| A recent report by economist Derek Holt of RBC | | | | amortization are often not aware of what it will |
| economics put a positive spin on the Canadian | | | | eventually cost. A survey conducted for Trans Union |
| mortgage market due to innovations such as 30 and | | | | found that 45% of Canadians under estimate the |
| 40 year mortgages. | | | | lifetime cost of their mortgage. Only 1/5 of people who |
| Holtz says that unlike the conventional 25 year | | | | answered the survey correctly responded that the |
| mortgage of 1980s, the past year has seen the | | | | average Canadian home owner will ultimately pay 1505 |
| introduction of extended amortization mortgages to | | | | to 200% of the original loan amount. For longer |
| broaden the ways in which households can cope with | | | | amortization periods it's even worse. |
| payment shock through higher mortgage rates. | | | | Alan Silverstein a Toronto real estate lawyer told the |
| It seems Canadians are jumping all over these new | | | | Toronto Sun that taking out a 40 or mortgage "is like a |
| products as our housing market continues to boom | | | | life sentence." |
| with several large urban centers setting all-time sales | | | | In my opinion, the Canadian mortgage industry needs |
| record this past summer. | | | | to be careful that these new products are not just |
| Longer amortization periods mean a rising rate might | | | | picked up by everyone. In Canada our criterion remains |
| not hurt home affordability. The way home affordability | | | | far stricter than in the States, so I don't think we need |
| is typically measured is housing payments over income. | | | | to be concerned at this point. Apparently Holtz says |
| To offset a one percentage point increase in rates a | | | | the mortgage delinquency rate remains firmly planted |
| borrower would need to go from a 25 year mortgage | | | | at the rock bottom level of 1/10 of 1% of all mortgages |
| to a 33 year mortgage assuming the same house | | | | outstanding. I think that this says something about us as |
| price. | | | | Canadians, something we should all be proud of. |
| Unfortunately consumers who go for longer | | | | |