Stability in the Canadian Mortgage Market: Canadian Association of Accredited Mortgage Professionals (CAAMP) Spring Survey
CAAMP’s spring survey results suggest Canadian Mortgage borrows are stable, have financial flexibility and reveal confidence in today’s mortgage environment. Canadians are reducing their mortgages by making lump sum payments, increasing their monthly payments and their amortization periods, of which exhibit confidence. According to the survey, 22% of mortgage borrowers increased their payments during the past year; 18% made a lump sum payment; 9% did both and 27% who renewed also increased their payments. The survey also states that the mortgages repaid in the last 20 years, 1/3 were paid off early.
"Prudent management of their mortgage debt has paid off for Canadians," said Jim Murphy, AMP, 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," said Murphy.
Highlights:
• 22% of mortgage borrowers increased their payments during the past year; 18% made a lump sum payment; 9% did both and 27% 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;
• Canadian homeowners have $222,000 in home equity, on average, equal to 66% of the value of their homes
• During the past year, homeowners borrowed $26 billion in additional equity from their homes. 15 per cent of homeowners withdrew equity, averaging $30,000;
• Investments (28%) replaced debt consolidation (19%) as the number two use of home equity takeout. Home renovations remain number one (36%).
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First-time Home Buyers boost Real Estate Market
First-time home buyers are on the rise across the country, according to a housing report by the Altus Group. In the past two years, approximately one in every two homes sold in Canada are first time buyers representing more than $250,000 sales per year. First-time home buyers are taking advantage of many factors to acquire home ownership, such as: reduced or minimal down-payments; longer amortization periods to reduce regular payments; variable rate mortgages to reduce regular payments; RRSPs for down-payments; as well as help from friends and family. “First-time buyers make the home sales world go around, playing an important role as buyers in the newly built market, and also in purchasing existing homes so that the sellers can buy another home, often in the new home market,” the Altus Group said.
Highlights of First-time Home Buyers:
• The majority of the first-time home buyers are under 35, 24-to-34 year olds account for approximately 60%; approximately 25% are 35-to-49 years old.
• 1/5 purchased a newly-built home, of these 1/3 opted for a condominium unit
• 1 in 4 of the homes were a single-person household
• Average price $273,000
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Market Update:
• TSX -12.26 to 13,377.16 (Reuters)
o It’s third weekly loss as resource stocks failed to respond to higher oil and metal prices.
Commodity prices were shaken this week by the feeling that global growth is slowing.
• DOW -100.17 to 12,595.75
o Eurozone worries helped push New York's Dow Jones industrial average down .
o Investors also took in data showing that American consumers paid more for gas and food in April, pushing inflation to its highest level in 2 1/2 years.
• Dollar -.68c to 103.24c USD
o A higher greenback sent the Canadian dollar down.
o The American dollar gained ground after the European Union warned that the debt loads of Greece, Ireland and Portugal will be much bigger than previously forecast. The assessment added to fears that international bailouts are failing to solve the region's crisis.
• Oil +$.68 to $99.65USD per barrel
o Traders concerned about flooding in key oil refining areas in the U.S. Midwest
• Gold -$13.20 to $1493.60 per ounce
• Canadian 5 yr. bond yields markets -.02bps to 2.53. The spread (based on the NEW MERIX 5 yr. rate published rate of 4.19%) is just above the comfort zone at 1.66. At the other end, the spread on the new 5yr Unpublished special of 3.89% is 1.36, well below the comfort zone.
