Since the introduction more than a year ago, extended amortizations for residential mortgages have been wildly popular with Alberta homeowners, largely fuelled by record gains in the province’s average house price.

More and more Albertans are looking to extend their amortizations, some as long as 40 years, in turn lowering their monthly carrying costs and freeing up disposable income for other household necessities.

"It gives homeowners more flexibility in terms of what they pay on a monthly basis," said Richard Corriveau, Regional Economist for Canada Mortgage and Housing Corporation (CHMC) Prairies and Territories Region. "We are moving into an environment where the average price of a home isn't as much of a concern as the monthly payment, a perfect analogy is the auto sector where auto dealers are no longer advertising the price for the automobile, what they are advertising is the monthly payment. So it comes down in essence to what the individual can afford."

Rising Alberta house prices are fuelling the desire for extended amortizations even more, especially with first time buyers trying to crack their way into the market.

"Last year the average price increased 31% in Alberta, that's more than double the highest rate of price growth ever recorded. This year the average price is forecast 24%, so with that and the impact of higher mortgage rates, modestly higher albeit, the monthly carrying costs for the average home will nearly double in a brief three year period. So under that environment people will be looking toward this new products and the extended amortization up to 40 years cuts the monthly principle on interest by 12%," said Corriveau. "It doesn't sound like a lot, but certainly for people at the margin in terms of affordability it definitely helps, and for others it allows them to perhaps buy a more expensive home and free up some disposable income for other consumption."

"It's just like a car, everyone wants the most expensive car but not everybody can afford it, the natural option is to buy something that's less expensive. Of course first time buyer product a number of years ago, you could buy a single detached home with an attached garage and that might still be considered first time buyer product. Now I would argue the majority of first time buyer product is in the condo market as it's less expensive. It allows people to get into home ownership, start building some equity so they can start to build to possibly buy a more expensive unit in the future," he added.

Alberta has the highest rate of homeownership in country and many are first time buyers who are willing to go into debt in order to quickly gain equity in the rapidly expanding market.

"Albertans are confident in the prospect that their asset that they purchase is going to appreciate in price in the future," he said. "We had the strongest price growth historically across the country, we've dominated price growth last year and we are among the price growth leaders in 2007. Under that environment, it represents quality debt because people are purchasing an appreciating asset."

In reality, with extended amortization homeowners will be paying more in the long run in terms of cost of interest. But the lower monthly costs frees up more disposable income for other outlets, in the long run benefiting the provincial economy.

"It's taking much longer time to pay off, but if you subtract house price growth over time we are talking about one of the only assets that's appreciated rapidly over the past couple of years," he said. "Some of those benefits might be it frees up some disposable income to allocate to other types of consumption, some of that consumption might be aligned with the home purchase furniture home electronics, appliances things like that or an auto purchase, it frees up some disposable income to purchase other goods."

With a lot of buzz in the industry coming from the imploding sub-prime market in the United States, many Albertans are confident that the crash below the border will not affect growth in their own province.

"The sub-prime activity in the U.S. when it peaked was pushing 40% of all mortgages taken out, in Canada we wouldn't characterize it as sub-prime, more likely near-prime mortgage and at it's peak it only represented 5% of activity. So it that respect, Canada is certainly not exposed to the extent that our friends south of the border are," he said

—Dan Leahul is the Calgary Real Estate News resident reporter