More than two thirds of Canadians are “comfortable with their debt” and are able to pay down their mortgages, suggesting that the stringent lending rules introduced by the government this summer may have been unnecessary, according the annual report released by CAAMP this week.
“Our most recent survey demonstrates once again that the vast majority of Canadian mortgage holders, whether they are first time buyers or long time homeowners, are acting responsibly, when it comes to reducing their mortgage indebtedness,” said Jim Murphy, president and CEO of CAAMP.
Data released by the association in its Annual State of the Residential Mortgage Market in Canada report indicate that one-third of borrowers made additional payments or accelerated payments to their mortgages, 87 per cent of homeowners have at least 25 per cent equity on their homes, and 61 per cent of consumers who renewed their mortgage in the past year saw a reduction in their interest rates.
Furthermore, the survey found, that regardless of the amortization period initially chosen by home buyers, their actual repayments were generally completed within two-thirds of the contracted period.
Early this summer, Finance Minister Jim Flaherty introduced a series of lending rule changes aimed at restricting access to mortgages in an effort to avert a debt crisis. The move shut off a huge number of first-time and BFS home buyers from the market and was not well-received by the mortgage industry with many brokers arguing that overheated markets such as those in Toronto and Vancouver were already headed towards a correction.
In its report, CAAMP has identified weaknesses in the mortgage market that could undermine the economy’s recovery.
“Our concern today is the number of growing first-time buyers who are now unable to get a mortgage,” Murphy said in a press release. “We worry that this is having a dampening effect on what was already a cooling market and we hope policymakers will give some thought to addressing the needs of this key sector.”
CAAMP also warned the slowdown could impact job creation in the country.
“Since the government tightened mortgage accessibility for the fourth time this past July, we’ve seen a drop in sales activity that I think foreshadows an overall decline in the housing market,” said Will Dunning, chief economist for CAAMP. “My concern is that the policy-induced housing market downturn creates unnecessary risk that directly affects not just housing but job creation and the economy as a whole.”