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10 Key Home-buying Averages in Canada

Are you an average Canadian home-buyer? Curious as to how you fit in the mix? Let’s examine a handful of key home-buying averages compiled by industry reporting organizations, and see how you stack up.

1.   First off, you can compare the amount you paid, or intend to pay, for your home against the average home price in Canada, whichwas $343,747 in October 2010, up from $341,232 over the same period in 2009. This, of course, as an average, represents a wide dispersion amongst cities, and rural and urban areas. For example, Vancouver reported the highest average home price at $707,207 while the average home price in Fredericton was only $152,764.[1]

2.   According to the latest census, the average shelter-cost-to-income ratio (STIR) of homeowners with mortgages was 24% in 2006. This is appropriate considering the general affordability rule, as outlined by the Canada Mortgage and Housing Corporation (CMHC), is that your monthly housing costs should not exceed 32% of your gross household monthly income, where housing costs include monthly mortgage principal and interest, taxes and heating expenses.[2]

3.   In terms of affording a down payment, a 2010 CMHC survey reported that 30% of new home-buyers plan to or have more than a 20% down payment,and 70% are making a down payment of less than 20%.[3]

4.   Also according to the CMHC, mortgage brokersrepresented 38% of total mortgage originations in 2009, up from 26% in 2003, with an even higher usage among first-time buyers (45%).[4]

5.   With a higher use of mortgage brokers, homeowners, on average, say they obtained 1.96 quotes when financing their current mortgages. So, the increased number of quotes acquired reflects prospective home-buyers’ inclination to ‘shop’ around, a role essentially taken on by a mortgage broker.

6.   On to mortgage rates, fixed rate mortgages, at 66%[5] of all mortgages, are the most common category; however, 29% of mortgages, a significant minority, do have variable rates. Fixed rates are also slightly more popular with younger age groups, while older age groups are more likely to opt for variable rates[6]. The most popular mortgage rate on the whole is the 5-year fixed rate.

7.   Borrowers who have taken the 5-year fixed mortgage rate during the past year have realized an average mortgage interest rate of 4.23%. The average rate advertised over the same period was 5.65%, meaning borrowers negotiated 1.42 percentage points below posted rates.[7]

8.   Another interesting finding is that the vast majority of Canadians have the ability to afford higher mortgage payments. In a survey conducted by the Canadian Association of Mortgage Professionals (CAAMP), 84% of respondents said they could handle monthly increases of $300 or more on their monthly payments.

In fact, 35% of mortgage holders did make additional payments on their mortgages in 2010. This includes 16% who increased their monthly payments, 12% who made lump sum payments, and 7% who did both.

9.   Looking at mortgage terms, a 5-year mortgage term, representing 66%[8] of all mortgages, is by far the most common duration. A further breakdown shows that an additional 8% of mortgages have terms exceeding five years, while 26% of mortgages have shorter terms, including 6% with one year or less and 20% with terms from one year to less than four years[9]. Amongst different age groups there is a slight tendency for younger adults to choose mid-length terms (1-3 years), and older age groups are slightly more likely to take longer terms.

10.  The most common mortgage amortization period, on the other hand, is 25 years. Still, 42% of new mortgages in 2009 had amortization periods exceeding 25 years. This is interesting, considering amortization periods were only extended to 35 years in 2006.

SO, did you lock into a 5-year fixed mortgage rate with an amortization of 25 years through a mortgage broker, on a home in the range of $343,747? No? Well, given the vast range of variables under consideration here, that’s to be expected. Nonetheless, at least now you know how you fit in!

To learn more about calculating your mortgage check out our mortgage calculator.

[1] Canadian Real Estate Association (CREA)
[2] Canada Mortgage and Housing Corporation (CMHC)
[3] CMHC 2010 consumer survey
[4] CMHC 2010 consumer survey
[5] Canadian Association of Accredited Mortgage Professionals (CAAMP) Fall 2010 Consumer Report
[6] CAAMP Fall 2010 Consumer Report
[7] CAAMP Fall 2010 Consumer Report
[8] CAAMP Fall 2010 Consumer Report
[9] CAAMP Fall 2010 Consumer Repor