Not all Canadian boomers in a hurry to pay off mortgage, says RBC Survey
In contrast to other age groups in Canada, the boomer generation of homeowners isn’t as concerned about being mortgage-free when they retire, according to the latest findings in RBC’s 14th Annual Homeownership Survey.
While 66 per cent of all Canadians think it’s very important to have their mortgages entirely paid off by the time they retire, this sentiment decreases with age, dropping to 59 per cent among those aged 55 plus - the lowest percentage among all age groups.
More than a third (37 per cent) of the 55 plus age group still has a mortgage on their homes, compared to 71 per cent of those aged 45-54 who have a mortgage - an indication that many older Canadians are successfully paying down their mortgages leading up to retirement. While the national average remaining on Canadians’ mortgages stands at $105, 557, Canada’s boomers have an average of $80,331.
“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. Yet, it appears that the level of importance in being mortgage free in retirement is decreasing for boomers,” explained Catherine Adams, vice-president of Home Equity Financing for RBC Royal Bank.
The poll also showed that boomer homeowners with a mortgage have the highest comfort level of all age groups with variable rate mortgages. Almost one-third (30 per cent) of homeowners aged 55 plus who have mortgages said that when they next renewed their mortgage, they would opt for a variable rate option - a higher percentage than any other age group.
“We found this particularly interesting, as older Canadians would recall the double-digit interest rates of the 1980s, and might be more inclined towards the security of a fixed rate,” added Adams. “But boomers also have enough mortgage experience to have uncovered one of the secrets to saving money - they know that variable rates often bring significant savings in interest costs over the course of a mortgage, while at the same time, offering the certainty of predictable payments.”
As expected, boomers are also less likely to want to upsize their homes when considering a future property purchase. Thirty-seven per cent of those 55 plus who intend to purchase a home in the next two years indicated they would prefer a smaller home, while 40 per cent would prefer the same size home. Only 22 per cent are looking for a bigger home. At 15 per cent, both younger (18-24) and boomer homebuyers (55+) are more likely to be thinking about buying a condo or loft, compared with 7 to 9 percent of those aged 25-54.
“We’re definitely starting to see the influence of boomers on the housing market,” noted Adams. “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.”
How much is left to pay on the mortgage on your home?
Yes, it’s very important that the mortgage is entirely paid off by retirement.
All respondents: 66 per cent
55+: 59 per cent
45-54: 61 per cent
35-44: 68 per cent
25-34: 76 per cent
18-24: 75 per cent
Yes I expect my home to be a primary source of retirement income when I retire.
Mean: 19 per cent
55+: 13 per cent
45-54: 19 per cent
35-44: 20 per cent
25-34: 25 per cent
18-24: 26 per cent
When I next renew my mortgage, I will likely choose a variable rate mortgage.
All respondents: 23 per cent
55+: 30 per cent
45-54: 17 per cent
35-44: 19 per cent
25-34: 24 per cent
18-24: 27 per cent
These are some of the findings of an RBC poll conducted by Ipsos Reid between January 18 and 22, 2007. The online survey is based on a randomly selected representative sample of 2,404 adult Canadians. With a representative sample of this size, the results are considered accurate to within ±2.0 percentage points, 19 times out of 20, of what they would have been had the entire adult Canadian population been polled. The margin of error will be larger within regions and for other sub-groupings of the survey population. These data were statistically weighted to ensure the sample’s regional and age/sex composition reflects that of the actual Canadian population according to the 2001 Census data.
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