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Canadian Mortgage Market Rests in Delicate Balance (Part 1)

6/23/2014

The Canadian mortgage market rests in a delicate balance: CAAMP
Housing activity high in three major markets; while most of Canada experiences slowdown

First time home buyers continue to enter the Canadian housing market in substantial numbers, encouraged by low interest rates and acting in response to their own favourable economic circumstances, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP), in its newest consumer survey report, Looking for a “New Normal” in the Residential Mortgage Market.

The report spends some time looking at Canadians’ attitudes about their purchase decisions and found that homeowners appear to be “happy with the decision to buy their home.” They say they feel confident they can weather a downturn in the housing market and they consider mortgage debt to be “good debt”. Their attitudes are the same whether they live in Toronto, Calgary or Vancouver where prices continue to rise, or in areas where home prices are stabilizing.

Highlights
• 55 per cent of homes purchased in 2013 were bought by first time buyers
• Most Canadians say they have no regrets taking on the size of mortgage they did and that real estate is a good long term investment
• 66 per cent agree in some degree that mortgages are a form of “good debt”
• House prices in Toronto, Calgary and Vancouver have increased by a year-over-year rate of 8.2 per cent, compared to just 2.9 per cent in the rest of Canada
• By next year, housing starts will have fallen by 20 per cent compared to levels in 2011 and 2012
• More than 80 per cent of homeowners in Canada have 25 per cent or more equity in their homes
• The average mortgage interest rate is 3.24 per cent, a drop from the average of 3.5 per cent found in the fall 2013 survey

“From the consumer perspective we have a picture of a very confident, healthy mortgage market,” said Jim Murphy, AMP, President and CEO of CAAMP. “Key to the current stability in the mortgage market is the fact that Canadians continue to pay down their mortgage debt faster than they are required and they continue to take out five-year, fixed rate mortgages. Canadians who renew their mortgages are seeing their interest costs reduced, which is boosting their personal financial circumstances, and this will continue to be a positive force during the coming year.”

 

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