Canadians are reaping the rewards of tactical, responsible debt management- at least when it comes to their mortgages, according to CAAMP’s Spring Market Report.
Canadian mortgage holders are aggressively attacking their debt, by way of pre-payment options, lump sum payments, increasing monthly payments as well as reducing amortizations.
payments as well as reducing amortizations.
Highlights of the survey include: 22 per cent of mortgage borrowers increased their payments during the past year; 18 per cent made a lump sum payment; 9 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; the average, Canadian homeowner has $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. 15 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).
According to CAAMP, this is reflective of “confidence and financial flexibility in a stable mortgage environment.”
Highlights of the survey include: 22 per cent of mortgage borrowers increased their payments during the past year; 18 per cent made a lump sum payment; 9 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; the average, Canadian homeowner has $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. 15 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," 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.
What is particularly interesting, is the chunk of the market the HELOC’s represent. This survey is the first time that CAAMP has identified the particulars of borrowing in terms of mortgage debt- and the results suggest that there is a healthy market for this particular product.
Nationally, Canadians have collectively nearly $2.10 trillion in mortgage debt, and by and large, most are comfortable with the amount they hold individually, and managing it. The data in the survey states that approximately 1.87 million have both mortgage and a HELOC; approximately 770,000 have a HELOC only and approximately 3.83 million have a mortgage only. 3 million homeowners are mortgage free.
Regionally, CAAMP found that Quebec and Atlantic Canada top the list for equity comfort levels (81 and 82 % respectively). On the other side of the coin, homeowners in Manitoba and Alberta have a lower threshold for comfort with their current equity levels positions (31 and 29 % respectively).
Also, Dunning reveals that the market is robust, and will continue to grow: "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," he said.