2/3's of Canadians pay off their mortgages early

Will Dunning, chief economist for CAAMP, The Canadian Association of Accredited Mortgage Professionals  , came out with a report recently on the effects of mortgage rule changes in July by the Finance department and general observations on the housing market in Canada in 2012.

     Here are some of his observations.

     Here are some of his observations.

1-Since the most recent round of mortgage tightening came into effect in July 2012, there has been a drop in Canadian housing resale activity: between August and October, sales were 8 per cent lower than in the year prior to the announcement

2- Approximately 17 per cent of high ratio mortgages funded in 2010 could not have been funded today, including 11% of prospective high ratio homebuyers who can’t qualify under the new 25 year amortization rule

3-Regardless of whether Canadians initially selected a 20, 30, or even 40 year amortization period, survey findings continue to indicate that actual repayment periods have generally been only two-thirds of the contracted periods

4- It is not only first time buyers who are affected: reduced activity at entry levels means that move-up activity will also be gradually impacted, because potential move-up buyers will find it more difficult to sell their current homes

5- Canadians have continued to show prudence when it comes to mortgage repayment: one-third of borrowers made additional payments or accelerated payments on their mortgages; 87 per cent of homeowners have at least 25 per cent equity in their homes

6- 61 per cent of people who renewed in the past year saw a reduction in their interest rates

7- Among borrowers who took out a new mortgage in 2012, a record 47 per cent obtained
from a mortgage broker.

What do each of these items mean to you?

1-If you want to sell a home in Canada, you will probably have to keep it on the market for a longer period of time.

2-it’s getting harder for first time home buyers to qualify for a mortgage, therefore move up home buyers will have to lower their sale price or wait longer for a qualified buyer.

3- Canadians have and remain to be prudent. They will pay off their mortgages faster.

4- ditto #2

5- there’s more proof of Canadian financial prudence. This is how we have avoided the

bubble the U.S. experienced.

 In conclusion, the housing market is softening after 4 years and 4 changes to the mortgage rules. It will be harder to sell your starter home and move up to a bigger home unless you have substantial equity in your home.
 If you have questions, feel free to contact me As you can see almost half of Canadians are now using mortgage brokers. Why aren’t you?

David Cooke, your Calgary mortgage broker . Find his mortgage website at http://davidcooke.ca