Paying off the mortgage
By Roma Luciw - Globe and Mail
A majority of home-owners still want to have paid off their homes by the time they retire, according to a survey that pegged the national average left on Canadians’ mortgages at $105,557.
A Royal Bank of Canada poll of 2,404 people taken in January by Ipsos Reid found that two-thirds think it’s “very important” to be mortgage-free by the time they stop working. Younger Canadians were more concerned with paying off that debt, with roughly 75% of respondents between 18 and 34 saying this was very important, compared with 59% of those over the age of 55.
The survey found that older Canadians are successfully paying down their mortgages leading up to retirement. Just over a third — 37% — of the over-55 age group still have a mortgage on their homes, down from 71% of those aged 45 to 54.
“Most Canadians still think it’s important to pay off their mortgage by the time they retire, and we see a huge jump in those that have paid it off once they hit 55,” said Catherine Adams, vice-president of Home Equity Financing for RBC.
Canada’s real estate market has been booming for five years, and although it has now passed its peak, prices have risen sharply across the country. RBC and the other Canadian banks have benefited from the sizzling pace of home buying, pulling in substantial profits from their mortgage lending businesses.
The poll also found that while the national average remaining on mortgages held by Canadians is $105,557, there were vast differences in the amount owed by the various generations. Not surprisingly, the largest amount, $144,056, is owed by those between the ages of 25 and 34. The boomers, many of whom bought their first houses decades ago, have an average remaining mortgage debt of $80,331.
The youngest Canadians were most likely to say they expected their home to be a primary source of retirement income — around a quarter of respondents between 18 and 34. That compared with just 13% of those over the age of 55.
Boomers with mortgages have the highest comfort level of all age groups with variable rate mortgages, the poll found, with 30% of respondents over the age of 55 saying they would choose a variable rate over a fixed. However, the vast majority of people of all ages said they preferred the security of a fixed rate.
As expected, boomers are also less likely to want to upsize their homes when considering a future property purchase. The poll also found that youngest and oldest Canadians are most likely to think about buying a condo or loft.
“We’re definitely starting to see the influence of boomers on the housing market,” Ms. Adams said. “Boomers may well be seeking the lifestyle flexibility to do some of the things they’re looking forward to in their retirement years, without the property upkeep concerns of a larger home.”
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