With home prices rocketing into new galaxies, one might think that loan-to-values are surging. After all, we’re bombarded with headlines about under-capitalized homebuyers struggling to get into the market.

In fact, loan-to-values have held steady for at least nine years running.

From March 2007—as far back as our mortgage balance data goes—to spring this year, Canada’s average home price jumped 70% to $508,567. (Source: CREA)

In that same time-frame, the average residential mortgage surged by a similar percentage: 71%, to $181,000. (Sources: RBC, 2007; Manulife, 2016)

Looking at this another way, the mean equity in a Canadian home nine years ago was 65% (in homes with mortgages). Today, it’s about the same.

Interestingly though, the average mortgage amount has risen $75,443 over the last nine years. But the mean value of a Canadian home has surged almost 2.8 times that, or $209,190. That’s a sizeable net gain in nominal dollar equity.

Of course, what the market giveth the market can taketh away. But that net equity growth, if it holds up longer-term, could be an essential store of wealth for so many with insufficient retirement savings.

Only 1 in 5 middle-income Canadians who are retiring without an employer pension have saved enough to retire comfortably, reports CBC. Imagine if they lost $100,000 to $200,000 of home equity to boot.

This is just one more reason why it’s so utterly essential that policy-makers stack housing policies carefully. It would be one thing for mortgage tightening to cause a correction, but it would be absolutely calamitous if it ever triggered a crash.


Sidebar: These are the average mortgage balances in Canada’s largest cities. How noteworthy that high-priced Toronto is only 7% above average. (Source: Manulife Bank)

$259,000 — Vancouver
$217,000 — Calgary and Edmonton
$194,000 — Toronto
$156,000 — Montreal