Low Rates Helping Borrowers Pay Off Mortgages at Record Pace

Low mortgage rates are allowing borrowers to pay off their mortgages faster than ever, with 61% of a new homebuyer's first mortgage payment going towards principal repayment at today's average rates. This is a significant increase from the early 2000s, where the percentage was 26.5%, and the 1990s and 1980s, where the percentages were 11.9% and 4.6%, respectively. This fast build-up of equity is a result of low interest rates and could explain why homebuying activity has remained strong in Canada. However, the Bank of Canada has stated that it expects to start raising interest rates by late next year, which could push housing markets and prices into overvalued territory and make housing unaffordable for most.