In its Annual State of the Residential Mortgage Market in Canada report, Mortgage Professionals Canada, reveals Canadians are finding ways to increase their down payments and start the process of retiring their mortgage debt.

The fall report, prepared by Mortgage Professionals Canada Chief Economist Will Dunning, highlights the cause and effect of higher down payments and lower interest rates. For example, “a 20 per cent down payment on an average priced house is now equal to 93 weeks at the average wage in Canada. A decade ago it was 68 weeks, two decades ago 53 weeks.”

Yet, Dunning says, “thanks to low interest rates and homeowners paying down their mortgages more quickly, the ‘net cost’ of homeownership is very low in historic terms and the rate of mortgage arrears continues to fall.”

Last week, the federal government announced that effective February 15, 2016, the minimum down payment will rise to 10 per cent from five per cent for the portion of the house price that exceeds $500,000.

The report cautions that continued restriction of mortgage activity “would be dangerous, not just for the housing market, but also for the broader economy.” Reflecting on last week’s announcement, Dunning added that “Mortgage Professionals Canada shares the government’s interest in achieving a balance between risk-management, promoting competition, and ensuring that mortgage funding is available for qualified homebuyers.”

Report Highlights:

•   At today’s interest rates, assuming a 25-year amortization, 50 per cent of the first payment goes towards the principal, compared to 31 per cent a decade ago
•   Two-thirds of those renewing mortgages in the next two years will see monthly interest increases between $51 to $200
•   On average, home equity is equivalent to 71 per cent of the value of the home
•   For homes purchased in 2014-2015, average amortization is 23.5 years, although buyers expect to actually fully repay the mortgages in 19.2 years
•   Among borrowers in 2014-2015, 45 per cent obtained their mortgage from a Canadian bank, 42 per cent from a mortgage broker
•   Overall, broker market share remains steady at 30%
•   14 per cent of homeowners rely on rental income
•   Mortgage credit has slowed from 7.7 per cent to 5.9 per cent year-over-year (as of September) and is likely to slow to 5.25 per cent by the end of 2016

Despite the very real challenges Canadians continue to face in hot markets like Toronto and Vancouver, they are continuing to invest, seeing homeownership as forced savings, in addition to providing a great place to live. The fall report demonstrates the resilience of Canadians as they continue to navigate the residential mortgage market.