If you need a visual of this trend in inventory, look at Sheldon’s bar graph. A blind man could see that there is only one way for prices to go. I am not calling for an extreme drop. Only 25% over the next two years. The average Canadian, as this survey points out, will be fine. Only a couple million will lose their shirts. It’s such a small number that we probably won’t even notice. What’s your prediction?
Love your work Spence. My prediction is for flat prices or very small gains over the two years. Maybe those neighbours of yours have been listening to you too much and think they can make a buck by selling now and buying back in later. I think we just found our Canadian fools.
Without the same survey being done on the Americans when they were going through the same thing that we are going through now, this survey doesn’t really tell us a lot. We can say Canadians are well informed but that’s about it. I don’t think we can really draw the conclusion that Canadians are more or less informed then the Americans or that we are fairing better or worse. Gordon’s numbers are a little more insightful in my opinion.
I don’t know why my neighbours are trying to sell Spud (two are new Comfree listings). Maybe they listen to Bob Truman and other realtors who are now openly predicting a drop in prices. Maybe they will not be able to comfortably afford their mortgages if there is a significant rise in variable rates. Maybe they are trying to cash out while the going is good. I don’t know.
I have nothing to gain if prices drop. I will lose equity just like every other homeowner. I just feel very strongly that we have reached the peak and the days of risky lending practises are winding down. Even a “flattening” in price trends makes no sense to me. Here is Bob Truman’s stats for Edmonton.
link to bobtruman.com
Take note of the average and median prices for March 31st 2010 ($401,270 – $368,500). If they are at or above these numbers on April 1st 2012, there will be an envelope with your name on it sitting at Sheldon’s office (not an April fools joke). 4 green fees to the course of your choice and $200 for the Keg. You can take your crew out on me. Let’s face it, if you win, I win too. My prediction would see me lose $80K on my house. Your prediction would see me part with $500 bucks for some golf and some grub (both worthy causes in my books). Good luck Spud.
I don’t know why my post isn’t fitting in the screen right. Maybe Sheldon Can fix it.
I don’t know why my neighbours are trying to sell Spud (two are new Comfree listings). Maybe they listen to Bob Truman and other realtors who are now openly predicting a drop in prices. Maybe they will not be able to comfortably afford their mortgages if there is a significant rise in variable rates. Maybe they are trying to cash out while the going is good. I don’t know.
I have nothing to gain if prices drop. I will lose equity just like every other homeowner. I just feel very strongly that we have reached the peak and the days of risky lending practises are winding down. Even a “flattening” in price trends makes no sense to me. Here is Bob Truman’s stats for Edmonton.
Take note of the average and median prices for March 31st 2010 ($401,270 – $368,500). If they are at or above these numbers on April 1st 2012, there will be an envelope with your name on it sitting at Sheldon’s office (not an April fools joke). 4 green fees to the course of your choice and $200 for the Keg. You can take your crew out on me. Let’s face it, if you win, I win too. My prediction would see me lose $80K on my house. Your prediction would see me part with $500 bucks for some golf and some grub (both worthy causes in my books). Good luck Spud.
Feel free to delete my first post Sheldon. I think the link to Bob’s site threw it off.
It looks fine on my screen?
link to edmontonjournal.com
This was a good read. Just wanted to post it for all
Sounds good Spence. You’ll understand if I don’t make a reciprocal offer. As you say, if your prediction comes true then we are all lighter in wealth.
LOL Spud. Exactly. If I win, we will probably be doing a lot of mini-golf and the occasional driving range that summer.
Spences post does not look good on my screen. After someone does a “3rd tier” reply on this site, the post gets cut off by right border. The middle window on the page is too small.
I rememeber telling some younger people I worked with in Calgary, in spring 2007 that it was a terrible time to buy, and the bubble would reverse itself.
They said all the same things the house pumpers say today.
And their houses are worth about $90 K less than when they bought them.
The historical data is fairly clear: Edmonton and Alberta house prices are way out of line with the long term trend in house prices, and the long term trend in house price to avg income.
CDN debt to disposable income is now higher than the US was, at its peak, and we’re still climbing.
There is a deep, deep layer of denial, and an foolish confidence in the ability to pay a 35 year obligation off among people who’ve never held the same job at the same place for five years.
Geez, if you have had the same job at the same place for more than 5 years, may be its time to upgrade your skills?? Also, if these young professionals dont invest in house, what alternative are you suggesting? rent for their entire life and give their ,moneies to the landlord’s mortgage?
House prices corrected in 2008 because of the GFC and job losses. Do you anticipate more job losses in 2010? People who haven’t been in the same job for 5 years are not the ones you should be worrying about. Likely they have moved jobs for better pay etc. People who are in the same job they were five years ago will have the problems because their pay is likely to be growing at snails pace. The fact interest rates are going up is a good indication of the strength of the economy.