More cash in our homes

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Canadians continue to have more than two-thirds more equity in their home than Americans, according to a new survey.

The study for the Canadian Association of Accredited Mortgage Professionals shows Canadian homeowners have, on average, 72% equity in their house, compared with 43% for Americans.

“It is a very positive part of the Canadian housing story,” said Jim Murphy, chief executive of Toronto-based CAAMP. “Canadians pay down their mortgages. Canadians are just more conservative than Americans.”

The study also found that Canadians have dramatically reduced the amount of equity they are taking out of their home. A year ago 22% of Canadians had accessed the equity in their home through measures such as lines of credit. Today that is down to 15%.

“This speaks to the whole thing about people belt-tightening,” said Mr. Murphy.

Despite the drop in prices in the Canadians marketplace, only 2% of Canadian mortgage holders have negative equity, in which the value of their mortgage is higher than the value of their home.

About the only new risk Canadians seem to be taking on is longer amortizations. While 83% of Canadians have an amortizations of 25 years or less, the number with 30-year and 35-year amortizations is rising. In the past six months, 46% of new mortgages have been for amortization of more than 25 years.

“I don’t think it’s a worry because [Canadians] are paying down their mortgages,” said Will Dunning, chief economist with CAAMP, noting the percentage of Canadians in arrears on their mortgage is rising but the total is still 0.38% of all mortgage holders. “That’s the middle of historical averages.”

Mr. Dunning said the study also indicates that subprime mortgages are likely a very small percentage of the Canadian marketplace. Only 2% of all Canadian mortgages have interest rates of 8% or higher — the low-water level for what would constitute the rate on a sub prime mortgage.

The survey did show that Canadians are also taking advantage of continued drops in interest rates by increasingly buying into variablerate products. CAAMP says 28% of Canadians have variable-rate products that are tied to prime. The number is rising, with 36% of new mortgage orientation in the past 12 months going into variablerate products.

With the Bank of Canada’s decision to lower rates another 25 basis points and its commitment to not change rates for another year, Canadians are expected to continue to take advantage of a record-low prime rates, which are 2.25% at most financial institutions.

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