Majority of homeowners “nearly debt free”
November 23, 2017
|Sherry Cooper of Dominion Lending Centre: 40 per cent of homeowners have no mortgage.|
As the federal government frets about homeowners carrying excessive debt and is introducing a second-round stress test for those applying for mortgages, mortgage professionals say the vast number of Canadians manage their debt responsibly.
In fact, it could be argued the typical mortgage holder is more financially astute than the federal government, which has accumulated a $645 billion debt that is rising by $57 million per day, according to the Canadian Taxpayers Association.
Sherry Cooper, chief economist for Dominion Lending Centres, said the majority of Canadians manage their finances in a responsible manner.
“Roughly 40 per cent of homeowners are mortgage-free and one-third of all households are totally debt-free. Another 25 per cent of households have less than $25,000 in debt, so 58 per cent of Canadian households are nearly debt free,” Cooper said.
She added that mortgage delinquency rates are extremely low. “In addition, two-thirds of outstanding mortgages are fixed rate, which mitigates the risk of rising mortgage rates over the near term,” Cooper said.
As of January 1, the new stress test will require all homebuyers, regardless of the size of the down payment, to qualify at a mortgage two per cent higher than what is really available.
“This will likely influence some homebuyers to purchase before the stress test comes into effect, especially in Canada's pricier housing markets,” said Andrew Peck, president of the Canadian Real Estate Association.