The report concluded that the vast majority of Canadians with mortgages are able to afford at least a $300 increase in their monthly mortgage payments.

In addition, slightly over one in three mortgage holders have either increased their payments or made a lump sum payment on their mortgage in the last year.

“Canadians are being smart and responsible with their mortgages, “said Jim Murphy, president and CEO of CAAMP. “They are building equity in their homes and making informed long-term mortgage decisions. The survey results speak to the strength of our mortgage market, especially when compared to the United States.”

According to the report, 89 per cent of Canadian homeowners have at least 10 per cent equity in their homes and 80 per cent have more than 20 per cent equity.

Overall home equity is at 72 per cent of the total value of housing in Canada; for homeowners who have mortgages, equity levels averages 50 per cent.

As of August 2010, there was $1.01 trillion in outstanding residential mortgage credit in Canada, an increase of 7.6 per cent from last year.

Most Canadians agree that buying a home is a good long term investment and are focused on their mortgages to support that investment.

Many mortgage holders are making voluntary additional payment; 16 per cent have increased monthly payments during the past year, 12 per cent have made lump sum payments and seven per cent did both.

Canadians are exercising caution when taking out their mortgages, with their mortgages, with a majority at 66 per cent choosing a fixed-rate. A five year fixed rate mortgage remains the most popular option in Canada.

Despite the fact that variable rate mortgage have become much less expensive compared to fix rates, the majority choice is still fixed rates. This decision is based on people’s individual assessments of risk, not just the cost difference.

The CAAMP study found that a vast majority of Canadians have significant capabilities to afford higher payments if and when mortgage interest rates rise, with 84 per cent reporting that they could weather an increase of $300 or more on their monthly payments.

Most of the people who have low tolerances for increased payments have fixed rate mortgages. By the time their mortgages are due for renewal, their financial capacity will have expanded and their mortgage principal will have been reduced.

Also, Canadians have been able to negotiate better than posted mortgage interest rates. For five year fixed rate mortgages arranged in the past year, the average rate is 4.23 per cent, which is 1.42 points lower than typical advertised rates.
Of the 1.4 million Canadians who renewed their mortgage in the past year, 72 per cent were able to renegotiate a decreased rate. On average, rates are 1.09 percentage points less than rates prior to renegotiating.

Canadians home equity is impressively high. Among homeowners who have mortgages, the average amount of equity is about $146,000 or 50 per cent of the average value of their homes.

The amount of equity take-out in the past year is unchanged from last year with around one-in-five homeowners, or 18 percent taking equity out of their home at an average of $46,000. The most common purpose for equity take-out is debt consolidation and repayment followed by home renovations, purchases and education investments.

The report was written by CAAMP chief economist Will Dunning and based on information gathered by Maritz Research Canada in a survey of Canadian consumers conducted in October.

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In other words, Canadian homeowners are unlikely to experience what U.S .have underwent in terms of the decline of their home value.

“The relationships between average price and income has recently been cited as portending a U.S.- style correction in Canadian home prices,” said Gregory Klump, chief economist for CREA.

Home prices tend to perform well in the market in accordance with periods of sharp growth periods of stability. By contrast, income generally follows an orderly upwards trend over time.

Winnipeg REALTORS® president Claude Davis said the Winnipeg market is more characterized by the term “slow but steady.” In addition, it is known to be one of the most affordable markets in Canada which is not prone to accelerated price increase unlike Calgary, Vancouver and Toronto.

“The Canadian housing market is now widely thought beat, or very near, the top of a cycle,” said Klump, “and the ratio of the home prices to incomes is currently high. This ratio will revert to its long-term average as it always does as part of a normal housing market cycle.

“History suggests, however, that it will not do so by means of a significant correction in home prices,” he added. “The more likely scenario is that home prices will stabilize, giving incomes chance to catch up again.”

Conservative lending practices in the mortgage industry combined with prudent borrowing and accelerated payments among Canadian mortgage holders have been seen throughout the recent housing market cycle.

Accelerated accumulation of home equity will provide options for the small proportion of homeowners who may face financial difficulty when their mortgage is renewed at a higher interest rate. Their trends are expected to help Canada avoid a U.S.-style housing crisis.

The unwinding of the housing boom in Canada will be more orderly, characterized by softening sales activity and stable prices, according to CREA.

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