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Thomas StorringDirector – Economics and Statistics
Tel: 902-424-2410Email: thomas.storring@novascotia.ca

August 12, 2019
STUDY: HOMEOWNERSHIP, MORTGAGE DEBT AND TYPES OF MORTGAGE AMONG CANADIAN FAMILIES

Statistics Canada recently released a study that examines trends in homeownership, mortgage debt, the types of mortgages held among Canadian families. The study looked at the factors associated with homeownership, the proportion of families who had paid off the mortgage on their principal residence, and the amount of mortgage debt owed by families who had a mortgage.

Data come from the Survey of Financial Security from the years 1999 to 2016. In 2016, the survey asked about the types of mortgage rates families had (fixed, variable, or a combination of the two) and financial difficulties (using payday loans, bankruptcy, and paying off credit card balances). This study looks at trends in mortgages across family characteristics including age of major income earner, higher level of education, family structure, immigrant status, labour force status, family income quintile, presence of a family budget and region.

Homeownership trends

In 2016, 63 per cent of Canadian families owned their principal residence, up from 60 per cent in 1999. Almost all of this increase is attributable to aging in the Canadian population, as older individuals are more likely to own their homes.

In 2016, homeownership among recent immigrants was lower than the Canadian-born average, although it increased significantly from 17 per cent in 1999 to 39 per cent in 2016. Established immigrants (been in Canada for at least 5 years) also saw a significant increase in homeownership over this period from 64 per cent to 70 per cent. Homeownership rates were also higher in 2016 than 1999 among families who major income earner had a non-university postsecondary certificate, families in the top two income quintiles, and those who maintained a family budget. Homeownership declined among those with less than high school education.

Controlling for family characteristics, the probability of owning a home was significantly higher among those aged 65 and over compared to younger age groups (25 to 34) in 2016. Ownership was also significantly higher among those with post-secondary education compared to those with less than high school, but this difference is attributed to different financial behaviours in these two groups. The probability of homeownership was significantly higher in the Atlantic provinces and areas outside of Census Metropolitan Areas compared to Toronto. Homeownership was significantly higher for those in higher income quintiles, and significantly lower for families who reported financial difficulties compared to those who had not.

Trends in mortgage debt

In 2016, 43 per cent of homeowners did not have any mortgage debt on their principal residence. This proportion varied across families, particularly with age. The study notes that older people are more likely to have paid off their mortgage, as this debt is typically contracted at a relatively young age and repaid over time. Couples with children were significantly less likely than unattached individuals to have paid off their mortgage, as were immigrants when compared to the Canadian-born population. Those without a family budget or who reported financial difficulties were less likely to have paid off their mortgage.  There were few statistical differences across regions.

From 1999 to 2016, the share of families that had paid off their mortgage declined from 46 per cent to 43 per cent. This decline would have been larger if not for the aging population. If the age structure of the population had remained the same, the share of families that had paid off their mortgage in 2016 would have been lower at 36 per cent. Over this period, almost all groups experienced a decline in having paid off their mortgage, with the largest declines among major earners aged 35 to 64, couples with children and other family types, and those living in Newfoundland and Labrador.

Trends in mortgage debt size and type

Mortgage debt represented the majority of a family’s total debt at 81 per cent in 2016, up from 77 per cent in 1999. The average total debt more than doubled from $75,300 in 1999 to $162,400 in 2016 (measured in constant 2016 dollars). This reflects a 125 per cent increase in mortgage debt and an 84 per cent increase in consumer debt. The rise in mortgage debt contributed 84 per cent of the increase in total debt over this period. In recent years (2012 to 2016) it has reflected 100 per cent of the increase in total debt as consumer debt was little changed.

As expected, mortgage debt declines with age as families pay down their debt over time. The study showed that the median mortgage debt increases with education level and income quintile. It was also higher among immigrants compared to Canadian-born, and higher for couples with children compared to other family types. Homeowners who had not experienced financial difficulties had higher levels of mortgage debt, reflecting a better ability of obtain credit. The highest median mortgage debt was in Toronto, Vancouver, Calgary and Edmonton, while the lowest was in Prince Edward Island and New Brunswick, where housing prices tend to be lower.

The median mortgage debt among Canadian families doubled from $91,900 in 1999 to $180,000 in 2016 (constant 2016 dollars). The increase in mortgage debt coincides with a period from 2005 to 2016 where housing prices almost doubled in Canada. At the same time, interest rates have been low, incentivising families to take on larger mortgages. The increase in median mortgage debt from 1999 was statistically significant across all family types, except for those aged 19 to 24 and families in Prince Edward Island. The largest (percentage) increase in mortgage debt occurred among those aged 45 to 54 (121 per cent), couples with children (112 per cent), families in the bottom income quintile (110 per cent), and those in Newfoundland and Labrador, Manitoba, Saskatchewan and Alberta.

Most families (74 per cent) had fixed rate mortgages in 2016, while 21 per cent had a variable rate mortgage and 5 per cent had a combination of both. Controlling for family characteristics, the amount outstanding did not have any association with the type of mortgage rate. However, homeowners who had either a relatively small number of years left (0 to 5) or a much longer period (21 or more years) were significantly more likely than those with 6 to 10 years left to have a fixed rate mortgage. Families at either end of the spectrum may be more interested in securing stable payments over these periods. Families who maintained a household budget were more likely to have a fixed rate, perhaps reflecting the preference of fixed payments over time.

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