Posted by: Daryl & Wendy Ashby | March 26, 2010

Mortgage Risk is Small

The Canadian Association of Accredited Mortgage Professionals (CAAMP) say that borrowers, including first time home buyers are being “extremely prudent” with their borrowing.

A recent survey of CAAMP members revealed more than 40,000 loans having been issued totalling $10 billion, during 2009 (data is for home purchases only and excludes renewals or refinances). This data represents about one-sixth of the total mortgage activity for home purchases in Canada.

Key findings include:

* 86% of these home buyers chose fixed-rate mortgages. This share fell late in the year as variable rates became more attractive at 2.25% compared to 4% for fixed rates.

* among borrowers who chose fixed rates, a significant number opted for longer terms — less than five per cent chose terms of two years or less. Twenty percent took three-year terms, five percent took four years, leaving 70 percent with fixed rates of five years or more.

* the majority of those who took out their first mortgage last year borrowed less than they could afford.

This new research shows that Canadians are assessing their abilities and vulnerabilities. They are being prudent and the vast majority of borrowers are not taking on undue risks but factoring in rising interest rates in to their mortgage decisions.

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