Canadian mortgage holders, including first time home buyers, are borrowing less, not more, than they can afford to borrow, according to a recent study by the Canadian Association of Accredited Mortgage Professionals.
The study is based on data from CAAMP members who issued more than 40,000 mortgage loans last year. The findings show that only three percent of recent home buyers have a gross debt service ratio (GDS) at or above the common 35 per cent benchmark. GDS is the percentage of annual gross income of the borrower that is required to maintain mortgage payments, taxes, heating costs, and 50% of condominium fees, if applicable.
“This new research shows that Canadians are assessing their abilities and vulnerabilities,” said Jim Murphy, AMP, President and CEO of CAAMP. “They are being prudent and the vast majority of Canadian mortgage borrowers are not taking on undue risks. They have factored rising interest rates in to their mortgage decisions.”
For CAAMP’s chief economist Will Dunning, the bottom line is that “even though mortgage payments will probably rise for most borrowers, the increase in their incomes will more than offset the higher payments."
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