Canadians Carrying Unprecedented Mortgage Debts

Here is the latest news from the Canadian mortgage market and it is quite startling. According to the latest market report released recently, presently the Canadians are carrying an unprecedented mortgage debt that was witnessed never before. For the first time ever, the total mortgage debt on them has crossed the $1 billion mark!

In its annual report, the Canadian Association of Accredited Mortgage Professionals (CAAMP) has noted that as of August 2010, the overall outstanding mortgage debt of Canada was to the tune of $1.008 trillion. The report says that during the last 15 years, the amount of due residential mortgages has enhanced by 194 per cent. In other words, the annual growth rate of the mortgage debts of the Canadians has been around 7.5 per cent!

Nevertheless, the present rate of growth of the mortgage debts is significantly lower compared to what it was a couple of years back. The report finds that the annual growth rate of Canada's mortgage debt between the period 2004 and 2008 has be around ten per cent. However, the growth rate slowed down to 7.6 per cent during the last one year primarily owing to the global economic recession.

Projecting a positive future of the Canadian mortgage market, the report released by the Canadian Association of Accredited Mortgage Professionals says that home owners in this country are basically at ease with the mortgage debts. It further said that they hold a notable equity in their property and also have the capacity to deal with any rise in the interest rates. In a recent release, CAAMP CEO and President Jim Murphy has stated that the Canadians are actually quite smart as well as dependable with their mortgage debts. He further said in the release that the Canadians are building equity in their homes and, at the same time, are taking knowledgeable and enduring decisions. Murphy said that the results of the survey illustrate to the potency of the Canadian mortgage market, particularly in comparison to the United States.

Some of the major findings of the Sixth Annual State of the Residential Mortgage survey are as follows:

  • All in all around 84 per cent of Canadians having mortgages have sufficient funds for paying additional amounts every month on their mortgage debts.
  • Altogether around 35 per cent of the Canadian mortgagors have already augmented their monthly payments towards their home loan debts or have made a payment of a one-time relatively large amount on their mortgage during the last year.
  • Approximately 89 per cent of the mortgagors have a minimum of 10 per cent equity in their homes, while around 80 per cent of them also have 20 per cent equity in their residential property.
  • On an average, the equity of among the homeowners is approximately $146,000 or around 50 per cent of the assessment of their residential properties.
  • As far as the interest rates on their mortgage debts is concerned, the findings of the Sixth Annual State of Residential Mortgage study revealed that the mean rate of interest is 4.22 per cent, which is significantly lower than the 4.5 per cent that prevailed around 12 months back. For Canadian home owners who have either got their mortgages financed or had them renewed during the last year, the interest rate is about 3.75 per cent.

Since, majority of the Canadians are actually worried regarding the likelihood of increasing interest rates, the report by of the Sixth Annual State of Residential Mortgage examined the manner in which any rise in the mortgage debt interest rates was likely to have an impact on the Canadian home owners.

According to the report, on an average the amount of room every month is generally $1,056 in addition to their existing expenditures. Murphy said that when one combines other data available from the survey report, it seems that a large number, in fact, the majority, of the mortgagors possess significant aptitude to pay for any increase in the interest rates on mortgages.

If the survey report is to be believed, as many as 84 per cent of the Canadians are said to have sufficient money to pay for a rise of around $300 or even more every month. At the same time, the survey report points out at approximately six per cent of the Canadian home owners having mortgages will find it difficult to pay their monthly mortgage payments in case there is a rise of below one per cent of their existing monthly payment. The report further stated that another five per cent of the Canadian home owners with mortgages debts would find it problematic if there is any hike of anything between one per cent and 1.49 per cent in the current interest rate.

What is, however, interesting is that majority of the people who have been surveyed during the study have actually consented with the remark that investing in real estate in Canada is among one of the most lucrative investment opportunities available in the country now. At the same time, majority of the Canadian home owners with mortgage debts were of the view that the recent economic depression did not have had any affect on their plans for investing in real estate. Nevertheless, some of the Canadian home owners who were surveyed during the study said that they felt sorry for having taking on the mortgage sizes that they have actually done.

When the people residing in Quebec were asked regarding their views on the future potential of the housing market in their neighbourhood, most of the people in the province actually said that they were very optimistic.

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