Canadian homeowners are much more confident than government officials and economists about their ability to pay off mortgages, even if the market takes a turn 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 reason that stood out to me is because of all the commentary we've all been hearing about Canadians being overextended, all of those various concerns bubbling around," said Marcia Moffat, RBC head of home equity financing.
The findings contrast with 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 that the debt-to-disposable income ratio of Canadians hit a record 148 per cent in the third quarter, even beating out Americans for indebtedness. Put another way, the figure 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 debt exposure.
"There has been a lot in the media around ... (those) concerns for at least the last year and maybe Canadians have been listening, seeking out advice, and ensuring that they're in a strong financial position," Moffat said.
"If you've got a concern about something transpiring, you may try to get ahead of it to put yourself in a better financial position."
Canadians' growing optimism about their debt situations could stem largely from increased job stability and rising incomes, which are providing a better backdrop to pay down debt, Moffat added.
But the government is less assured.
Its third round of tightening mortgage rules in as many years is set to take effect later this month.
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 were confident about real estate as an investment and a large majority still thought it was 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 urgency 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 Moffat.
"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 prices for new houses continued to rise at the beginning of this year along with resale home prices.