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Shopping for Mortgages
Stephen Dupuis, chief executive of the Toronto-based Building Industry and Land Development Association, said the study by the mortgage brokerages confirms conservatism is still ruling the housing market.
He said first-time buyers, the most vulnerable to any change in rates, continue to overwhelmingly get long-term fixed-rate mortgages. While rates may be much higher in five years, he said the income of first-time buyers tends to climb by the time they get their second mortgage.
"There has been a massive overreaction," Mr. Dupuis said, about calls to shorten amortization periods and increase down payments.
Mr. Dupuis added that while 2009 purchases in the Toronto area rebounded sharply from 2008 lows, sales are still well off levels reached in 2007. The same is true for much of the country.
There is little doubt any move to tighten regulations will have negative consequences on the market, said Benjamin Tal, senior economist with CIBC World Markets. He estimates at least 25% of the new purchases would be affected by a change in the down payment.
"The industry is fighting back and asking the government to look at the data before making any decision," Mr. Tal said, referring to the latest salvo fired by the mortgage brokers.
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FINDINGS
- Eighty six per cent of these home buyers chose fixed rate mortgages.
- Among borrowers who chose fixed rates, a significant number opted for longer terms
- less than 5% chose terms of two years or less.
- Twenty per cent took three year terms, 5% four years, leaving 70% with a fixed rate for five years or more.
- The vast majority of people who took out their first mortgage last year borrowed less than they could afford to, as their Gross Debt.
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