More paying down principal, not worrying about rate increases in the
TORONTO, April 25, 2012 /CNW/ - Four-in-10 prospective homebuyers in
Canada (42 per cent) plan to choose a fixed-rate mortgage, twice as
many as those who intend to take out a variable-rate mortgage (21 per
cent), according to the 19th Annual RBC Homeownership Poll.
For the first time in four years, interest in fixed-rate mortgages, the
typical choice for the majority of Canadians, has edged higher (up two percentage
points from 2011), as many homeowners look to maximize their cash flow.
This preference had declined from 49 per cent in 2008, as variable rate
and combination mortgages were in higher demand.
"The popularity of fixed-rate mortgages had been declining over the past
few years, but the trend is shifting. Canadians are now looking to lock
in at historically low interest rates," said Claude DeMone, director of
strategy for home-equity financing, RBC. "What you're currently seeing
is a small margin of difference between fixed and variable interest
rate offers, so many Canadians are opting for the peace of mind that
comes with a fixed rate."
Six-in-10 Canadian mortgage holders (62 per cent) say they are taking
advantage of low interest rates to pay down more principal on their
mortgages (up from 57 per cent last year). The study also found that
more than half of mortgage holders (55 per cent) do not think interest
rate increases will cause them financial difficulty (up from 49 per
cent a year ago).
Getting the "best rate" was the number one reason Canadian mortgage
holders chose their mortgage (56 per cent), followed by four-in-10 Canadians (43 per cent) who say
loyalty and trust in their lender are important. One-third (33 per
cent) put convenience as an important consideration when selecting
"There is more to a mortgage than simply a low interest rate," added
DeMone. "Homeowners should make sure their mortgage fits in with their
overall financial plan and provides maximum payment flexibility. Life
happens and when it does, you want to be able to be nimble and adjust
as easily as possible."
DeMone offers the following advice that will help Canadians choose the right mortgage to fit their
individual needs and to pay it down faster:
Look beyond the interest rate. Many closed mortgages allow for double-up payments or for a lump sum to
be applied to a 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
"Stress test" for rate increases. With the help of a mortgage specialist and an online calculator, you can determine how much each mortgage payment may increase with a
one to three per cent rise in interest rates. This will give greater
peace of mind about affordability down the road, knowing that your new
home is affordable both today and in a few years, when rates might be
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.
Canadians can visit the RBC Advice Centre, a free online resource to help Canadians understand all facets of homeownership. Through advice videos, articles, and online calculators, Canadians can
learn about buying their first home, planning their next move, or renovating. With the guidance of RBC mortgage specialists, Canadians have access
to free, no-obligation professional advice about RBC mortgage products
About the 19th Annual RBC Homeownership Poll
RBC is the largest residential mortgage lender in Canada. As the
country's number one source of financial advice on homeownership, RBC
conducts consumer surveys as one way to provide insight to Canadians
about the marketplace in which they live. These are some of the
findings of the RBC's 19th Annual Homeownership poll conducted by Ipsos
Reid between January 24 and 30, 2012. The annual online survey tracks
Canadians attitudes and behaviours around homebuying and homeownership.
The results are based on a sample where quota sampling and weighting
are employed to balance demographics and ensure that the sample's
composition reflects that of the actual Canadian population according
to Census data. Quota samples with weighting from the Ipsos online
panel provide results that are intended to approximate a probability
sample. An unweighted probability sample of 2,006 adult Canadians, with
100 per cent response rate would have an estimated margin of error of
±2 percentage points, 19 times out of 20. The margin of error will be
larger within regions and for other sub-groupings of the survey
Image with caption: "19th Annual RBC Homeownership Poll: Reasons for mortgage choice (CNW Group/RBC)". Image available at: http://photos.newswire.ca/images/download/20120425_C8804_PHOTO_EN_12683.jpg
Image with caption: "19th Annual RBC Homeownership Poll: Next likely mortgage choice. (CNW Group/RBC)". Image available at: http://photos.newswire.ca/images/download/20120425_C8804_PHOTO_EN_12682.jpg
For further information:
Matt Gierasimczuk, RBC Corporate Communications, 416-974-2124
Ka Yan Ng, RBC Corporate Communications, 416-974-1794