Canadian households, capitalizing on the rising equity in their homes, have reaped approximately $20 billion in added cash since 2001 through mortgage refinancing and home equity loans, according to a new CIBC’s economics report released Friday.
With mortgage rates falling and the run-up in home values adding on average an estimated $43,000 in wealth to each of Canada’s 7.5 million homeowners, Canadians have been borrowing against their homes at a rate never seen before, say the report authors Benjamin Tal, CIBC World Markets senior economist and Grigoris Karakoulas, vice president, customer behaviour analytics, CIBC.
“And, as interest rates are expected to remain low and house prices still have some upward potential, real estate will continue to put extra purchasing power in the hands of mortgage holders and remain a source of economic strength for the second half of the year,” says Tal.
The report estimates that since 2001 mortgage refinancing has led to $12 billion in extra borrowing. Increases in mortgage principal levels over the past year across the country show:
- Quebec leading with a 60% increase;
- increases of 43% in Alberta, 31% in Ontario, 25% for the Prairies and 13% in Atlantic Canada; and
- an 8% increase in British Columbia where the weakness in refinancing reflects the province’s relatively soft housing activity and a home price rise of only 10% since 2001, half the national rate.
Canadians’ use of home equity loans — currently rising by over 20% annually — has generated an additional $10 billion in borrowing.