Canadians confront housing market with caution and confidence
Canadian Association of Accredited Mortgage Professionals releases annual Fall report on consumer perceptions and choices
Canada News Wire
Residential mortgage consumers remain remarkably positive as they weather the financial storm, according to a report released today by the Canadian Association of Accredited Mortgage Professionals (CAAMP). Attitudes towards local conditions have shifted only slightly with 38% of Canadians believing now is a good time to purchase and 32% believing it is a bad time. Mortgage arrears remain low and steady at 0.28% and an overwhelming 84% of home owners are satisfied with their mortgages. The information was gathered by Maritz from an online survey of over 2,000 Canadians in mid-October and analyzed in conjunction with CAAMP Chief Economist Will Dunning.
Canadians do expect housing prices to fall: 35%, more than twice as many as last fall, now believe prices will drop; half of those surveyed gave a neutral answer while the number who thought prices would go up fell from 40% to 20%. Westerners, who have endured particularly hot housing markets, are most negative, and in British Columbia, 48% of those surveyed said they expect prices to fall, far above the national average.
“As we confront these challenging times, borrowers foresee changes in their local housing markets, yet remain confident in a stable Canadian mortgage system,” said Jim Murphy, AMP, President and CEO of CAAMP. “CAAMP anticipates mortgage credit growth to slow, but remain relatively strong, surpassing the $1 trillion mark by 2010.”
Despite the traumatic American mortgage fall out, Canada has managed to steer clear of deflated markets. The Canadian system is supported by low and steady interest rates, better underwriting processes, different products and normal re-sale activity levels. “Canada is a financially conservative country where consumers are able to meet the terms of their mortgages and buying decisions are based on affordability,” said Dunning. “This contributes to a solid real estate market that will not experience the same drop off we see south of the border.”
Housing equity positions are strong in Canada with a growing trend of re-financing mortgages. About one in five borrowers took out an increasing amount of cash from their mortgages, with the average draw rising 20% to $41,000 compared to last year. Fifty-six percent of respondents said they used this money, which totals $18.5 billion nationwide, for debt consolidation and repayment; 30% of these funds went towards home repair and renovation.
New home buyers took advantage of alternative mortgage products – half of new mortgages taken out in the last year were for amortizations longer than the traditional 25 years, an increase of 13%. Longer term amortizations now account for 16% of all outstanding mortgages and 6% are 40-year terms. The federal government has now introduced stricter regulations on insured mortgages. CAAMP’s survey found Canadians had low awareness of the new regulations; however once explained, 60% supported the changes.
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