Homeowners confident, survey suggests
Canadian home owners are much more confident than government officials and economists about their ability to pay off their mortgages, even if the market turns for the worse, according to a survey released Wednesday.
Homeowners confident, survey suggests
Canadian home owners are much more confident than government officials and economists about their ability to pay off their mortgages, even if the market turns for the worse, according to a survey released Wednesday.
The Royal Bank's annual outlook suggests 85 per cent of respondents think they are doing a good job paying off their loan obligations, and 73 per cent think they are well positioned even if the housing market were to drop.
The findings contrast against a slew of statistics and warnings from top economists – including Bank of Canada governor Mark Carney – that Canadians are getting in over their heads and may find themselves in difficulty when interest rates rise.
Statistics Canada's most recent report showed the often-quoted indicator of debt-to-disposable income hit a record 148 per cent in the third quarter, even beating out the U.S. indebtedness ratio. That means Canadians owe $1.48 for every dollar they earn.
But the Royal Bank survey, conducted in January, could also be a sign that Canadians are taking heed after more than a year of warnings issued by the Bank of Canada and the federal government about Canadians' debt exposure.
New measures introduced by Finance Minister Jim Flaherty to rein in borrowing will take effect March 18. The changes include reducing the amortization period on government-insured mortgages from 35 to 30 years, limiting the size of home-equity loans and removing government insurance on lines of credit secured on homes.
Interest rates are widely expected to rise in the second half of this year, driving up the borrowing costs for variable mortgages and other loans linked to bank's prime borrowing rates.
Still, 90 per cent of respondents in the Royal Bank survey said they are confident about real estate as an investment and a large majority still think it's a good time to buy.
Interest in purchasing a new home over the next two years has fallen, but only slightly. At 29 per cent, the number is considered strong and is still better higher than it was 2006.
However, fewer respondents than in last year's survey said it was better to buy now rather than wait, suggesting that buyers aren't feeling the same sense of panic to get into the market.
Buyers rushed into the market in the opening months of last year to beat a combination of rising interest rates, new mortgage rules and the HST in two provinces.
“Last year's survey showed that people were looking to buy ahead of rising costs,” said Marcia Moffat, RBC head of home equity financing.
“This year marks a return to more normal levels of purchase intentions and recent housing data reflects this move to a more balanced market.”
Nearly 70 per cent of homeowners said the value of their homes has increased in the last two years.
Meanwhile, a Statistics Canada report also released Wednesday suggested that new housing prices continued to rise at the beginning of this year along with resale home prices.
The federal agency's new housing price index rose 0.2 per cent in January from the level in December.