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That is One BIG Mortgage

1 Trillion Dollars in Mortgages in Canada (2010)

The CAAMP (Canadian Association of Accredited Mortgage Professionals) released their Fall Consumer Report and said Canadians, in 2010, held over $1 Trillion in Mortgage debt. To be specific, they said that:

As of August 2010, there was $1.01 trillion in outstanding residential mortgage credit
in Canada.


That is a big pile of debt to be holding, but it is well spread out.

A good thing to see is

The average mortgage interest rate for home owners’ mortgages is 4.22%, a drop
from 4.55% a year earlier.

So at least we are not holding this debt at a very high interest rate.

And I did like reading:

Among home owners who have mortgages, the average amount of equity is about
$146,000, representing 50% of the average value of their homes ($291,000).

So we are close to having half the debt paid off on average too.

I strongly urge everyone to look at this exciting report so they understand the scope of the Mortgage industry in Canada right now.

Mortgage Graph 2010
Mortgage Debt over the Years

One last exciting quote about the value of all the property held with these loans:

The total value of owner-occupied housing in Canada is estimated at $2.91 trillion.
Mortgages on these homes total $820 billion, leaving $2.08 trillion in home owners’
equity. This equity is equal to 72% of the total value of the housing.

Wow! That is a dilly of a number. Remember we are pretty small potatoes compared to our friends to the south.

Should We All Be Owning Homes?

There is an interesting debate, to be had. The Wall Street Journal dragged up an interesting article written 70 years ago, by Melchior Palyi which said not everyone should be a homeowner (at least in the U.S.).

The warnings included statements about if everyone owned homes, it would nail their feet to the floor and make them less mobile and worse, heavily loaded down with the costs of home ownership. This is an interesting take on the question of whether you should own a home or not, I know that once I moved into my first house, my ideas of migrating to better jobs in other places, dropped considerably.

The Journal contends that this chap predicted the U.S. housing bubble. I’m not sure I completely buy that concept, but it’s still an interesting take on housing. It’s also very topical, given the CAAMP report that just came out.

Is having over a Trillion Dollars of Debt in the Canadian Economy a good thing? It would be much better if it was less, and if interest rates start ramping up, that debt will grow much faster, too.

Feel Free to Comment

  1. Hi There Again,

    I had some more thoughts about the point on mobility and housing that I wanted to share.

    I think that this 70 year old assessment that you mention was a fascinating one, especially as it relates to real estate investing. As the link to the Wall Street Journal that you added mentions, “not everyone should be a home owner”.

    Using this same theory, I think one can conclude that not everyone should be a real estate investor as well.

    Given, only 4% of Canadians own rental properties (reference Peter Kinch, Mortgage Broker), I think that number should really be lower because there are people that own investment properties that should not. Some people find that their rental properties are a burden, as such, their ‘feet are nailed down’ to the floor as the article states. Some real estate investors experience a high degree of anxiety owning property and fear that they cannot be on vacation for too long, because something could go wrong with their property that they would have to tend to.

    So I think that this research done 70 or so years ago hit the nail on the head with respect to the mobility issues that owning property causes.

    On the flip side, there are of course those individuals who own rental properties that are completely unaffected by the mobility issue.

    They can take vacations and physically be away from their rental properties for a long period of time without feeling any anxiety.

    Best Regards,
    Neil Uttamsingh.

  2. The point raised on mobility and housing was an interesting one. I would tend to agree with the assessment that people who own homes are less likely to migrate to areas where there are fruitful job opportunities. In more expensive urban markets, I believe that the mobility issue would not exist as much with the younger population. This is because for instance in Toronto, the average age of first time home buyers is 35 years old (reference CMHC). This would mean that the mobility of the workforce would be high compared to other areas of the Country (up to the age of 35), and then after 35 there would be an obvious decrease in mobility.
    Once again, a very interesting point raised on the topic of mobility and housing.
    Best Regards,
    Neil Uttamsingh.

  3. Just to extend from what Credit Cards Canada wisely said, in addition to rising interest rates, if house prices were to drop by 20 or 25%, a lot of people would be underwater on their mortgages and we would start getting a feedback loop like the US suffers from. With people slipping into voluntary foreclosure, prices would fall further. It seems unlikely, but it seemed unlikely in the US too.

  4. it is one of those never-ending debates.
    At the end of the day, one should take decisions based on available resources.

  5. I am not sure if everyone should own a home. This pressure of owning a home makes quite a few people to bite more than they can chew. One should own a house only when they are financially ready and stable.
    I am glad that the Government is making sure that people need to be really qualified to get a mortgage.
    Tighter requirements for mortgages should be implemented.

  6. So apparently Canadians were less concerned about purchasing gigantic, cheaply made houses than Americans? Good for them.

  7. Nice to see those equity levels higher than the headlines based on the report would imply.

    Interesting point on mobility and housing as well. I’ve read a couple of recent reports that point out that one of the problems with the negative housing equity issue in the States is that people who owe more than their homes are worth are much less likely to want to sell their home to find a better job.

  8. Interestingly, I was reading a blog comment elsewhere this morning predicting hyperinflation 18-months out. While this prediction is just as good as any six-pack of predictions stored ion my closet, let’s not forget that anything can happen. Huge mortgage debt at 4.22% is not too bad. But at 14.22%, such debt could be crippling – and you just never know what might happen in as short a time frame as a year or two.

  9. Thanks for putting the report in perspective by including the total value of homes as well as the lowering interest rate.

    As for the question, “should everyone own a home”, the answer of course is, “it depends”. Sometimes it costs the same to rent as it would to buy, but in some cities it doesn’t. I would be perfectly happy to rent in New York, maybe even in Vancouver. It’s not throwing your money away as they say, sometimes it’s just unaffordable to buy.

    As long as you invest the difference, you’ll be fine.

  10. Freddie @ Real Estate Investing for dummies

    Wow, that is an interesting piece of information. Looks like Canadians didn’t fall the mortgage mess that they Americans did. You can tell because there is so much equity in your homes. I bet if this was done in the United States that the average person would either be under water or only have like 10K in equity.

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