Most Canadian homeowners are in position to withstand an increase in interest rates, but it may present difficulties for a "sizable minority," according to Canada's mortgage lenders.
The Canadian Association of Accredited Mortgage Professionals said Wednesday about 12% of respondents, representing about 650,000 households, would come under stress if their mortgage rates rose by as little as one per cent.
But the report points out that many will have time to improve their finances before mortgage rates actually do rise. "Most of these have fixed-rate mortgages, (so) by the time their mortgages are due for renewal, their financial capacity will have increased and the amount of mortgage debt will be reduced," the report notes.
As well, the vast majority of challenged borrowers have at least 10% equity in their homes.
"There are about 75,000 borrowers who are susceptible to short-term moves of interest rates and have limited home equity, less than two per cent of the 5.8 million mortgage holders in Canada."
Many economists believe the Bank of Canada won't start hiking interest rates until late next year or 2013, and that rate increases will be moderate because of the weak economy.
The report was based on a late-October online survey of 2,000 Canadians, slightly more than half of whom have mortgages.
Overall, it found Canadians generally satisfied with their home ownership and confident they would be able to withstand a rate increase.
Despite concerns from Bank of Canada Governor Mark Carney that Canadians are taking on too much debt, 84% said they could handle an increase in their monthly payments of up to $200. The average room for rising payments was $750 a month.
The survey also found Canadians are taking advantage of low interest rates and that three-quarters of those who have renewed mortgages this year received a discount from their previous deals. The average interest rate for homeowners is currently 3.92%, down from 4.22% last year.
As well, fewer people are drawing equity out of their homes and 78% said they have at least 25% equity.
