Canadians Carry $1 Trillion Mortgage Debt

The Canadian Association of Accredited Mortgage Professionals released a web poll survey (n = 2005) that was discussed in The Vancouver Sun [8 Nov 2010] and The Globe and Mail [8 Nov 2010]. Here follow some data points:

There is $1.01 trillion in outstanding mortgage debt in the country as of the end of August, up 7.6 per cent when compared to last year.

Over the past 15 years, the volume of outstanding mortgages has increased by 194 per cent. [It has thus tripled. This works out, by co-incidence, at 7.45% per annum, compounded, for 15 years. Far greater than  the inflation rate.  -ed.]

The average mortgage holder has home equity (the value of their home minus their owed mortgage debt) of $146,000, or 50% of the value of their home. [We would love to see figures and distribution for what percentage of net worth is tied up in RE. -ed.]

People who have arranged a mortgage in the last year had attained an average rate of 4.23 per cent a year on five-year, fixed mortgages.

22% of mortgages in Canada have amortization periods of more than 25 years.
42% of home owners who have taken out a new mortgage on a newly purchased home or condominium, in the past year, have amortization periods of more than 25 years.

18% of mortgage holders took equity out of their homes, almost half of them citing a need for “debt consolidation or repayment.” [=”spending”. -ed.]
The average amount borrowed against home equity was $46,000.
There are 5.65 million mortgage holders in Canada, thus the borrowing is estimated at $41-billion, about the same as last year.
About $15-billion was taken out for renovations, $6-billion for education and other spending, $7.5-billion for investments and $4-billion for other purposes.

84% of those with mortgages could withstand paying an extra $300 or more on their monthly payments. [Thus, 16% will not be able to withstand $300 more per month. – ed.]
At $1,056 per month on top of current costs, the average respondent would “be concerned with [their] ability to make [their] payments.” [Thus, 50% could not withstand paying $1,056 more per month. -ed.]

“There is a sizable minority, about 350,000 out of 5.65 million, or about 6 per cent, who would be challenged by rate rises of less than 1 per cent, and a further 225,000 (5 per cent) have thresholds in the range of 1.00 per cent to 1.49 per cent. However, most of these have fixed-rate mortgages: by the time their mortgages are due for renewal, time will have increased their financial capacity and reduced the amount of mortgage debt being financed. There are about 100,000 borrowers who are susceptible to short-term moves of interest rates, which is a quite small share (less than 2 per cent) of the 5.65 million mortgage holders in Canada.” [Thus 11% will be unable to tolerate rate increases of 1.5% by the time they renew. -ed.]

[Note: The above self-estimations likely have an optimistic bias, as most people, by their hopeful nature, underestimate the risk of getting into dire financial circumstances. Thus we could read “at least 16%…” etc. -ed.]

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