TransUnion released second quarter results on Canadian debt trends and found the level of non-mortgage debt to be at an all-time 8 year high! The average consumer carries $26,221 in non-mortgage debt which is up 0.74 per cent from first quarter results and up 2.41 per cent from last year. Oddly enough, credit cards and lines of credit are not to blame.
Who’s The Culprit?
Who’d of thunk it – car loans! There was a big increase in auto loans, which was partly offset by a lower reliance on lines of credit. Car loans are up 13.25 per cent from last year and 3.67 per cent from last quarter. The good news is that the payback rate is very good and delinquency rates are quite low. The bad news is that as consumer confidence increases and everyone becomes more comfortable with spending… they aren’t spending their own money. Call me old fashioned, but spending beyond your means – living in debt, and paycheque to paycheque – just to have a nice ride isn’t what I call impressive or responsible. What ever happened to actually saving up for a purchase?
Skin in the Game: The Real Cost of an Insured Mortgage
There’s an idea – saving up for a purchase, (your parents would be so proud)! What can upping the ante really do for you? Save you money (up to $87,806 over the life of your mortgage in payments) and alleviate some of the market pressure and stress that comes along with wanting a good return on your investment!
Forking Out the Down Payment and Your Bottom Line
Below is a comparison of how a 5, 10, 15 and 20 per cent down payment can really change your game. The chart below is based on a purchase price of $350,000, 3.04 per cent 5 year fixed term, 25 year amortization and regular bi-weekly payments – all numbers are rounded to the nearest whole dollar. Want to see how your own savings account will work for you? Check out the new mortgage calculator!
20 per cent vs. 10 per cent down: Right off the hop, you’re hit with a $6,300 CMHC premium. So yes, you have to double your down payment but at the end of the 25 year amortization with 20 per cent down you’ve paid approximately $398,850 for your $350K home (meaning if your home appreciated by about 14 per cent – you can then sell it for the true cost of nearly $399K).
However, if you only have 10 per cent down you’ve paid over $58,000 more over the life of your mortgage AND you need your home to appreciate by about 31 per cent in order to sell it and break even. Don’t get me wrong – I’m all for getting into the real estate market – I just wanted to shed some light on the true cost of a high ratio mortgage (keep in mind I didn’t take months of rent into consideration).
No surprise, CMHC’s latest quarter profits are down in core mortgage insurance since last year by nearly 25 per cent. This is to be expected after Flaherty’s new rule kicked in surrounding tightening insured mortgages – specifically decreasing the maximum amortization from 30 to 25 years. These losses are said to also be driven by a recent increase in claims, however I would argue that perhaps claims seem higher as there is less insurance being issued.
One thing is for sure; CMHC only had $24billion to go in June before reaching their $600billion cap. Growth had to be curbed and losses were to be expected. As a result, overall profits and insured volume numbers have both suffered.
RateSupermarket.ca Week in Review
A few changes to report this week to the best mortgage rates page – specifically increases to the 3, 5 and 10 year rates. The biggest change was seen in the 10 year fixed rate which rose 6 basis points and sits at 3.84 per cent. Both the 3 year fixed and the 5 year variable rate increased 5 basis points while the 5 year fixed rate nearly sits in the same spot as last week – only increasing by 1 basis point.
Nose and nose are the 5 year rates (yet again) this week. 49.5 per cent of our visitors are looking for the best 5 year fixed rate while 49.2 per cent is checking out the 5 year variable rates. Really far behind in the race is the next popular 1 year fixed rate with under 1 per cent of visitors searching for a deal.