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Monday Mortgage Update: October 22, 2012

Canadian Household Debt Reaches U.S. Bubble Territory

The average Canadian household is even more in debt than we could have imagined. According to Statistics Canada, the debt-to-income ratio (calculated by dividing your total debt by your annual net income) has ballooned to 163.4 per cent in the second quarter of 2012. This means for every dollar of debt, Canadians only have 63 cents of income to show. At first, I was surprised to see that the new calculation resulted in such a high number (up from 152.0 per cent in the first quarter), but the new debt numbers aren’t as scary as they would seem.

The revised ratio provides a more accurate financial picture, by excluding non-profit organizations. As a result, Canadians can now finally make an apples-to-apples debt comparison with Americans. With more equity in our homes and far fewer sub-prime mortgages, we are still much better off than Americans. However, if you’re a first-time homebuyer with little equity in your home, it’s important to understand the risks you could face if a 15 per cent housing correction occurred. Your home equity could be completely wiped out, resulting in a mortgage worth more than the fair market value of your house. This is a situation nobody wants to find themselves in.

Canadian Housing Continues to Slow, Prices Only Slightly Up

The Canadian real estate market continues to show signs of slowing. Despite some of the best mortgage rates in Canada being available, the Canadian Real Estate Association reported existing home sales were down a whopping 15.1 per cent nationally in September. If you live in one of Canada’s largest cities, you fared even worse: sales in Vancouver were down 32 per cent, while Toronto sales were down 25 per cent.

Up a paltry 1.1 per cent, prices didn’t fair too well either. Major cities that saw the largest gains include: Regina (14.2 per cent), Calgary (6.5 per cent), Toronto (5.7 per cent) and Greater Montreal (2.2 per cent). Vancouver continued its trend into a buyer’s market, as average prices went down by 3.8 per cent. If you’re looking to buy a home in Vancouver, these figures are promising, as you’ll actually be able to negotiate with sellers, get a proper home inspection, and not have to deal with the “dreaded” multiple offer situation.

Canada Mortgage Rates: Where are they this week?

A history of weekly 5-year fixed mortgage rates and 5-year variable mortgage rates

Canadian Mortgage Rates in 2012

The average discounted mortgage rate in Canada for 2012:

Note:  This is simply a small sample size and does not represent the entire market. It does, however, offer some useful insight.

Sean Cooper is a personal finance freelance writer and blogger. You can check out his portfolio at