Canadians are comfortable with their mortgage and are accelerating mortgage repayment efforts

The Canadian Association of Accredited Mortgage Professionals (CAAMP) releases annual spring survey report on residential mortgage market

TORONTO, May 30, 2012 /CNW/ - Housing markets are stable and healthy in most of Canada; Canadian homeowners are comfortable with their current mortgage, focusing on reducing their mortgage faster by making lump sum payments, reducing amortization periods and refinancing with lower interest rates, according to CAAMP's most recent survey report, Confidence in the Canadian Mortgage Market.

Highlights

• Mortgage borrowers are making significant efforts to accelerate repayment, such as voluntarily increasing their regular payments (23 per cent) and making lump sum payments (19 per cent), with some borrowers (10 per cent) doing both
• Approximately 50 per cent of borrowers pay $100 per month (or more) above their required payments
• Recent buyers indicate that their expected amortization period will be about 20 per cent shorter than their contracted length
• 74 per cent of borrowers who renewed in the last year saw their new interest rate decrease. On average, the interest rate was reduced by one-half percentage point
• Mortgage brokers account for 26 per cent of all mortgages. For borrowers who took out a new mortgage in 2011, 31 per cent obtained it from a mortgage broker
• 83 per cent of Canadians have at least 25 per cent equity in their home

"Despite daily warnings in the media about mortgage indebtedness - or maybe because of them - Canadians are making responsible decisions about their mortgages and they're exhibiting confidence in their own situations," said Jim Murphy, AMP, President and CEO of CAAMP. "We should feel encouraged by this behaviour - it means Canadians are well positioned to weather a potential rise in interest rates."

The report, entitled Confidence in the Canadian Mortgage Market, is a semi-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 and May 2012.

Lump sum payments, lower amortizations, lower rates
Canadians are taking prudent steps to manage their mortgage debt levels, making lump sum payments, paying off their mortgages early and securing lower interest rates.

For mortgages on homes purchased between 2008 and the present with extended amortization periods, the average expected amortization period of 22.8 years is considerably shorter than the original contracted periods of 31.9 years, 30 per cent of the original contracted period.

Mortgage holders, particularly those who purchased homes recently, are making considerable efforts to accelerate repayment of their mortgage. The survey found that 23 per cent of mortgage holders have increased their monthly payments during the past year. In addition, 19 per cent have made lump sum contributions to their mortgage in the past year, and 10 per cent have done both.

For those who voluntarily increased their regular payments, the average amount of increase was $400-$450 per month. There are approximately 5.85 million mortgage holders in Canada and roughly 1.35 million voluntarily increased their payments, resulting in a combined amount of about $7 billion per year. Lump sum payments averaged $12,500, and with about 1.1 million people making these payments, this produces a combined repayment estimated at $13.75 billion.

Among borrowers who renewed a mortgage in 2011, almost 75 per cent saw a reduction in their interest rate. And even though some borrowers didn't experience a rate decrease in 2011, Canadians are only facing an average rate of 3.88 per cent (for fixed-rate mortgages), well below the average posted rates of 5.37 per cent over a five year term.

Level of debt concern
CAAMP asked Canadians how concerned they are with the level of Canadian indebtedness as a whole, and the overall level of debt they hold personally. Perhaps unsurprisingly, after being repeatedly told that level of indebtedness in Canada is high, they indicated a high level of concern. On a 10-point scale (10 being very concerned), they indicated an average of 7.3 regarding Canadian indebtedness as a whole.

However, when asked about their own level of indebtedness, they were considerably less concerned. 25 per cent indicated only 1 or 2 out of 10, with an average rating of 5.2 out of 10. Canadians, it seems, are much more concerned with other people's debt levels than with their own.

For a full copy of CAAMP's spring survey report, visit www.caamp.org.

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