Monday, November 14, 2011

Renewing and refinancing mortgages is saving Canadians

Almost a quarter of Canadians renewed or refinanced their mortgages in the past year and the vast majority found themselves with a better rate for doing so, the Canadian Association of Accredited Mortgage Professionals said.

The group found about 32% of Canadians reported making some sort of change to their mortgage in the past year with almost two-thirds of those people saying they were refinancing or renewing their mortgages. Among those who renewed, 78% got a rate reduction.

Canadians who are looking for that better rate appear ready to shop around with 21% of respondents who renewed or refinancing their mortgages in the last year, saying they switched lenders.

Mortgage rates continue to be at or near all-time lows with a flat yield curve reducing the steep discount on variable rates and making locking in more attractive. The website says the best variable rate product on the market is now 2.48% while a five-year fixed rate closed mortgage is now as low as 3.19%.

“Overall, our survey paints a picture of Canadians generally and homeowners in particular as very focused on their finances,” said Jim Murphy, president of CAAMP. “They are planning ahead, aggressively paying down their mortgage in advance of any economic jolt.”

Despite the shrinking gap between fixed rate and variable rate mortgages, 31% of Canadians are still in variable rate mortgage tied to prime and ultimately any interest rate changes from the Bank of Canada.

One thing Canadians have become more conservative about is taking equity out of their home. Only 10% of equity holders took money out of their home in the last year, a 40% drop from a year ago.

The decline could have something to do with tougher refinancing rules which lowered the level on refinancing to 85% of home’s value, down from 90%.

Source: The Financial Post