- A third of older Canadians with a mortgage will carry debt into their 70's
- Half of Canadians think interest rates will stay the same in the next year
TORONTO, November 17, 2011- Nearly three-quarters (72 per cent) of Canadians with a mortgage hope to be mortgage-free by the time they reach age 65, but one-third (33 per cent) of older Canadians, those over the age of 55, have 16 or more years left on their mortgage term, according to the latest RBC Housing Snapshot poll.
"Canadians want to be mortgage-free as they approach retirement age and beyond, but the reality is that it takes prudent planning and the right advice to stay on track," said Claude DeMone, director of Strategy for Home Equity Financing, RBC. "Using flexible and accelerated payment options are an easy and pain-free way to help take years off your mortgage and save thousands of dollars in interest costs."
Canadians overwhelmingly say that a low interest rate is the most important feature when choosing a mortgage (96 per cent). Almost nine-in-10 Canadians also say that accelerated payment options (85 per cent) and flexible payment options (88 per cent) are important and desirable features.
Looking ahead, the majority of Canadians expect steady interest rates in the next six to 12 months. Almost one-in-five Canadians (18 per cent) expect rates will rise less than one per cent. Just over a quarter of respondents (26 per cent) think interest rates will rise more than one per cent in the same time period.
"Though many Canadians expect interest rates to stay the same over the next year, they should still keep in mind that it's important to build some wiggle room into your budget to prepare for any extra costs or future rate increases," DeMone added.
With a firm belief that interest rates will stay relatively stable over the next year, the RBC poll shows Canadians are increasingly interested in using either a variable (29 per cent, compared to 19 per cent in the first quarter of this year) or fixed rate mortgage (46 per cent, compared to 40 per cent in the first quarter of this year). Interest in using a hybrid mortgage (part fixed, part variable) has declined (25 per cent, compared to 41 per cent in the first quarter of this year).
DeMone offers the following mortgage advice that will help Canadians pay down mortgages faster and get the right one to meet their individual needs:
- "Stress test" your mortgage for rate increases. If you are concerned about affordability down the road, knowing what your payments would be with a one to three per cent rate increase will give you greater peace of mind that your new home is affordable both today and in a few years, when rates might be higher.
- Look beyond the interest rate and consider your prepayment options. Many closed mortgages allow you to double up a payment or pay a lump sum on your mortgage annually without prepayment charges. Prepayments are applied directly to the principal balance, helping to save thousands of dollars in interest costs over the life of the mortgage.
- Take advantage of early renewal options. Some mortgages allow you to renew up to 120 days before the end of your term. This means you can lock in your new mortgage rate early.
Poll highlights:
- An equal amount of Canadians in the 35-54 age group plan to be mortgage-free by age 55 (39 per cent) or by age 65 (39 per cent).
- Young Canadians (age 18-34) have the most aggressive views of when they will be mortgage-free (by age 35: 12 per cent; by age 45: 26 per cent).
- Among Canadian homeowners, the number of mortgage-free Canadians has increased slightly to 41 per cent in the fourth quarter from 38 per cent in the first quarter, and the highest level since 2006.
- Canadians ages 55 and over were more likely to expect interest rates to stay about the same in the next six to 12 months (55+ 60 per cent compared to the national average of 51 per cent).
One-third of younger Canadians (18-34: 34 per cent) anticipate a steeper increase in interest rates in the next six to 12 months.
