Mortgage debt soars 7.6%

Canadians owe a record $1.01 trillion through their mortgages, an increase of 7.6% over last year. But most appear comfortable with their debt load, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP).

The organization’s sixth Annual State of the Residential Mortgage Market report found that 84% believed they could handle an increase of $300 or more on their monthly payments.

The good news is that one in three are taking steps to pay down their mortgage faster, with 16% increasing their monthly payments and 12% making lump sum payments in the past year. An additional 7% said they had done both.

While the prolonged low interest rate environment has been rough on fixed income investors, it has been a boon for mortgage holders. In the past year, 1.4 million people renewed their mortgages, with 72% managing to secure a lower interest rate – on average 1.09% lower than their previous rate.

The CAAMP study found that most Canadians believe buying a home is a good long-term investment and view their mortgages as a means to support that investment.

Among mortgage-holders, home equity averages $146,000 or about 50% of the nation-wide average home value. Of course, should the Canadian real estate market decline significantly, home equity will erode quickly.

The survey also found that 18% of homeowners have tapped into their home equity in the past year, on average to the tune of $46,000.

(11/08/10)