Source: The Canadian Press

The Bank of Canada may be concerned about the level of debt homeowners are assuming, but consumers who have recently taken out or renewed their mortgage are not.

A new online survey of Canadians active in the mortgage market, including first-time buyers, shows the vast majority are not only comfortable with their level of debt, but two thirds think they will pay their loans off sooner than required.

The annual survey by Canada Mortgage and Housing Corporation also suggests that Canadians are savvy consumers when it comes to buying a home.

On average, consumers surveyed say they took a year to think through their decision and 89% said they used the Internet to research mortgage options.

“First time home buyers, they do their homework,” said Pierre Serre, the CMHC’s vice president of insurance product and business development.

“The key findings are that people are getting more into the Internet, people are getting informed and people are comfortable with home ownership.”

According to the CMHC, nine in 10 new buyers believe ownership is a good long-term investment and that now is a good time to purchase a home.

The housing market has been one of the mainstays of the economic recovery, with prices and sales already back, and in some markets, beyond pre-recession levels.

In a separate report Monday, the real estate brokerage firm Re/Max said luxury home sales had soared in the first quarter of 2010, with nine of 13 markets shattering records for the winter months.

Kelowna, B.C. led the way in terms of percentage increase at 700%, followed by Montreal at 300% and Victoria at 275%. Canada’s most populous city, Toronto, was not far behind with a 263% advance.

“Recovery in the upper end has been nothing short of remarkable,” said Elton Ash, the regional vice-president for Re/Max in western Canada.

It’s been such home-buying enthusiasm that has raised concerns at the Bank of Canada about super-low interest rates luring some into taking on more debt than they can afford. Although affordability remains high, given the low rates, household debt has risen to a record $1.47 per $1 of disposable income.

Bank governor Mark Carney and his deputies have warned that buyers should make sure when they purchase a home, they can afford not only the current mortgage but payments when interest rates rise.

The central bank has hinted it may start raising its policy rate as early as June 1, but already, chartered banks have increased longer-term, closed and some variable mortgages by close to a percentage point.

On Monday, Royal Bank bumped up its mortgage rates on all its lending terms by nearly a seventh of a percentage point. It was the third mortgage rate increase in recent weeks, reflecting the rising costs of borrowing on the bond market, where banks finance their mortgage lending.

The CMCH survey of 2,500 who have actually taken out a first mortgage, or renewed their mortgage in the last year, strongly suggests they are doing so with eyes wide open.

The survey found that 81% are “comfortable” with their level of debt. But even the 19% who did not answer in the affirmative didn’t raise a red flag — 13% were neutral, 5% were somewhat not comfortable, and only 1% said they were very uncomfortable.

Among first-time buyers, 85% said they had a good understanding of how much of a mortgage they could afford.

The results are not surprising to CIBC economist Benjamin Tal, who recently researched the housing market for his bank. Tal’s report tended to undercut concerns that Canadians were significantly vulnerable to rising interest rates.

“The number of people who are really, really vulnerable is a relatively small number,” he said,.

“Clearly, when you have a situation of interest rates rising there will be defaults rising, but it will not be over the cliff like the U.S., it will not be a crisis.”

Tal says Canadians traditionally adopt a variety of strategies to rising rates, including locking in to longer-term fixed mortgages, something he says is already occurring.

The other difference between the Canadian situation and that of the U.S., where the sub-prime crisis triggered a financial market meltdown, is that lower-income Canadians tend to be more conservative than higher-income buyers, said Tal. In reverse of the U.S. situation, lower-income Canadians tend to take out fixed-rate mortgages, he said.