Mortgage borrowers show confidence, says CAAMP

REM – Real Estate Magazine
26 May, 2011 6:31 AM
by Jim Adair

Mortgage borrowers show confidence, says CAAMP

Many Canadians are aggressively reducing their mortgages by making lump sum payments, increasing monthly payments and reducing amortization periods, revealing confidence and financial flexibility in a stable mortgage environment, says the Canadian Association of Accredited Mortgage Professionals (CAAMP).

The association’s spring survey report is a bi-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 2011.

Some highlights from the report:

* Twenty-two per cent of mortgage borrowers increased their payments during the past year, 18 per cent made a lump sum payment, nine per cent did both and 27 per cent who renewed increased their payments;

* For mortgages repaid in the last 20 years, one-third were paid off early;

* For the first time, CAAMP has identified that home equity lines of credit (HELOC) represent 22 per cent of all mortgages, making these lines of credit a $215 billion industry;

* On average, Canadian homeowners have $222,000 in home equity, equal to 66 per cent of the value of their homes;

* During the past year, homeowners borrowed $26 billion in additional equity from their homes. Fifteen per cent of homeowners withdrew equity, averaging $30,000;

* Investments (28 per cent) replaced debt consolidation (19 per cent) as the number two use of home equity takeout. Home renovations remain number one (36 per cent).

“Prudent management of their mortgage debt has paid off for Canadians,” says Jim Murphy, president and CEO of CAAMP. “By taking advantage of low interest rates, we have been paying down our mortgages. As economic confidence returns in Canada, many survey respondents have told us they now feel comfortable using some of that equity to improve their homes and to invest,” says Murphy.

Of an approximate 9.45 million homeowners in Canada, an estimated 1.87 million hold a mortgage and a HELOC; approximately 770,000 have a HELOC only with no mortgage and approximately 3.83 million have a mortgage only. About three million Canadians have no debt on their homes.

Canadians hold $2.10 trillion in home equity and appear generally comfortable. Quebec and Atlantic Canada lead the way in equity comfort levels (81 and 82 per cent respectively). In contrast, homeowners in Manitoba and Alberta have lower levels of comfort with their current equity positions (31 and 29 per cent respectively).

While the CAAMP spring survey report reflects a positive outlook by mortgage borrowers, Dunning cautions that the pace of the economic recovery will remain modest in 2011 and 2012. “Mortgage credit will continue to expand by about $80 billion (7.8 per cent) in 2011, down from its peak of 13 per cent in 2008, but nevertheless a healthy increase,” Dunning says.

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