Posts Tagged ‘mortgage amortization’

The Canadian Association of Accredited Mortgage Professionals released its report “The Canadian Residential Mortgage Market During Challenging Times” on April 22, 2009. And while sentiments of Canadians towards the overall state of the economy are low, their expectations of their local real estate markets show an increase over 2008.

Summary of Report Highlights

• Residents in provinces who have felt the greatest impact due to the economic downturn are surprisingly the most positive about the current housing market. Sixty three per cent of Ontarians, 62 per cent of Albertans and 64 per cent of British Columbians believe that now is a good time to purchase a home.

• While one-third of Canadians expect prices to fall, Saskatchewan residents are most optimistic about house pricing with 26 per cent believing values will go up.

• Of those who financed or renewed their mortgage during the past 12 months, over a third (36 per cent) obtained variable rate terms, up from 24 per cent of those surveyed in CAAMP’s fall 2008 report.

• Of all Canadian mortgage holders, 68 per cent have fixed rate mortgages, 28 per cent have variable and only five per cent hold combination mortgages. Fixed rate mortgages are most common among those aged 18-34 years (71 per cent), while Canadians aged 55 years or older are most likely to secure adjustable rates (35 per cent).

• The majority of mortgages (83 per cent) have amortization periods of up to 25 years and a minority of mortgages (17 per cent) have amortization periods of more than 25 years.

• Roughly 9.1 million homes are owned in Canada. The estimated value of these homes is $2.67 trillion and the total outstanding mortgage principal on these homes is estimated at $739 billion. This means that Canadian homeowners have about $1.93 trillion in home equity, which amounts to 72.3 per cent of the total value of their homes.

• Home equity positions in the Canadian market are about 67 per cent greater than in the United States. The US Federal Reserve reports that of the more than 75 million American home owners, the average equity holding is 43 per cent which is in contrast to Canada’s average of 72 per cent equity in their homes.

A full copy of the report is available at http://www.caamp.org/download_docs/Spring-Consumer-Report_Apr09.pdf.

What does this all mean for the Canadian home owner?

To put it in persepctive, consider these factors:

1) Mortgage loan rates are at absolute record lows. In the April 21, 2009 Key Interest Rate Announcement issued by Mark Carney, Governer of the Bank of Canada lowered its target for the overnight rate by one-quarter of a percentage point to 1/4 per cent. The Bank Rate is correspondingly lowered to 1/2 per cent. as a result. Read another way: Money is cheap to get a hold of right now.

2) Real estate values, especially in historically strong markets, are turning positive. There remains a backlog of real estate inventory in most markets, keeping prices stable for the coming months. Most Canadian markets are heading into the natural summer upswing that occurs as spring gets us all out of the house, and active in the housing markets.

3) Stock market performance has been poor, and many Canadians are looking to their assets and equity in real estate to bring them back into the green (more on this in a future article- stay tuned!)

All things considered, what a truly remarkable time to invest in real estate- money is cheap, real estate inventory is high, and banks and mortgage companies are becoming highly competitive for your mortgage business. All of these factors combine to make the right property, in the right city, a brilliant idea- right now.