Homeowners are increasingly taking control of their home financing options – and are enjoying savings as a result – according to the comprehensive housing market report released by CMHC this Wednesday.
According to the 2013 edition of the Canadian Housing Observer, an annual market tome released by the crown corporation, there is a growing trend in mortgage rate negotiation, taking advantage of prepayment options, and growing home equity at a faster pace.
It Pays To Question The Posted Rate
The report finds that those who challenged the posted rate offered by big lenders saved on average 2.2 points on their interest rate, based on a survey that finds the average five-year fixed rate held by negotiating buyers to be 3.05, compared to the advertised 5.25 per cent from the banks.
These savings are even greater than last year, when the average rate by negotiation was 1.85 per cent. Buyers are also increasingly turning to brokers to help them secure their best rate – 23 per cent in 2013, compared to just 14 per cent in 1999.
5 Year Terms Remain Most Popular
The report includes findings from the Financial Industry Research Monitor’s Residential Mortgage Survey – 68 per cent of new buyers and refinancers who took the survey within a six-month period said they went for a five-year term with a 25-year amortization.
Of those buyers:
– 69 per cent chose a fixed rate option
– 26 per cent chose a variable mortgage rate
– five per cent went for a combination of the two.
The Equity Grab
Homeowners are in a hurry to accumulate their home’s equity and are are taking advantage of available prepayment options in order to own their homes faster, with the average home equity level in Canada clocking in at 47 per cent.
– 31 per cent made a lump sum or accelerated their payments in 2013
– 71 per cent have paid off at least a quarter of their home’s value
– Just seven per cent have paid 10 per cent or less on their homes.
The Average Home Price Will Be Almost $400,000 By 2014
2012 sales saw a slight downturn due to OSFI-implemented mortgage rules and an uptick in unemployment – resales dropped by 1.2 per cent to 454,463 units. However this is still much higher than the average set between 1990 and 2012 of 382,825.
Sales continued to increase throughout 2013 – the Canadian Real Estate Association released a revised forecast this week due to stronger than expected growth, upping this year’s sales projections to 438,200, and another 8.4 per cent increase in 2014. The revised report states the final 2013 average sale price to be $382,200, which will grow to $391,100 in 2014. The CMHC data backs this with increases in all of Canada’s major markets.
The greatest home price levels next year will be:
– $730,063 in Greater Vancouver
– $498,973 in Toronto
– $484,146 in Victoria
However, higher prices won’t deter home buyers, who are expected to grow in numbers annually between 106,000 and 146,000 until 2036.