Canadians expecting higher mortgage costs in 2010: RBC poll

Three-quarters of homeowners believe preparation is key

TORONTO, March 24 /CNW/ - According to RBC's 17th Annual Homeownership Survey, 64 per cent of Canadians are expecting mortgage rates to be higher over the next year, with roughly the same number of mortgage holders (66 per cent) concerned about higher rates.

"The best advice for concerned homeowners is to review their mortgage holdings with a financial advisor regularly, just as they would an investment portfolio, to position themselves for any upcoming changes," said Marcia Moffat, RBC's head of home equity financing.

Three-quarters (73 per cent) of homeowners feel strongly that homebuyers need to think ahead to ensure they will still be able to make their mortgage payment if rates rise.

Encouragingly, Canadians are taking action with six-in-ten mortgage holders saying they have taken advantage of current low interest rates to pay more principal. Eighteen per cent of home owners say they have made a lump sum payment on their mortgage and 16 per cent have doubled up their payment to reduce their mortgage principal.

"Homeowners that are uneasy about future rate increases may want to consider one of the many options available to decrease their mortgage costs," said Moffat.

While the majority of mortgage holders (84 per cent) believe they are doing an excellent or good job of paying down their mortgage, half of homeowners (49 per cent) say their mortgage is larger that they thought it would be at this stage in their life.

In addition to seeking customized advice from a financial advisor, Moffat provides the following tips for Canadian homeowners:

    
    1.  Look into your prepayment options. Many closed mortgages allow you to
        double up a payment or pay up to 10 per cent of your mortgage
        annually. Prepayments are applied directly to the principal balance,
        helping to save thousands of dollars in interest costs over the life
        of the mortgage.

    2.  Pay down higher cost debt. If you have access to a home equity line,
        consider using the line of credit to pay down higher unsecured debt
        to save on interest costs. For example, if you regularly carry a
        balance on a credit card, transferring the balance to your home
        equity line with a lower interest rate can help you lower your
        overall borrowing costs.

    3.  Have a strategy to pay off your home equity line of credit. Rather
        than making interest payments only, set up a regular payment that
        includes paying down your line of credit. Alternatively, consider
        converting your home equity line of credit into a fixed or variable
        rate mortgage. Even if you are waiting to see where rates are headed,
        by choosing a variable mortgage you are able to retain a low
        prime-based rate and you are paying down both principal and interest
        on the loan. Also, many variable rate mortgages can be converted to a
        fixed rate mortgage at any time.
    

Canadians can visit the new RBC Advice Centre www.rbcadvicecentre.com to stress test their mortgage for potential rate increases. The RBC Advice Centre is an online resource that gives Canadians access to advice about all aspects of their homeownership goals - whether they are buying their first home, planning their next move, renovating or managing their current home financing. Advice videos are updated regularly to reflect current housing trends and to answer the questions that are top of mind with Canadian homeowners. Interactive tools and calculators provide customized information covering all facets of homeownership. With the guidance of RBC mortgage specialists, Canadians have access to free, no-obligation professional advice and personalized one-on-one service about RBC mortgage products and services.

These are some of the findings of the RBC's 17th Annual Homeownership poll conducted by Ipsos Reid between January 8 to 13, 2010. The annual online survey tracks Canadians attitudes and behaviours around home buying and home ownership. It is based on a randomly selected representative sample of 2,047 adult Canadians that was statistically weighted by region, age and sex composition according to the 2006 Census data. The results are considered accurate to within +/-2.2 percentage points, 19 times out of 20, of what they would have been had the entire adult Canadian population been polled. The margin of error will be larger within regions and for other sub-groupings of the survey population.

For further information: Media contacts: Jacqui van der Jagt, RBC, [phone]; Matt Gierasimczuk, Media Relations, [phone]