Report identifies new risks in the Canadian mortgage market: CAAMP

Interviews this fall with more than 2,000 Canadians indicate that those holding mortgages are comfortable with their debt, a majority plan to pay off their mortgage in less than 25 years, and at least one-third are taking advantage of current low interest rates to accelerate payments, according to the most recent survey report from CAAMP entitled Annual State of the Residential Mortgage Market in Canada.

However, the report has also identified weaknesses in the mortgage market that could undermine Canada’s economic recovery.

Data, collected by CAAMP and analyzed by Chief Economist Will Dunning, from prospective first time homebuyers who have been shut out of the market because of the most recent tightening of amortization rules, is troubling. This smaller number of first time buyers is already impacting the resale market, which in turn threatens to dampen economic activity more broadly.


  • Since the most recent round of mortgage tightening came into effect in July 2012, there has been a drop in Canadian housing resale activity: between August and October, sales were 8 per cent lower than in the year prior to the announcement
  • Approximately 17 per cent of high ratio mortgages funded in 2010 could not have been funded today, including 11% of prospective high ratio homebuyers who can’t qualify under the new 25 year amortization rule
  • Regardless of whether Canadians initially selected a 20, 30, or even 40 year amortization period, survey findings continue to indicate that actual repayment periods have generally been only two-thirds of the contracted periods
  • It is not only first time buyers who are affected: reduced activity at entry levels means that move-up activity will also be gradually impacted, because potential move-up buyers will find it more difficult to sell their current homes
  • Canadians have continued to show prudence when it comes to mortgage repayment: one-third of borrowers made additional payments or accelerated payments on their mortgages; 87 per cent of homeowners have at least 25 per cent equity in their homes; 61 per cent of people who renewed in the past year saw a reduction in their interest rates
  • Among borrowers who took out a new mortgage in 2012, a record 47 per cent obtained it from a mortgage broker

“Our most recent survey report demonstrates once again that the vast majority of Canadian mortgage holders, whether they are first time buyers or long time homeowners, are acting responsibly when it comes to reducing their mortgage indebtedness,” said Jim Murphy, AMP, President and CEO of CAAMP. “Our concern today is the number of growing first time buyers who are now unable to get a mortgage. We worry that this is having a dampening effect on what was an already cooling market and we hope policy makers will give some thought to addressing the needs of this key sector of the market.”

The report examines possible causes for the recent drop in housing resale rates. An estimated 11 per cent of high ratio home buyers are especially hard hit since the amortization periods were cut from 30 years to 25 years. Some of these buyers can become re-qualified to buy homes by saving for larger down payments and thereby reducing their monthly payments, but on average it would take these buyers 3.5 years to re-qualify, assuming interest rates and house prices do not increase.

This creates a snowball effect. A reduction in activity at the entry level will create difficulty for those who wish to sell their homes and move up in the market, creating a slowdown in upper segments of the housing market as well.

The report, Annual State of the Residential Mortgage Market in Canada, is a semi-annual review of the Canadian mortgage market authored by Dunning. The report is based on information gathered by Maritz Research Canada in a survey of more than 2,000 Canadian consumers in October 2012.

For a full copy of CAAMP’s spring survey report, visit

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