According to a report on The Globe and Mail, outstanding debt on Canadian residential mortgages has exceeded an unprecedented $1 trillion. The figure has jumped by 7.6% as compared to last year, while over the last decade and a half, it has almost tripled.
The sharp increase in mortgage debt is attributed to consumers rushing to buy new homes, primarily because of low interest rates. The other major contributor has been home equity loan. Almost a fifth of Canadians used the equity built up in their homes to release cash. The key reasons given for renewed interest in home equity loans was debt repayment and consolidation. This is largely on expected lines, as every time interest rates dip, homeowners tend to use their equity in their home to get rid of some of the high interest rate debts like credit card balance or personal loans. According to the report, 30% of the total amount taken out was for this purpose.
Another important trend that came out was an increase in mortgage payments by borrowers. Almost 35% of mortgage holders paid more than they were required to in the last year, with about 16% choosing to raise their monthly payment amount.
The report also showed a slight cooling off of the housing market. Last May, the average house price had touched $346,881, which was an all time record. The latest average price figure has been put at $331,000.
