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State Mortgage Market in Canada: Self Denial?

State Mortgage Market in Canada: Self Denial?

Canadians are increasingly concerned about the increasing debt of their fellow citizens, according to a new survey.

The Canadian Association of Accredited Mortgage Professionals (CAAMP) produced the findings in its annual State of the Residential Mortgage Market in Canada report after surveying 2,000 online respondents.  About half the respondents were homeowners.

Respondents were asked to rank their agreement on a scale of 10 on various issues relating to housing and mortgages, and the highest score, 7.98, was for the statement “as a whole, Canadians have too much debt.” Almost one-half, 46%, gave a rating of nine or 10, showing very strong agreement with the statement. (I talked about rising consumer debt levels in a recent post)

The response to those surveyed was more mixed when asked if the Canadian market was in a bubble currently. The average score was 6.07 out of 10, with 46% of responses being closer to a neutral score of 5 or 6.

But while there might be some concern about a bubble, the average response for the agreement with the statement that real estate in Canada was a good long-term investment was 7.27 out of 10, with just 2% of respondents giving very low ratings of one or two.

It’s quite interesting that respondents are quick to point to debt levels and proliferation of home ownership of others on the one hand.  And on the other, suggest that their own situations are responsible and self assured.

Self-denial, perhaps?  Just the kind of symptom that screams concern.

The table below summarizes the responses. (Average scores of 5.5 would indicate neutral opinions.)

Highlights include:

  • The statement that found the highest degree of agreement (an average rating of 7.98 out of 10) is that “as a whole, Canadians have too much debt”. Almost one-half (46%) gave ratings of 9 or 10, showing very strong agreement with this statement.
  • This, coincidentally or not, has been asserted repeatedly by senior government officials and other voices in the news media.
  • There is also agreement (average rating of 7.11 out of 10) that “low interest rates have meant that a lot of Canadians became homeowners over the past few years who should probably not be homeowners”.
  • However, different perspectives were found with several other questions.
  • There is a widespread opinion that “real estate in Canada is a good long-term investment”, which received the second highest rating, an average of 7.27 out of 10.
  • Furthermore, there was a high degree of agreement that mortgage debt is “good debt (7.07 out of 10).
  • In addition, in a statement that was asked for mortgage holders only, few agreed that “I regret taking on the size of mortgage I did”. The average score of 4.04 was well below neutral. Just 7% agreed strongly with the statement; 37% strongly disagreed.
  • Many Canadians believe that other people have taken on too much debt or have bought homes for which they are unprepared. But, when responses about their own situations are aggregated, most believe that they have been responsible. The contrast between these sets of responses is interesting. Actual behaviour by people and their beliefs about their own behaviour tells us more than does their beliefs about the behavior of other people: overall these responses suggest that prudence rules the land.
  • Meanwhile, data on mortgage arrears indicates that there are very few Canadians who are not meeting their mortgage obligations, and estimates developed in this report indicate that a vast majority of Canadian mortgage borrowers are well-positioned to deal with potential increases of mortgage rates. Moreover, they are acting aggressively to pay off their mortgages, considerably more rapidly than they are required to.

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