Canadian homebuyers are showing “a high level of financial literacy,” according to CMHC’s 2011 Mortgage Consumer Survey released today that found both high levels of research and a determination to pay off mortgages quickly.
The survey said 75% of respondents felt it “very important” to pay off their mortgages as soon as possible and that 39% had set payments higher than the required minimum.
As well, 20% had made at least one lump-sum payment since obtaining their mortgage and 39% planned to reduce their amortization periods at their next renewal, CMHC said.
Meanwhile, the survey found 80% of respondents had researched mortgage terms and conditions, 88% had a good understanding of how big a mortgage they could afford and 81% have some form of savings.
Canada will continue to outperform most economically advanced countries over the next two years, even as the pace slows and risks mount, the International Monetary Fund (IMF) says.
The IMF’s latest forecast presents Canada as a relative sea of tranquility amid rising global turbulence from European and US debt issues, the aftermath of Japan’s natural disasters, and growing inflationary pressures.
This will result in growth in advanced countries of about 2.5% this year, it says – about half a point lower than last year. And emerging economies as a group will suffer a one-point drop in growth to 6.5%.
As well, the downside risks to the outlook have risen sharply since the IMF’s previous report in April. “The balance of risks point down more,” the IMF says. “Downside risks due to heightened potential spillovers from other further deterioration in market confidence in the euro area periphery have risen. Market concerns about possible setbacks to the US recovery have also surfaced.”
Although the growth in Canadian household debt is slowing and household assets are rising, debt ratios have pushed further above levels in the US, and more steps need to be taken to repair the household balance sheet, according to Doug Porter, Deputy Chief Economist, and Sal Guatieri, Senior Economist and Vice President, BMO Capital Markets.
New figures released this week show household credit market debt climbed to an all-time high of $1.524 trillion in Q1, or a record 147.3% of disposable income. Further, while household debt growth has cooled notably in recent months, it continues to outstrip income growth.
But growing household assets remain a bright spot. “We have been much less alarmist than others on the build-up of debt, as in many cases there are solid assets on the other side of the balance sheet,” said Porter. “Indeed, because of higher house prices and equity markets in Q1, households are wealthier despite carrying more debt, with net financial assets hitting fresh peaks.”
According to Porter, the increase in debt ratios has slowed in the past year after soaring 35 percentage points in the previous eight years.
You better buy a house in this market before it’s too late. How many times have you heard those words? The panic thinking is driven partially by prices continuing to rise to record levels but also by the sense that near-record-low interest rates could rise at any moment.
The sense of desperation to buy now out of fear you won’t be able to get it tomorrow is probably one of the first things taught to any salesperson. Create a sense of urgency. “There’s six left on the shelf, nope, it’s down to five,” jokes Certified Financial Planner Ted Rechtshaffen, President of TriDelta Financial. “It’s an interesting phrase.”
Rechtshaffen says his clients are not uttering panic words but you have to wonder whether Mark Carney, Governor of the Bank of Canada, may have been hearing them before making a speech to the Vancouver Chamber of Commerce this month.
“One cannot totally discount the possibility that some pockets of the Canadian housing market are taking on characteristics of financial asset markets, where expectations can dominate underlying forces of supply and demand,” Carney said. “The risk is that expectations become extrapolative, prompting the classic market emotions of greed and fear – greed among speculators and investors, and fear among households that getting a foot on the property ladder is a now-or-never proposition.”
Click here for the full article in the Financial Post.
Renovation spending in Alberta is forecast to lead the country in year-over-year growth this year and in 2012, according to a report by economic consulting firm Altus Group.
The report said spending in Alberta on renovations hit $5.7 billion in 2010, which accounted for 9.5% of all spending in the country. Total spending in the province was up 7.2% from the previous year, which was behind many other provinces for annual growth.
Canada saw 9.2% growth in 2010 to $60.1 billion.
Altus Group forecasts spending to increase in Alberta by 1.7% this year and by 4.9% next year – both growth rates leading the nation. For Canada, the report forecasts a 0.1% decline this year followed by a 3.6% hike in 2012.