OTTAWA — Recent mortgage borrowers appear to be aware of the risks of taking on new debt and anxious to pay it off as quickly as possible, results of a Canada Mortgage and Housing Corp. survey suggest.
The latest annual survey by the federal mortgage insurance agency found that 75 per cent of respondents felt it was “very important” to pay off their mortgages as soon as possible, and that 39 per cent had set payments higher than required.
As well, another 20 per cent had made at least one lump sum payment since obtaining their mortgage.
“The investment in homeownership is not entered into quickly,” the CMHC added.
“Overall, results show that recent buyers demonstrated a good level of financial literacy … Eighty-eight per cent had a good understanding of how much mortgage they could afford before buying.”
The online survey of 3,512 recent participants only tracked Canadians who refinanced, renewed or took out a mortgage over the past 12 months, a time when interest rates were at or near historic lows.
That has caused some anxiety among policy-makers, including the Bank of Canada governor Mark Carney and federal Finance Minister Jim Flaherty, who have recently warned about the dangers of taking on too much debt.
Last week, Carney warned that rates “will not remain at their current levels forever” and that “the impact of eventual increases is likely to be greater than in previous cycles.”
The central bank reiterated its concern in its semi-annual Financial Systems Review released Wednesday, saying Canadian household debt had reached a new high and is “the main source of concern domestically.”
The risk is that as household finances get squeezed, Canadians will have less money to spend on consumer goods, which would slow economic growth, it said.
Earlier this week, Statistics Canada reported that household debt to disposable income continued to hover at all-time highs, above 147 per cent.
Those concern aren’t much reflected in the CMHC survey. Eight in 10 respondents said they had researched mortgage terms and conditions carefully, 88 per cent had a good understanding of how big a mortgage they could afford and 81 per cent had some form of savings.
“The 2011 survey findings indicate that Canadians feel confident in how they manage their mortgage debt,” the CMHC report said.
“Over 80 per cent of recent buyers reported doing some level of household budgeting. While establishing this budget, a majority also reported that they had assessed, to some degree, the potential impact of rising interest rates on the budget, assessed to some degree the potential impact of a loss of income on the budget, or assessed to some degree the potential impact of rising expenses on the budget.”
But an official with CMHC said that since recent participants in the mortgage market represents a small subset of Canadians who have mortgages, it would be difficult to draw definitive conclusions about how many could find themselves over their heads if interest rates rise.
“It doesn’t paint a bleak picture for sure … but it doesn’t allow us to make any conclusions on the household indebtedness front,” explained Pierre Serre, vice-president of insurance products.
Serre said he found it encouraging that Canadians are taking their time and doing research before signing on to a mortgage.
On average, homebuyers took 11 months to plan their purchase and recent buyers took about five weeks to research the best mortgage for them.
However, homebuyers were not accessing all the help that is available.
The survey showed that during their mortgage research, just 23 per cent of first-time buyers received advice on budgeting and 18 per cent on managing debt.
In addition, the survey found that one in four recent buyers were not sure of where to go to receive reliable advice in case of financial difficulty.
The online survey of recent mortgage consumers was conducted between Feb. 25 and March 25.