Canadians are emerging from the recession confident that the value of their homes is rising and optimistic about their local housing markets. The Canadian mortgage market is rebounding and will surpass the $1 trillion mark in 2010, reports the Canadian Association of Accredited Mortgage Professionals (CAAMP) in the fifth edition of the Annual State of the Residential Mortgage Market, released in late November.
Canadians are positive about house prices, and attitudes about whether this is a good time to buy a home have never been higher in the three years that CAAMP has surveyed on that question. The overwhelming majority of those surveyed (40%) expect house prices to go up, which is more than double the opinion of those surveyed in spring 2009 (18%).
In past surveys, negative house price sentiments were most evident in British Columbia, Alberta and Ontario – provinces that, in retrospect, were hardest hit by the economic downturn. On a 10-point scale (where 1 is very negative and 10 is very positive), attitudes in these provinces have sharply rebounded to 6.44 from 4.77 in fall 2008, 6.24 from 5.00, and 6.30 from 5.11, respectively, and are now in line with the 6.25 national average.
Most Canadians are optimistic and believe now is a good time to purchase a home, setting a record-high national average of 6.56 out of 10, up almost a full point from 5.58 last fall. Ontarians are most positive at 6.82, while Saskatchewan residents, who have seen house prices increase rapidly, are most negative at 6.05.
As interest rates remain low, it is not surprising that Canadians continue to be satisfied with their mortgages. Of those who renewed in the last year, 73% received lower rates than their original mortgage term.
“Mortgage consumers have been busy, and have effectively capitalized on low interest rates to shop and renegotiate,” said Jim Murphy, President and CEO of CAAMP. “CAAMP’s survey found that, on average, negotiated rates were discounted by 1.23 percentage points lower than typical advertised rates for five-year
mortgages, and we see this discounting trend continuing. ”In spite of continued job loss concerns, Canadians’ mortgage debt load remains reasonable. Homeowners have close to three-quarters (74%) of the value of their properties in equity and for those with mortgages, equity is more than one-half (52%) of the value of their homes. Fewer Canadians took equity out of their mortgages this fall (down to 18% from 22% last year). The primary motivator was, once again, debt consolidation or payment (approximately $17 billion), followed by home renovations (approximately $12 billion, down from $14.5 billion in 2008). One third of respondents who took out equity to fund home renovations said the Home Renovation Tax Credit had influenced their decision.
Significant Statistics from the Study
• Overall, Canadians remain very satisfied with their current mortgage, with 77% either completely satisfied or satisfied. The top reason cited is the mortgage rate, which averaged 4.55% this past year – a dramatic decline from 5.41% last year.
• Canadians in provinces that have felt the greatest effect of the recession are also the most optimistic about the increase in house prices – 42% of people in Ontario, 43% of people in Alberta and 47% of people in British Columbia feel that house prices will increase in the next year.
• Two-thirds of all mortgages are fixed for terms of four or more years, with five-year terms remaining the most popular at 56%. But many people who took out a mortgage in the past year chose a shorter term, with 20% at one year or less.
• 68% of mortgage holders have fixed-rate mortgages, while 27% have variable- and adjustable-rate mortgages. Fixed-rate mortgages are the most popular among people between the ages of 18 and 34, while those in the 55+ age group are more likely to opt for variable-rate mortgages.
Dominion Lending Centres Kelowna
Toll Free: 1-866-862-5040