Canadians ready for a mortgage makeover, says RBC survey

    Homebuyers combining fixed and variable options

    TORONTO, March 22 /CNW/ - The number of Canadians considering combination
mortgages - those with both fixed and variable rate segments - is on the rise,
according to RBC's 14th Annual Homeownership Survey. Over one third (38 per
cent) of Canadians who are likely to purchase a home within the next two years
plan to take out a combination mortgage, compared to 30 per cent in 2006.
    At the same time, the RBC poll found that many Canadians are confused
about the various mortgage options now available to them. A majority
(66 per cent) responded that they found it difficult to choose between a fixed
rate and a variable rate.
    Poll results also revealed that, even when Canadian homeowners planning
to choose a fixed rate mortgage were informed they could pay less interest
overall through a combination or variable rate mortgage, only 12 per cent
indicated they would be much more likely to choose combination or variable.
The top reason cited for not opting for a variable rate was the preference for
payments that don't change every month (30 per cent). Seventy-six per cent of
Canadians believe that their regular mortgage payments will change when the
prime rate changes, if they take out a variable rate mortgage.
    "The research suggests many Canadians think that only fixed rate
mortgages provide predictability of payments. But in reality, variable rate
does not necessarily mean variable payment," explained Adams. "There are
variable rate mortgages that are designed to keep the payment stable. When
interest rates go up, your payment will pay off more interest than principal;
when interest rates go down, your same payment will pay off more principal
than interest."
    Fixed rate mortgages continue to be the most common choice for potential
buyers and current mortgage-holders across the country - preferred by
49 per cent of Canadians likely to buy a home within the next two years and
54 per cent of Canadian homeowners with mortgages they plan to renew. Atlantic
Canadians planning to buy are most likely (69 per cent) to opt for a fixed
rate; Albertans planning to buy are the least likely (41 per cent) to choose a
fixed rate.
    "We find that many Canadians automatically opt for a fixed mortgage with
a longer term, until they begin to explore the upside potential of combining
multiple mortgage segments under one plan," said Catherine Adams,
vice-president, Home Equity Finance, RBC Royal Bank. "As consumers begin to
learn about the benefits that mortgage diversification can bring, we're seeing
more homebuyers gaining a better comfort level with including variable rate
mortgage options."
    Adams emphasized that exploring all the mortgage options now available
requires doing some homework. "Typically people will spend more time planning
their vacation activities or financing their next vehicle, than understanding
how best to maximize their mortgage," added Adams. "This is a great example of
a personal finance area where a little investment of your time can save you a
substantial amount of money down the road."

    Mortgage findings at-a-glance

    Fixed rate mortgages are preferred by:

    -   49 per cent of Canadians likely to buy a home within the next two
    -   54 per cent of Canadians homeowners with mortgages they plan to renew
    -   69 per cent of Atlantic Canadians planning to buy a home within the
        next two years (the highest in Canada)

    Variable rate mortgages are preferred by:

    -   13 per cent of Canadians likely to buy a home within the next two
    -   23 per cent of Canadian homeowners with mortgages they plan to renew
    -   31 per cent of Quebec homeowners with mortgages they plan to renew
        (the highest in Canada)

    Mortgage term most likely to be chosen at renewal time:

    -   Five year term: 46 per cent
    -   More than five year term: 31 per cent
    -   Three year term: 8 per cent

    63 per cent: the proportion of Canadian homeowners who have mortgages
    (compared to 60 per cent in 2006)

    $105,557: the average amount remaining on Canadian homeowners' mortgages
    (compared to $95,840 in 2006)

    39 per cent: the proportion of Canadian homeowners who have borrowed
    against the equity in their homes (compared to 38 per cent in 2006)

    28 per cent: the proportion of Canadian homeowners who have refinanced
    their mortgage in the last 12 months (compared to 27 per cent in 2006)

    RBC is the largest residential mortgage lender in Canada with more than
$109 billion in loans outstanding at the end of 2006 and over 15.5 per cent of
the Canadian mortgage market. 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 an RBC poll conducted by Ipsos Reid
between January 18 and 22, 2007. The online survey is based on a randomly
selected representative sample of 2,404 adult Canadians. With a representative
sample of this size, the results are considered accurate to within
+/-2.0 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.
These data were statistically weighted to ensure the sample's regional and
age/sex composition reflects that of the actual Canadian population according
to the 2001 Census data.

    For full tabular results, please see the Ipsos Reid website at

For further information:

For further information: Media contact: Kathy Bevan, Media Relations,
(416) 974-8810

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