A new study from RBC suggests that not only are debt levels mounting in this country, they are extending much longer than most people had hoped for. What this study has revealed too, is that there is a disconnect between planning and actual activity, which underscores the crucial need for active, focused financial planning, in the short term to reach long term goals.RBC said in a release, Nearly three-quarters (72 per cent) of Canadians with a mortgage hope to be mortgage-free by the time they reach age 65, but one-third (33 per cent) of older Canadians, those over the age of 55, have 16 or more years left on their mortgage term.’
“Canadians want to be mortgage-free as they approach retirement age and beyond, but the reality is that it takes prudent planning and the right advice to stay on track,” said Claude DeMone, director of Strategy for Home Equity Financing, RBC. “Using flexible and accelerated payment options are an easy and pain-free way to help take years off your mortgage and save thousands of dollars in interest costs.”
Looking at mortgages themselves, decisions seem to be made overwhelmingly based on interest rates. 96% of respondents indicate that a low interest rate is the most attractive feature in a mortgage. Similarly, an overwhelming majority also indicated that having the option for prepayments, and accerlated payments were desirable features.
Although many indicate the desire to have the option to accelerate payments and shorten mortgage amortization, seemingly not many are actually doing so, as proven by the fact that so many Canadians are forced to carry mortgage debt into their retirement, suggesting that mortgage holders should take a more proactive position in budgeting.
“Though many Canadians expect interest rates to stay the same over the next year, they should still keep in mind that it’s important to build some wiggle room into your budget to prepare for any extra costs or future rate increases,” DeMone added.
Most Canadians believe that rates will increase over the next six to twelve months. The poll shows too that there has been a steady increase in interest in variable rates over fixed rates.