A recent news report suggests that Canadian homeowners are paying down their mortgages faster than most think.
According to a CIBC World Markets study, homeowners are taking advantage of record-low interest rates to accelerate their mortgage payments, and therefore shorting their amortization periods. The study shows that homeowners are paying an additional $11 billion a year in principal, which isn’t being officially recognized by the Bank of Canada.
The report also suggests that an estimated 30 to 40 percent of households with mortgages are accelerating their payments, while 40 to 50 percent of borrowers are estimated to have amortization periods of less than 20 years, opposed to the standard 25 years.
This means that the debt-service ratio in the Canadian mortgage market is 7.3 percent, one point higher than the 6.3 percent officially used in calculations by the Bank of Canada.