Life in Canada

TORONTO - Canadians amassed mortgage debt at a slightly higher than normal level in 2010 as low interest rates helped push the country's total residential mortgage debt to over $1 trillion for the first time. Lots of propaganda will follow I am sure. New rate increase for mortgage are on the way for sure..smoothing the way Canadian style. Look for the information 'Canadians can afford at least a $300 increase in their monthly mortgage payment' Excellent news for Harper..its as good as done!

The value of outstanding mortgages is now 7.6 per cent higher than it was last year, the Canadian Association of Accredited Mortgage Professionals said in its annual report released Monday. The average annual increase is around 7.1 per cent.

In the early 2000s, debt growth hovered closer to 10 per cent year over year.

"Canadians are being smart and responsible with their mortgages," he said. "The survey results speak to the strength of our mortgage market, especially when compared to the United States."

Murphy said most Canadians have heeded warnings from economists — including the Bank of Canada — about growing debt levels and took advantage of low interest rates to refinance and pay off other debts.

The low interest rate environment has also encouraged one in three mortgage holders to either increase payments or make a lump sum payment on their mortgages in the past year.

Murphy noted that higher home prices drove many Canadians to borrow heavily to finance home purchases, while a low interest rate environment encouraged others to refinance loans and consolidate debt.

The market has been cooling in recent months as many sales were pushed ahead to the beginning of the year in advance of tighter mortgage qualification rules, a new tax regime in B.C. and Ontario and higher interest rates.

Meanwhile, the Bank of Canada's policy rate has been hiked three times to one per cent, still historically low and an admitted mistake.

The low interest rate environment has enabled some consumers to take on bigger mortgages than they might otherwise have been able to carry, while it has encouraged others to borrow against their homes. The report found 18 per cent of mortgage holders have taken equity out of their homes to free up extra cash.

Almost half of those mortgage holders surveyed in the report cited a need for “debt consolidation or repayment” and the average amount borrowed against home equity was $46,000.

The report says about $15 billion was taken out for renovations, $6 billion for education and other spending, $7.5 billion for investments and $4 billion for "other purposes.”

Apparently most mortgage holders appear to be comfortable with their debt levels and that the vast majority — about 84 per cent — said they could afford at least a $300 increase in their monthly mortgage payment.

The association asked approximately 2,000 Canadians surveyed how much of an interest rate hike they could withstand. The average Canadian has room for $1,056 per month on top of current costs, the report found.

However, about 350,000 out of 5.65 million, or about six per cent of Canadian mortgage holders, would be challenged by rate rises of less than one per cent, CAAMP said.

"Most of the people who have low tolerances for increased payments have fixed-rate mortgages," the reports said. (So) by the time their mortgages are due for renewal, their financial capacity will have expanded and their mortgage principal will have been reduced."

Many Canadians continue to favour fixed-rate mortgages and a five-year fixed-rate mortgage remains the most popular option despite the fact that variable rates have become much less expensive than fixed rates, the report found.