1 Trillion Dollars in Mortgages in Canada
The CAAMP (Canadian Association of Accredited Mortgage Professionals) put out their Fall Consumer Report and says that Canadians now hold 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 rate of interest.
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 would strongly urge everyone to have a look at this interesting report, just so you understand the scope of the Mortgage industry right now in Canada.
Mortgage Debt over the Years
One last interesting 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 isn’t it? Remember we are pretty small potatoes compared to our friends to the south as well.
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, not sure I completely buy that concept, but still an interesting take on the whole housing issue, and very topical given the CAAMP report that just came out as well.
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.
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.