Canadians saved $2.7 billion in the past year renewing or refinancing their mortgages, and the betting money among consumers seems to be that interest rates are not going up any time soon, according to a new survey.
The Canadian Association of Accredited Mortgage Professionals says 37 per cent of Canadians opted for a variable rate mortgage in the last year, pushing up the overall percentage of Canadians floating with prime – and vulnerable to Bank of Canada rate hikes – to 31 per cent.
But the group maintains Canadians are not overexposed to a potential rising rate environment with the survey finding 84 per cent say they could handle a rate increase that boosted their mortgage payments by $200 per month. The average amount of room Canadians say they could afford on top of their current costs is $750 per month.
“Overall, our survey paints a picture of Canadians generally and homeowners in particular as very focused on their finances,” said Jim Murphy, president of CAAMP. “They are planning ahead, aggressively paying down their mortgage in advance of any economic jolt.”
Government policy that cracked down on refinancing rules may also be having an effect on the market. Earlier this year Ottawa tweaked the rules on refinancing, restricting consumers to 85 per cent debt on the value of their home, down from 90 per cent.
CAAMP said Canadians have become conservative about taking equity out of their home, with 10 per cent of mortgage holders doing so in the last year, a drop from 40 per cent a year earlier.
“There is no need for policy-makers to introduce new measures that would reduce housing activity,” said Murphy, his comments clearly aimed at suggestions the market needs even more governance and tighter measures such as increased minimum downpayments.
It’s clear Canadians are enjoying the low interest-rate environment that CAAMP says lowered the average mortgage rate to 3.92 per cent from 4.22 per cent. The effect is that among the 1.35 million mortgage borrowers who renewed or refinanced in the past year, the savings was $2.7 billion.