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OTTAWA – Mortgages have continued to help make owning a home a reality for a majority of Canadians, with almost 60 per cent of homeowners in Canada also holding a mortgage, according to newly released statistics.
Data from 2011 National Household Survey revealed that 5.3 million of the country’s nine million homeowners – not including households on farms or reserves – had a mortgage.
The rate of 58.6 per cent was little changed from 2006 census results that revealed 57.9 per cent of homeowners held a mortgage, although the data is not directly comparable due to differences in methodology.
Douglas Porter, chief economist with BMO Capital Markets, cited some of his own data that showed the value of mortgages in Canada rising about 8.5 per cent annually, on average, between 2006 and 2011. He said this jump stems from a combination of more mortgages being taken out and higher values attached to them.
Porter said historically low interest rates in recent years have encouraged increases in home ownership and spurred more homebuyers to seek mortgages. He added that mortgages are more often being used, not just for buying homes, but to unlock the value of properties to finance other purchases at relatively low interest rates.
“Increasingly, I tend to think that because interest rates have been so low, many households have been trying to consolidate their debts in their mortgages,” he said. “With those exceptionally low rates, it may have encouraged some people to extract equity in their home and make other big-ticket purchases like renovations or a vehicle. . . . I do think households have become a little wiser in how they handle debt.”
Benjamin Tal, deputy chief economist with CIBC World Markets, said it’s an indication of people “getting more financially savvy. It’s an effective way of using debt. (Mortgages are) the cheapest debt there.”
Still, Statistics Canada said the average shelter costs of households with a mortgage – $1,585 a month – were three times higher than owner households that were mortgage-free. The federal government has taken several measures in recent years to curb the growth of mortgage debt in Canada, including reducing the maximum amortization period on government-insured mortgages to 25 years from 40 in three separate moves between 2008 and 2012.
Tal said there have been signs in recent years that the overall growth of mortgages is slowing, “reflecting the fact that people are compromising” on things such as the size of their homes.
The National Household Survey showed that about 20 per cent of those who bought homes between 2006 and 2011 did so without accessing a mortgage.
It also showed that a majority of homeowners in most provinces and territories held mortgages – the lone exception was Newfoundland and Labrador, where just 73,956 homeowners were making mortgage payments compared to 87,445 that were mortgage-free.
Porter said the financial crisis that occurred in late 2008 and early 2009 might have had mixed results on the mortgage market. For example, money lost on stock markets may have necessitated the need for some people to turn to mortgages for financing.
“Although the counter to that is if confidence was badly shaken, you would think people would have delayed making a major investment, like buying a house. So it could have cut both ways on that front,” he said.
The voluntary nature of the National Household Survey leaves gaps in the data from groups that tend not to respond to voluntary surveys, including aboriginals, new immigrants and low-income families. While experts believe the data should provide a fairly accurate big-scale picture of Canada, statisticians and economists warn the smaller the group surveyed, the less reliable the information.
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