CIBC Senior Economist, Ben Tal, spoke at this year’s annual Mortgage Broker conference in Montreal. The conference, organized by the Canadian Association of Accredited Mortgage Professionals, is a great place for Mortgage Brokers to meet all the Lenders and service providers under one roof.
It’s also a great opportunity to hear some of Canada’s experts talk about the economy, real estate, interest rates and the mortgage market. Here are a few highlights from Mr. Tal’s presentation.
-there are 12.5million households in Canada…31% rent, 69% own..
-of the 69% that own, 39.9% have a mortgage and 28.9% have no mortgage.
-69% of homeowners with a mortgage have more than 20% equity in their homes… only 30% have less than 20% equity in their homes.
-Renters have excellent cashflow… 96% of renters are using less than 40% of their income to pay for all their debts… so in reality, these renters could qualify for a mortgage based on their debt servicing ratios.. (most lenders allow borrowers to use up to 42% of their gross income towards a mortgage payment)…
One more comment that caught our attention was about Variable rate mortgages vs. Fixed rate… The historical data is overwhelmingly in favour of Variable rates….it’s really been a no-brainer… But what about now? Fixed rates are at historical lows… Mr. Tal said that Fixed rates might outperform Variable rate over the next 5 years… BUT it is so close that a 0.50% increase in Fixed rates would probably tip the scales back in favour of Variable…
That being said, we must also consider the flexibility of a Variable Rate product.. it does allow one to lock into a fixed rate at any time and it does allow for an early exit at a minimal cost…. For me, Variable rate is still better choice…for most of us.