Compared to even six years ago, today’s interest rates are a steal. The discounted 5-year fixed has tumbled more than 2.25 percentage points in that time. That gives mortgagors a chance to pay up to 30% more principal in the first five years of a standard mortgage.
But that savings potential isn’t motivating more people to pay extra on their mortgage, at least not according to a new poll. CIBC has found that 55% of today’s mortgagors are accelerating their mortgage amortization, down from 68% in the same survey last year.
CIBC doesn’t get into detail about how people are redeploying their spare cash, but it suggests that home renovation and summer vacation spending are up 30% and 20% this year, respectively.
The average age that Canadian mortgagors expect to be mortgage-free also rose a bit. It’s now 58, compared to 57 last year.
In B.C., however, the typical homeowner plans to keep their mortgage past retirement age and not pay it off till 66. At this pace, it may not take long until a sizable minority of B.C. residents are bequeathing mortgages to their kids.
Additional findings from this year’s poll (among those with mortgages):
- 32% accelerated their payment frequency (vs. 42% in 2013)
- 28% increased their payment amount (vs. 30% in 2013)
- 18% made a lump-sum prepayment (vs. 15% in 2013)
Rob McLister, CMT (email)