The Canadian Association of Accredited Mortgage Professionals (CAAMP) recently released its biannual report "Consumer Mortgage Choices in a Changing Market." Written by CAAMP economist Will Dunning, it contains a wealth of information on Canadians' attitudes toward their mortgage, and includes key findings based on a national telephone survey of Canadians undertaken by Maritz Research in late February, 2007.
The report indicates that even if mortgage rates were to rise by as much as one-half point, 80% of Canadians could tolerate the increase to their mortgage payments. A half-point increase in rates would translate into an average increase of $62 in monthly mortgage costs. The total cumulative impact of such an increase would be $3.66-billion, which pales in comparison to the overall size of the Canadian economy estimated at $1.2-trillion. Since the report was written, posted rates on a five-year mortgage have increased by .20%, or a fifth of a point. Canadian consumer expectations for interest rate increases are benign, with 29% anticipating increases, 8% expecting decreases and 63% neutral. Canada's overall economy remains strong with record-low unemployment and continued population growth.
At a time when the U.S. mortgage market has been affected by defaults in the sub-prime market, CAAMP asked Canadians if they were aware of alternative mortgage products such as longer amortizations and no-down-payment mortgages. About half of respondents had heard of these new products, with 36% responding positively to the alternatives, 27% negatively and 31% had no opinion. Interestingly, younger Canadians, and those not owning a home, were the most positive and the most interested in these new mortgage alternatives. This corresponds to other research CAAMP has undertaken, which shows younger Canadians are also the most likely to shop their mortgage, wanting several quotes before arriving at a final decision. Those in a position to benefit the most from new mortgage products are the most positive. A further indicator of the health of the Canadian economy is that of the 4.9 million homeowners in this country, almost 300,000 will not renew their mortgages because they will have been paid off.
In terms of their mortgage, Canadians remain fairly conservative, with 73% opting for a fixed-term mortgage rate, compared to 67% a year ago. The five-year mortgage remains the most popular term for Canadians. With regard to mortgage renewal activity, almost one-quarter of respondents have yet to decide on the type of mortgage, although 44% of surveyed mortgage holders who expect to renew their mortgage in the coming half of 2007 will choose a five-year term. Overall mortgage market growth in Canada is expected to exceed 10% in both 2007 and 2008. By the end of this year there will be more than $800-billion in outstanding mortgage credit in Canada. Canadians remain confident about the future housing market.
Finally, Canadians were also asked to comment on their local housing market and whether it was a good time to buy a home. Across Canada, only 9% of consumers surveyed expressed negative opinions about the prospects for house prices in their community. The most positive responses were in Atlantic Canada and Ontario while British Columbia had the most significant jump in positive responses. Albertans provided the most negative outlook, where many consumers considered their local housing market overheated. In recent months, resale prices in Calgary have increased near 50% year over year.
To view a copy of the CAAMP report, visit caamp.org.
