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Thursday, 31 May 2012

More Canadians locking in low-rate mortgages, reducing debt

The Canadian Association of Accredited Mortgage Professionals (CAAMP) has stated in their spring release that an increasing number of Canadians are reducing debt by locking in low mortgage rates. This article from the Financial Post explores newly released statistics that show the efforts Canadians are taking to pay their mortgages down faster.

At one time, taking a mortgage at a variable rate seemed like the best way to save on a mortgage. Now, with rates at historic lows, even those who started out with a variable mortgage are renewing with a low fixed rate and a longer term. Facing uncertainty surrounding the direction interest rates will take later this year, locking in for a ten year term offers a sense of security a variable rate wouldn't necessarily provide. CAAMP's report shows that 14% of the 3.8 million Canadians holding a fixed rate mortgage made this choice within the past year. It is also reported that in 2011, Mortgage Brokers accounted for 26% of the overall market, showing the necessity for qualified mortgage advice.

In addition to taking advantage of low rates, a large percentage of Canadians are using pre-payment privileges to decrease debt. We learn that 23% increased the amount of their regular payments, 19% made lump sum payments and 10% did both. An encouraging 50% of borrowers pay at least $100 more than required on their monthly payments. Jim Murphy, chief executive of CAAMP, reports these statistics show that the majority of Canadians are in a position to safely absorb a potential interest rate increase.

Click here for the full article from the Financial Post.

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