Although mortgage debt remains a topic of concern for most Canadians, spending trends indicate that growth in mortgage debt is actually declining.
While the gross debt may still be increasing as there are more people and more houses each year, the rate of growth has slowed substantially. This past year was slower than 2011, and both were considerably slower than the peak year of 2007.
Non-mortgage debt is down to less than one-third of peak levels. This makes sense as some homeowners are consolidating higher-interest non-mortgage debt into their mortgage with a more favourable rate.
Roughly half of homeowners in Canada have mortgages and, on average, they have about $160,000 in mortgage debt outstanding. That's about half the market value of their homes.
In Manitoba and Saskatchewan, the average market value of a home is about $40,000 lower than the Canadian average, and our percentage of mortgage debt is the lowest in the country.
One of the ways that homeowners are planning their financial futures is by locking in mortgages at today's great rates. About 75 per cent of those active in the mortgage market in 2012 chose a fixed rate.
The recent change in amortization periods caused some initial concern as the take-up of longer amortization periods was significant. About one in three homes purchased from 2008 through 2011 involved mortgages amortized over 25 years.
However, further research indicates that homebuyers had a variety of reasons for doing so, with few related to the ability to access the home-ownership market.
More than 25 per cent indicated that longer amortization would permit them to buy a more expensive home. Another 24 per cent wanted to improve their cash flow for other spending in the early years of their mortgage.
It seems that flexibility was a key factor in determining a longer amortization, rather than affordability or accessibility. Nor does it appear that people were taking out longer amortizations in order to finance vacation homes or investment properties.
Although we must always be mindful of our debt load and mortgage levels, it does appear that Canadians, and especially those on the Prairies, are getting these numbers under control.
Sound financial planning is resulting in consumers purchasing the homes they want and within their means, while still maintaining the desired flexibility for other activities.
Mike Moore is president of the Manitoba Home Builders' Association.